0001130310 cnp:HoustonElectricMember cnp:OperationAndMaintenanceExpenseMember cnp:CenterpointEnergyMember 2019-01-01 2019-03-31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 10-Q
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| (Mark One) |
| ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 20202021
OR
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| FOR THE TRANSITION PERIOD FROM __________________ TO __________________ |
Commission file number 1-31447
CenterPoint Energy, Inc.
(Exact name of registrant as specified in its charter)
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| Texas | | 74-0694415 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 1111 Louisiana | Houston | Texas | 77002 |
| (Address of Principal Executive Offices) | | (Zip Code) |
(713) (713) 207-1111
Registrant's telephone number, including area code
Commission file number 1-3187
CenterPoint Energy Houston Electric, LLC
(Exact name of registrant as specified in its charter)
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| Texas | | 22-3865106 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 1111 Louisiana | Houston | Texas | 77002 |
| (Address of Principal Executive Offices) | | (Zip Code) |
(713) (713) 207-1111
Registrant's telephone number, including area code
Commission file number 1-13265
CenterPoint Energy Resources Corp.
(Exact name of registrant as specified in its charter)
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| Delaware | | 76-0511406 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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| 1111 Louisiana | Houston | Texas | 77002 |
| (Address of Principal Executive Offices) | | (Zip Code) |
(713) (713) 207-1111
Registrant's telephone number, including area code
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| Securities registered pursuant to Section 12(b) of the Act: |
| Registrant | Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| CenterPoint Energy, Inc. | Common Stock, $0.01 par value | CNP | The New York Stock Exchange |
| | | Chicago Stock Exchange, Inc. |
| CenterPoint Energy, Inc. | Depositary Shares for 1/20 of 7.00% Series B Mandatory Convertible Preferred Stock, $0.01 par value | CNP/PB | The New York Stock Exchange |
| CenterPoint Energy Houston Electric, LLC | 9.15% First Mortgage Bonds due 2021 | n/a | The New York Stock Exchange |
| CenterPoint Energy Houston Electric, LLC | 6.95% General Mortgage Bonds due 2033 | n/a | The New York Stock Exchange |
| CenterPoint Energy Resources Corp. | 6.625% Senior Notes due 2037 | n/a | The New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| CenterPoint Energy, Inc. | Yes | þ | | No | o |
| CenterPoint Energy Houston Electric, LLC | Yes | þ | | No | o |
| CenterPoint Energy Resources Corp. | Yes | þ | | No | o |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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| CenterPoint Energy, Inc. | Yes | þ | | No | o |
| CenterPoint Energy Houston Electric, LLC | Yes | þ | | No | o |
| CenterPoint Energy Resources Corp. | Yes | þ | | No | o |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| Large accelerated filer | Accelerated filer | Non-accelerated filer | Smaller reporting company | Emerging growth company |
| CenterPoint Energy, Inc. | þ | o | o | ☐ | ☐ |
| CenterPoint Energy Houston Electric, LLC | o | o | þ | ☐ | ☐ |
| CenterPoint Energy Resources Corp. | o | o | þ | ☐ | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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| CenterPoint Energy, Inc. | Yes | ☐ | | No | þ |
| CenterPoint Energy Houston Electric, LLC | Yes | ☐ | | No | þ |
| CenterPoint Energy Resources Corp. | Yes | ☐ | | No | þ |
Indicate the number of shares outstanding of each of the issuers’ classes of common stock as of May 1, 2020:
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| CenterPoint Energy, Inc. | | 502,656,951580,495,853 | shares of common stock outstanding, excluding 166 shares held as treasury stock |
| CenterPoint Energy Houston Electric, LLC | | 1,000 | common shares outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc. |
| CenterPoint Energy Resources Corp. | | 1,000 | shares of common stock outstanding, all held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy, Inc. |
CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.
TABLE OF CONTENTS
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| PART I. | | FINANCIAL INFORMATION | |
| Item 1. | | | |
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PART I. | | FINANCIAL INFORMATION | |
Item 1. | | | |
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| Item 3. | | | |
| Item 4. | | | |
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| PART II. | | OTHER INFORMATION | |
| Item 1. | | | |
| Item 1A. | | | |
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| Item 6. | | | |
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| GLOSSARY |
| ACE | | Affordable Clean Energy |
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GLOSSARY | | |
ACEAMA | | Affordable Clean Energy |
AMA | | Asset Management Agreement |
| AMS | | Advanced Metering System |
| APSC | | Arkansas Public Service Commission |
| ARAM | | Average rate assumption method |
| ARO | | Asset retirement obligation |
ARP | | |
| ARP | | Alternative revenue program |
ASCARPA | | American Rescue Plan Act of 2021 |
| ASC | | Accounting Standards Codification |
ASUAsset Purchase Agreement | | Accounting Standards Update |
AT&T Common | | AT&T Inc. common stock |
Athena Energy Services | | Athena Energy Services Buyer,Asset Purchase Agreement, dated as of April 29, 2021, by and between CERC Corp. and Southern Col Midco, LLC, a Delaware limited liability company and subsidiaryan affiliate of Energy Capital Partners, LLCSummit Utilities, Inc. |
Bailey to Jones Creek ProjectASU | | A transmission project in the greater Freeport, Texas area, which includes enhancements to two existing substations and the construction of a new 345 kV double-circuit line to be located in the counties of Brazoria, Matagorda and WhartonAccounting Standards Update |
BcfAT&T Common | | AT&T Inc. common stock |
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| Bcf | | Billion cubic feet |
| Bond Companies | | Bond Company II, Bond Company III, Bond Company IV and Restoration Bond Company, each a wholly-owned, bankruptcy remote entity formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of Securitization Bonds |
Bond Company II | | CenterPoint Energy Transition Bond Company II, LLC, a wholly-owned subsidiary of Houston Electric |
| Bond Company III | | CenterPoint Energy Transition Bond Company III, LLC, a wholly-owned subsidiary of Houston Electric |
| Bond Company IV | | CenterPoint Energy Transition Bond Company IV, LLC, a wholly-owned subsidiary of Houston Electric |
| BTA | | Build Transfer Agreement |
| Capital Dynamics | | Capital Dynamics, Inc. |
| CARES Act | | Coronavirus Aid, Relief, and Economic Security Act |
| CCR | | Coal Combustion Residuals |
CECA | | Clean Energy Cost Adjustment |
CECL | | Current expected credit losses |
| CEIP | | CenterPoint Energy Intrastate Pipelines, LLC, a wholly-owned subsidiary of CERC Corp. |
| CenterPoint Energy | | CenterPoint Energy, Inc., and its subsidiaries |
| CERC | | CERC Corp., together with its subsidiaries |
| CERC Corp. | | CenterPoint Energy Resources Corp. |
| CES | | CenterPoint Energy Services, Inc. (now known as Symmetry Energy Solutions, LLC), previously a wholly-owned subsidiary of CERC Corp. |
| Charter Common | | Charter Communications, Inc. common stock |
| CIP | | Conservation Improvement Program |
CME | | Chicago Mercantile Exchange |
| CNG | | Compressed Natural Gas |
| CNP Midstream | | CenterPoint Energy Midstream, Inc., a wholly-owned subsidiary of CenterPoint Energy |
CODM | | |
| CODM | | Chief Operating Decision Maker, the Registrants’who is each Registrant’s Chief Operating Executive Officer |
| Common Stock | | CenterPoint Energy, Inc. common stock, par value $0.01 per share |
| COVID-19 | | Novel coronavirus disease 2019 and related global outbreak that was subsequently declared a pandemic by the World Health Organization |
| COVID-19 ERP | | COVID-19 Electricity Relief Program
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CPPCPCN | | Certificate of Public Convenience and Necessity |
| CPP | | Clean Power Plan |
| CSIA | | Compliance and System Improvement Adjustment |
| DCRF | | Distribution Cost Recovery Factor |
| DRR | | Distribution Replacement Rider |
| DSMA | | Demand Side Management Adjustment |
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GLOSSARYECA | | Environmental Cost Adjustment |
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CSIA | | Compliance and System Improvement AdjustmentGLOSSARY |
DCRFEDIT | | Distribution Cost Recovery Factor |
DRR | | Distribution Replacement Rider |
DSMA | | Demand Side Management Adjustment |
EBITDA | | Earnings before income taxes, depreciation and amortization |
EDIT | | Excess deferred income taxes |
| EECR | | Energy Efficiency Cost Recovery |
| EECRF | | Energy Efficiency Cost Recovery Factor |
| EEFC | | Energy Efficiency Funding Component |
| EEFR | | Energy Efficiency Funding Rider |
| ELG | | Effluent Limitation Guidelines |
Enable | | |
| Elk GP Merger Sub | | Elk GP Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Energy Transfer |
| Elk Merger Sub | | Elk Merger Sub LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Energy Transfer |
| Enable | | Enable Midstream Partners, LP |
| Enable GP | | Enable GP, LLC, Enable’s general partner |
| Enable Merger | | The proposed merger of Elk Merger Sub with and into Enable and the merger of Elk GP Merger Sub with and into Enable GP, in each case on the terms and subject to the conditions set forth in the Enable Merger Agreement, with Enable and Enable GP surviving as wholly-owned subsidiaries of Energy Transfer |
| Enable Merger Agreement | | Agreement and Plan of Merger by and among Energy Transfer, Elk Merger Sub LLC, Elk GP Merger Sub, Enable, Enable GP and, solely for the purposes of Section 2.1(a)(i) therein, Energy Transfer GP, and solely for the purposes of Section 1.1(b)(i) therein, CenterPoint Energy |
| Enable Series A Preferred Units | | Enable’s 10% Series A Fixed-to-Floating Non-Cumulative Redeemable Perpetual Preferred Units, representing limited partner interests in Enable |
| Energy Services | | OffersOffered competitive variable and fixed-priced physical natural gas supplies primarily to commercial and industrial customers and electric and natural gas utilities through CES and its subsidiary, CEIP |
| Energy Services Disposal Group | | Substantially all of the businesses within CenterPoint Energy’s and CERC’s Energy Services reporting unit that will bewere sold under the Equity Purchase Agreement |
EPAEnergy Transfer | | Energy Transfer LP, a Delaware limited partnership |
| Energy Transfer GP | | LE GP, LLC, a Delaware limited liability company and sole general partner of Energy Transfer |
| Energy Transfer Series G Preferred Units | | Energy Transfer Series G Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Units |
| EPA | | Environmental Protection Agency |
| Equity Purchase Agreement | | Equity Purchase Agreement, dated as of February 24, 2020, by and between CERC Corp. and Symmetry Energy Solutions Acquisition, LLC (f/k/a Athena Energy Services Buyer, LLC) |
| ERCOT | | Electric Reliability Council of Texas |
| ESG | | Energy Systems Group, LLC, a wholly-owned subsidiary of Vectren |
FERCFebruary 2021 Winter Storm Event | | The extreme and unprecedented winter weather event in February 2021 (Winter Storm Uri) resulting in electricity generation supply shortages, including in Texas, and natural gas supply shortages and increased wholesale prices of natural gas in the United States, primarily due to prolonged freezing temperatures |
| FERC | | Federal Energy Regulatory Commission |
| Fitch | | Fitch Ratings, Inc. |
| Form 10-Q | | Quarterly Report on Form 10-Q |
| FRP | | Formula Rate Plan |
Gas Daily | | Platts gas daily indices |
| GHG | | Greenhouse gases |
GRIP | | |
| GRIP | | Gas Reliability Infrastructure Program |
GWhGSR | | Gigawatt-hoursGas Supply Rate |
| GWh | | Gigawatt-hours |
| Houston Electric | | CenterPoint Energy Houston Electric, LLC and its subsidiaries |
| IDEM | | Indiana Department of Environmental Management |
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| GLOSSARY |
| Indiana Electric | | Operations of SIGECO’s electric transmission and distribution services, and includes its power generating and wholesale power operations |
| Indiana Gas | | Indiana Gas Company, Inc., a wholly-owned subsidiary of Vectren |
| Indiana North | | Gas operations of Indiana Gas |
| Indiana South | | Gas operations of SIGECO |
| Indiana Utilities | | The combination of Indiana Electric, Indiana North and Indiana South |
| Infrastructure Services | | ProvidesProvided underground pipeline construction and repair services through Vectren’sVISCO and its wholly-owned subsidiaries, Miller Pipeline, LLC and Minnesota Limited, LLC |
| Infrastructure Services Disposal Group | | Businesses within the Infrastructure Services reporting unit that were sold under the Securities Purchase Agreement |
| Interim Condensed Financial Statements | | Unaudited condensed consolidated interim financial statements and combined notes |
IRP | | Integrated Resource Plan |
IRS | | Internal Revenue Service |
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GLOSSARYIRP | | Integrated Resource Plan |
IURCIRS | | Internal Revenue Service |
| IURC | | Indiana Utility Regulatory Commission |
| kV | | Kilovolt |
KW | | Kilowatts |
| LIBOR | | London Interbank Offered Rate |
| LNG | | Liquefied Natural Gas |
MergerLPSC | | Louisiana Public Service Commission |
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| Merger | | The merger of Merger Sub with and into Vectren on the terms and subject to the conditions set forth in the Merger Agreement, with Vectren continuing as the surviving corporation and as a wholly-owned subsidiary of CenterPoint Energy, Inc. |
| Merger Agreement | | Agreement and Plan of Merger, dated as of April 21, 2018, among CenterPoint Energy, Vectren and Merger Sub |
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| Merger Sub | | Pacer Merger Sub, Inc., an Indiana corporation and wholly-owned subsidiary of CenterPoint Energy |
| MES | | CenterPoint Energy Mobile Energy Solutions, Inc., a wholly-owned subsidiary of CERC Corp. |
| MGP | | Manufactured gas plant |
MLP | | |
| MLP | | Master Limited Partnership |
MMBtu | | One million British thermal units |
| Moody’s | | Moody’s Investors Service, Inc. |
| MPSC | | Mississippi Public Service Commission |
| MPUC | | Minnesota Public Utilities Commission |
MRT | | Enable Mississippi River Transmission, LLC |
| MW | | Megawatts |
NGDNERC | | Natural gas distribution businessNorth American Electric Reliability Corporation |
NGLs | | |
| NGLs | | Natural gas liquids |
| NOLs | | Net operating losses |
| NRG | | NRG Energy, Inc. |
NYMEX | | New York Mercantile Exchange |
OCC | | |
| OCC | | Oklahoma Corporation Commission |
| OGE | | OGE Energy Corp. |
| PBRC | | Performance Based Rate Change |
| Posey Solar | | Posey Solar, LLC, a special purpose entity |
| PowerTeam Services | | PowerTeam Services, LLC, a Delaware limited liability company, now known as Artera Services, LLC |
PRPs | | |
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| PPA | | Power Purchase Agreement |
| PRPs | | Potentially responsible parties |
| PUCO | | Public Utilities Commission of Ohio |
| PUCT | | Public Utility Commission of Texas |
| Railroad Commission | | Railroad Commission of Texas |
| RCRA | | Resource Conservation and Recovery Act of 1976 |
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| GLOSSARY |
| Registrants | | CenterPoint Energy, Houston Electric and CERC, collectively |
Reliant Energy | | Reliant Energy, Incorporated |
| REP | | Retail electric provider |
| Restoration Bond Company | | CenterPoint Energy Restoration Bond Company, LLC, a wholly-owned subsidiary of Houston Electric |
ROE | | |
| ROE | | Return on equity |
| ROU | | Right of use |
| RRA | | Rate Regulation Adjustment |
| RSP | | Rate Stabilization Plan |
| SEC | | Securities and Exchange Commission |
| Securities Purchase Agreement | | Securities Purchase Agreement, dated as of February 3, 2020, by and among VUSI,Vectren Utility Services, Inc., PowerTeam Services and, solely for purposes of Section 10.17 of the Securities Purchase Agreement, Vectren |
| Securitization Bonds | | Transition and system restoration bonds |
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GLOSSARY |
| Series A Preferred Stock | | CenterPoint Energy’s Series A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
| Series B Preferred Stock | | CenterPoint Energy’s 7.00% Series B Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
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| Series C Preferred Stock | | CenterPoint Energy’s Series C Mandatory Convertible Preferred Stock, par value $0.01 per share, with a liquidation preference of $1,000 per share |
| SIGECO | | Southern Indiana Gas and Electric Company, a wholly-owned subsidiary of Vectren |
| S&P | | S&P Global Ratings |
| SRC | | Sales Reconciliation Component |
TBDSymmetry Energy Solutions Acquisition | | Symmetry Energy Solutions Acquisition, LLC, a Delaware limited liability company (f/k/a Athena Energy Services Buyer, LLC) and subsidiary of Energy Capital Partners, LLC |
| TBD | | To be determined |
TCEH Corp. | | Formerly Texas Competitive Electric Holdings Company LLC, predecessor to Vistra Energy Corp. whose major subsidiaries include Luminant and TXU Energy |
| TCJA | | Tax reform legislation informally called the Tax Cuts and Jobs Act of 2017 |
| TCOS | | Transmission Cost of Service |
| TCRF | | Transmission Cost Recovery Factor |
| TDSIC | | Transmission, Distribution and Storage System Improvement Charge |
| TDU | | Transmission and distribution utility |
TSCR | | Tax Savings Credit Rider |
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| Tenaska | | Tenaska Wind Holdings, LLC |
| Texas RE | | Texas Reliability Entity |
| TOB | | Tariffed On Bill |
| Utility Holding | | Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy |
VCC | | Vectren Capital Corp., a wholly-owned subsidiary of Vectren |
| Vectren | | Vectren Corporation, a wholly-owned subsidiary of CenterPoint Energy as of February 1, 2019 |
| VEDO | | Vectren Energy Delivery of Ohio, Inc., a wholly-owned subsidiary of Vectren |
| VIE | | Variable interest entity |
| VISCO | | Vectren Infrastructure Services Corporation, formerly a wholly-owned subsidiary of Vectren |
| Vistra Energy Corp. | | Texas-based energy company focused on the competitive energy and power generation markets, whose major subsidiaries include Luminant and TXU Energy |
| VRP | | Voluntary Remediation Program |
| VUHI | | Vectren Utility Holdings, Inc., a wholly-owned subsidiary of Vectren |
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| GLOSSARY |
| ZENS | | 2.0% Zero-Premium Exchangeable Subordinated Notes due 2029 |
| ZENS-Related Securities | | As of both March 31, 20202021 and December 31, 2019,2020, consisted of AT&T Common and Charter Common |
20192020 Form 10-K | | Annual Report on Form 10-K for the fiscal year ended December 31, 20192020 as filed with the SEC on February 25, 2021 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
From time to time the Registrants make statements concerning their expectations, beliefs, plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements that are not historical facts. These statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied by these statements. You can generally identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “target,” “will” or other similar words.
The Registrants have based their forward-looking statements on management’s beliefs and assumptions based on information reasonably available to management at the time the statements are made. The Registrants caution you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, the Registrants cannot assure you that actual results will not differ materially from those expressed or implied by the Registrants’ forward-looking statements. In this Form 10-Q, unless context requires otherwise, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries, including Houston Electric, CERC and Vectren.
The following are some of the factors that could cause actual results to differ from those expressed or implied by the Registrants’ forward-looking statements and apply to all Registrants unless otherwise indicated:
•the performance of Enable, the amount of cash distributions CenterPoint Energy receives from Enable, Enable’s ability to redeem the Enable Series A Preferred Units in certain circumstances and the value of CenterPoint Energy’s interest in Enable, and factors that may have a material impact on such performance, cash distributions and value, including factors such as:
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◦ | competitive conditions in the midstream industry, and actions taken by Enable’s customers and competitors, including drilling, production and capital spending decisions of third parties and the extent and timing of the entry of additional competition in the markets served by Enable; |
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◦ | the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines; |
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◦ | economic effects of the recent actions of Saudi Arabia, Russia and other oil-producing countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices; |
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◦ | the demand for crude oil, natural gas, NGLs and transportation and storage services; |
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◦ | environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing; |
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◦ | recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable; |
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◦ | the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments; |
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◦ | changes in tax status; and |
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◦ | access to debt and equity capital; |
◦the timing and extent of changes in the supply of natural gas and associated commodity prices, particularly prices of natural gas and NGLs, the competitive effects of the available pipeline capacity in the regions served by Enable, and the effects of geographic and seasonal commodity price differentials, including the effects of these circumstances on re-contracting available capacity on Enable’s interstate pipelines and its commodity risk management activities;
◦economic effects of the actions of certain crude oil-exporting countries and the Organization of Petroleum Exporting Countries, which have resulted in a substantial decrease in oil and natural gas prices, and the combined impact of these events and COVID-19 on commodity prices;
◦the demand for crude oil, natural gas, NGLs and transportation and storage services;
◦environmental and other governmental regulations, including the availability of drilling permits and the regulation of hydraulic fracturing;
◦recording of goodwill, long-lived asset or other than temporary impairment charges by or related to Enable;
◦the timing of payments from Enable’s customers under existing contracts, including minimum volume commitment payments;
◦changes in tax status; and
•access to debt and equity capital;
•the integration of the businesses acquired in the Merger, including the integration of technology systems; the outcome of shareholder litigation filed against Vectren that could reduce the benefits of the Merger; the ability to realize additional benefits and commercial opportunities from the Merger, including the development of new opportunities and the performance of projects undertaken by ESG, which are subject to, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties, guarantees and other contractual and legal obligations;
•the recording of impairment charges;
•industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns;
•timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment, including the timing and recovery of natural gas purchase costs associated with the February 2021 Winter Storm Event;
•future economic conditions in regional and national markets and their effect on sales, prices and costs;
•weather variations and other natural phenomena, including the impact of severe weather events on operations and capital, including impacts from the February 2021 Winter Storm Event;
•CenterPoint Energy’s or Enable’s business strategies and strategic initiatives, restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the announced sale of our Natural Gas businesses in
Arkansas and Oklahoma, which we cannot assure will be completed or will have the anticipated benefits to us, and the Enable Merger, which we cannot assure will be completed or will have the anticipated benefits to us or Enable;
•the outcome of litigation, including litigation related to the February 2021 Winter Storm Event;
•the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric, including the negative impact on such ability related to COVID-19 and the February 2021 Winter Storm Event;
•the COVID-19 pandemic and its effect on our and Enable’s operations, business and financial condition, our industries and the communities we serve, U.S. and world financial markets and supply chains, potential regulatory actions and changes in customer and stakeholder behaviors relating thereto;
•volatility and a substantial recent decline in the markets for oil and natural gas as a result of the actions of certain crude-oil exporting nationscountries and the Organization of Petroleum Exporting Countries and reduced worldwide consumption due to the COVID-19 pandemic;
the expected benefits of the Merger and integration, including the outcome of shareholder litigation filed against Vectren that could reduce anticipated benefits of the Merger, as well as the ability to successfully integrate the Vectren businesses and to realize anticipated benefits and commercial opportunities;
the recording of impairment charges, including any impairment or loss associated with the sale of the Infrastructure Services and Energy Services Disposal Groups;
industrial, commercial and residential growth in our service territories and changes in market demand, including the demand for our non-utility products and services and effects of energy efficiency measures and demographic patterns;
timely and appropriate rate actions that allow recovery of costs and a reasonable return on investment;
future economic conditions in regional and national markets and their effect on sales, prices and costs;
weather variations and other natural phenomena, including the impact of severe weather events on operations and capital;
•state and federal legislative and regulatory actions or developments affecting various aspects of our businesses (including the businesses of Enable), including, among others, energy deregulation or re-regulation, pipeline integrity and safety and changes in regulation and legislation pertaining to trade, health care, finance and actions regarding the rates charged by our regulated businesses;
tax legislation, including the effects of the CARES Act and of the TCJA (which includes any potential changes to interest deductibility) and uncertainties involving state commissions’ and local municipalities’ regulatory requirements and determinations regarding the treatment of EDIT and our rates;
CenterPoint Energy’s and CERC’s ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms;
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| • | the timing and extent of changes in commodity prices, particularly natural gas and coal, and the effects of geographic and seasonal commodity price differentials on CERC and Enable;
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the ability of CenterPoint Energy’s and CERC’s non-utility business operating in the Energy Services Disposal Group to effectively optimize opportunities related to natural gas price volatility and storage activities, including weather-related impacts;
actions by credit rating agencies, including any potential downgrades to credit ratings;
problems with regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates;
the availability and prices of raw materials and services and changes in labor for current and future construction projects;
local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact the continued operation, and/or cost recovery of generation plant costs and related assets;
the impact of unplanned facility outages or other closures;
any direct or indirect effects on our or Enable’s facilities, operations and financial condition resulting from terrorism, cyber-attacks, data security breaches or other attempts to disrupt our businesses or the businesses of third parties, or other catastrophic events such as fires, ice, earthquakes, explosions, leaks, floods, droughts, hurricanes, tornadoes, pandemic health events or other occurrences;
•our ability to mitigate weather impacts through normalization or rate mechanisms, and the effectiveness of such mechanisms;
•actions by credit rating agencies, including any potential downgrades to credit ratings;
•matters affecting regulatory approval, legislative actions, construction, implementation of necessary technology or other issues with respect to major capital projects that result in delays or cancellation or in cost overruns that cannot be recouped in rates;
•local, state and federal legislative and regulatory actions or developments relating to the environment, including, among others, those related to global climate change, air emissions, carbon, waste water discharges and the handling and disposal of CCR that could impact the continued operation, cost recovery of generation plant costs and related assets, and CenterPoint Energy’s carbon emissions reduction targets;
•the impact of unplanned facility outages or other closures;
•our ability to fund and invest planned capital and the timely recovery of our investments, including those related to Indiana Electric’s anticipatedgeneration transition plan as part of its most recent IRP;
•our ability to successfully construct and operate electric generating facilities, including complying with applicable environmental standards and the implementation of a well-balanced energy and resource mix, as appropriate;
our ability to control operation and maintenance costs;
•the sufficiency of our insurance coverage, including availability, cost, coverage and terms and ability to recover claims;
•the investment performance of CenterPoint Energy’s pension and postretirement benefit plans;
•changes in interest rates and their impact on costs of borrowing and the valuation of CenterPoint Energy’s pension benefit obligation;
•commercial bank and financial market conditions, our access to capital, the cost of such capital, and the results of our financing and refinancing efforts, including availability of funds in the debt capital markets;
•changes in rates of inflation;
•inability of various counterparties to meet their obligations to us;
•non-payment for our services due to financial distress of our customers;
•the extent and effectiveness of our and Enable’s risk management and hedging activities, including, but not limited to financial and weather hedges and commodity risk management activities;hedges;
•timely and appropriate regulatory actions, which include actions allowing securitization, for any future hurricanes or natural disasters or other recovery of costs;
the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric;
CenterPoint Energy’s or Enable’s potential business strategies and strategic initiatives, including restructurings, joint ventures and acquisitions or dispositions of assets or businesses, including the proposed sale of CES, which CenterPoint Energy and Enable cannot assure will be completed or will have the anticipated benefits to CenterPoint Energy or Enable;
•acquisition and merger activities involving us or our competitors, including the ability to successfully complete merger, acquisition and divestiture plans;
•our or Enable’s ability to recruit, effectively transition and retain management and key employees and maintain good labor relations;
the outcome of litigation;
the development of new opportunities and the performance of projects undertaken by ESG, including, among other factors, the level of success in bidding contracts and cancellation and/or reductions in the scope of projects by customers, and obligations related to warranties and guarantees;
•changes in technology, particularly with respect to efficient battery storage or the emergence or growth of new, developing or alternative sources of generation;
•the impact of alternate energy sources on the demand for natural gas;
•the timing and outcome of any audits, disputes and other proceedings related to taxes;
•the effective tax rates;
•the transition to a replacement for the LIBOR benchmark interest rate;
•the effect of changes in and application of accounting standards and pronouncements; and
You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and the Registrants undertake no obligation to update or revise any forward-looking statements. Investors should note that the Registrants announce material financial information in SEC filings, press releases and public conference calls. Based on guidance from the SEC, the Registrants may use the Investors section of CenterPoint Energy’s website (www.centerpointenergy.com) to communicate with investors about the Registrants. It is possible that the financial and other information posted there could be deemed to be material information. The information on CenterPoint Energy’s website is not part of this combined Form 10-Q.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions, except per share amounts) |
| Revenues: | | | | | | | |
| Utility revenues | | | | | $ | 2,484 | | | $ | 2,073 | |
| Non-utility revenues | | | | | 63 | | | 94 | |
| Total | | | | | 2,547 | | | 2,167 | |
| Expenses: | | | | | | | |
| Utility natural gas, fuel and purchased power | | | | | 935 | | | 609 | |
| Non-utility cost of revenues, including natural gas | | | | | 40 | | | 64 | |
| Operation and maintenance | | | | | 669 | | | 674 | |
| Depreciation and amortization | | | | | 307 | | | 282 | |
| Taxes other than income taxes | | | | | 143 | | | 136 | |
| Goodwill impairment | | | | | 0 | | | 185 | |
| Total | | | | | 2,094 | | | 1,950 | |
| Operating Income | | | | | 453 | | | 217 | |
| Other Income (Expense): | | | | | | | |
| Loss on marketable securities | | | | | (23) | | | (144) | |
| Gain on indexed debt securities | | | | | 26 | | | 135 | |
| Interest expense and other finance charges | | | | | (113) | | | (139) | |
| Interest expense on Securitization Bonds | | | | | (6) | | | (8) | |
| Equity in earnings (loss) of unconsolidated affiliates, net | | | | | 108 | | | (1,475) | |
| | | | | | | |
| | | | | | | |
| Other income (expense), net | | | | | (8) | | | 14 | |
| Total | | | | | (16) | | | (1,617) | |
| Income (Loss) from Continuing Operations Before Income Taxes | | | | | 437 | | | (1,400) | |
| Income tax expense (benefit) | | | | | 74 | | | (347) | |
| Income (Loss) from Continuing Operations | | | | | 363 | | | (1,053) | |
| Loss from Discontinued Operations (net of tax benefit of $-0- and $17, respectively) | | | | | 0 | | | (146) | |
| Net Income (Loss) | | | | | 363 | | | (1,199) | |
| Income allocated to preferred shareholders | | | | | 29 | | | 29 | |
| Income (Loss) Available to Common Shareholders | | | | | $ | 334 | | | $ | (1,228) | |
| | | | | | | |
| Basic earnings (loss) per common share - continuing operations | | | | | $ | 0.56 | | | $ | (2.15) | |
| Basic earnings (loss) per common share - discontinued operations | | | | | 0 | | | (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 | | | (0.29) | |
| Diluted Earnings (Loss) Per Common Share | | | | | $ | 0.56 | | | $ | (2.44) | |
| | | | | | | |
| Weighted Average Common Shares Outstanding, Basic | | | | | 552 | | | 502 | |
| Weighted Average Common Shares Outstanding, Diluted | | | | | 631 | | | 502 | |
|
| | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | 2020 | | 2019 |
| | | |
| Revenues: | | | | |
| Utility revenues | | $ | 2,073 |
| | $ | 2,171 |
|
| Non-utility revenues | | 94 |
| | 58 |
|
| Total | | 2,167 |
| | 2,229 |
|
| Expenses: | | | | |
| Utility natural gas, fuel and purchased power | | 609 |
| | 797 |
|
| Non-utility cost of revenues, including natural gas | | 64 |
| | 47 |
|
| Operation and maintenance | | 674 |
| | 748 |
|
| Depreciation and amortization | | 282 |
| | 300 |
|
| Taxes other than income taxes | | 136 |
| | 126 |
|
| Goodwill Impairment | | 185 |
| | — |
|
| Total | | 1,950 |
| | 2,018 |
|
| Operating Income | | 217 |
| | 211 |
|
| Other Income (Expense): | | | | |
| Gain (loss) on marketable securities | | (144 | ) | | 83 |
|
| Gain (loss) on indexed debt securities | | 135 |
| | (86 | ) |
| Interest expense and other finance charges | | (139 | ) | | (121 | ) |
| Interest expense on Securitization Bonds | | (8 | ) | | (12 | ) |
| Equity in earnings (loss) of unconsolidated affiliates, net | | (1,475 | ) | | 62 |
|
| Interest income | | — |
| | 12 |
|
| Interest income from Securitization Bonds | | 1 |
| | 2 |
|
| Other income, net | | 13 |
| | 6 |
|
| Total | | (1,617 | ) | | (54 | ) |
| Income (Loss) from Continuing Operations Before Income Taxes | | (1,400 | ) | | 157 |
|
| Income tax expense (benefit) | | (347 | ) | | 14 |
|
| Income (Loss) from Continuing Operations | | (1,053 | ) | | 143 |
|
| Income (loss) from discontinued operations (net of tax expense (benefit) of ($17) and $8, respectively) | | (146 | ) | | 26 |
|
| Net Income (Loss) | | (1,199 | ) | | 169 |
|
| Preferred stock dividend requirement | | 29 |
| | 29 |
|
| Income (Loss) Available to Common Shareholders | | $ | (1,228 | ) | | $ | 140 |
|
| | | | | |
| Basic earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
|
| Basic earnings (loss) per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Basic Earnings (Loss) Per Common Share | | (2.44 | ) | | 0.28 |
|
| Diluted earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
|
| Diluted earnings (loss) per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Diluted Earnings (Loss) Per Common Share | | $ | (2.44 | ) | | $ | 0.28 |
|
| | | | | |
| Weighted Average Common Shares Outstanding, Basic | | 502 |
| | 502 |
|
| Weighted Average Common Shares Outstanding, Diluted | | 502 |
| | 504 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Net Income (Loss) | | | | | $ | 363 | | | $ | (1,199) | |
| Other comprehensive income (loss): | | | | | | | |
| Adjustment to pension and other postretirement plans (net of tax of $-0- and $1) | | | | | 2 | | | 1 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other comprehensive income (loss) from unconsolidated affiliates (net of tax of $-0- and $-0-) | | | | | 1 | | | (3) | |
| Total | | | | | 3 | | | (2) | |
| Comprehensive income (loss) | | | | | 366 | | | (1,201) | |
| Income allocated to preferred shareholders | | | | | 29 | | | 29 | |
| Comprehensive income (loss) available to common shareholders | | | | | $ | 337 | | | $ | (1,230) | |
|
| | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Net income (loss) | | $ | (1,199 | ) | | $ | 169 |
|
| Other comprehensive income (loss): | | | | |
| Adjustment to pension and other postretirement plans (net of tax of $1 and $1) | | 1 |
| | 1 |
|
| Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-) | | — |
| | (1 | ) |
| Reclassification of deferred loss from cash flow hedges realized in net income (net of tax of $-0- and $-0-) | | — |
| | 1 |
|
| Other comprehensive loss from unconsolidated affiliates (net of tax of $-0- and $-0-) | | (3 | ) | | — |
|
| Total | | (2 | ) | | 1 |
|
| Comprehensive income (loss) | | (1,201 | ) | | 170 |
|
| Preferred stock dividend requirement | | 29 |
| | 29 |
|
| Comprehensive income (loss) available to common shareholders | | $ | (1,230 | ) | | $ | 141 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
| | | | | | | | | | | |
| March 31,
2021 | | December 31,
2020 |
| (in millions) |
| Current Assets: | | | |
| Cash and cash equivalents ($142 and $139 related to VIEs, respectively) | $ | 146 | | | $ | 147 | |
| Investment in marketable securities | 848 | | | 871 | |
| Accounts receivable ($24 and $23 related to VIEs, respectively), less allowance for credit losses of $65 and $52, respectively | 780 | | | 676 | |
| Accrued unbilled revenues, less allowance for credit losses of $4 and $5, respectively | 343 | | | 505 | |
| | | |
| Natural gas and coal inventory | 67 | | | 203 | |
| Materials and supplies | 310 | | | 297 | |
| | | |
| Taxes receivable | 79 | | | 82 | |
| | | |
| Prepaid expenses and other current assets ($16 and $15 related to VIEs, respectively) | 646 | | | 139 | |
| Total current assets | 3,219 | | | 2,920 | |
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 32,991 | | | 32,514 | |
| Less: accumulated depreciation and amortization | 10,252 | | | 10,152 | |
| Property, plant and equipment, net | 22,739 | | | 22,362 | |
| Other Assets: | | | |
| Goodwill | 4,697 | | | 4,697 | |
| Regulatory assets ($597 and $633 related to VIEs, respectively) | 3,795 | | | 2,094 | |
| | | |
| | | |
| Investment in unconsolidated affiliates | 853 | | | 783 | |
| Preferred units – unconsolidated affiliate | 363 | | | 363 | |
| | | |
| | | |
| Other non-current assets | 240 | | | 252 | |
| Total other assets | 9,948 | | | 8,189 | |
| Total Assets | $ | 35,906 | | | $ | 33,471 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions) |
| Current Assets: | | | |
| Cash and cash equivalents ($190 and $216 related to VIEs, respectively) | $ | 220 |
| | $ | 241 |
|
| Investment in marketable securities | 678 |
| | 822 |
|
| Accounts receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $30 and $21, respectively | 711 |
| | 702 |
|
| Accrued unbilled revenues, less bad debt reserve of $3 and $-0-, respectively | 320 |
| | 469 |
|
| Natural gas inventory | 97 |
| | 209 |
|
| Materials and supplies | 278 |
| | 263 |
|
| Taxes receivable | 93 |
| | 106 |
|
| Current assets held for sale | 1,647 |
| | 1,002 |
|
| Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively) | 120 |
| | 123 |
|
| Total current assets | 4,164 |
| | 3,937 |
|
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 30,830 |
| | 30,324 |
|
| Less: accumulated depreciation and amortization | 9,852 |
| | 9,700 |
|
| Property, plant and equipment, net | 20,978 |
| | 20,624 |
|
| Other Assets: | | | |
| Goodwill | 4,697 |
| | 4,882 |
|
| Regulatory assets ($758 and $788 related to VIEs, respectively) | 2,120 |
| | 2,117 |
|
| Investment in unconsolidated affiliates | 850 |
| | 2,408 |
|
| Preferred units – unconsolidated affiliate | 363 |
| | 363 |
|
| Non-current assets held for sale | — |
| | 962 |
|
| Other | 223 |
| | 236 |
|
| Total other assets | 8,253 |
| | 10,968 |
|
| Total Assets | $ | 33,395 |
| | $ | 35,529 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
| | | | | | | | | | | |
| March 31,
2021 | | December 31,
2020 |
| (in millions, except share amounts) |
| Current Liabilities: | | | |
| Short-term borrowings | $ | 0 | | | $ | 24 | |
| Current portion of VIE Securitization Bonds long-term debt | 212 | | | 211 | |
| Indexed debt, net | 13 | | | 15 | |
| Current portion of other long-term debt | 1,563 | | | 1,669 | |
| Indexed debt securities derivative | 927 | | | 953 | |
| Accounts payable | 797 | | | 853 | |
| | | |
| Taxes accrued | 229 | | | 265 | |
| Interest accrued | 119 | | | 145 | |
| Dividends accrued | 0 | | | 136 | |
| Customer deposits | 120 | | | 119 | |
| Non-trading derivative liabilities | 2 | | | 3 | |
| | | |
| | | |
| | | |
| Other current liabilities | 344 | | | 432 | |
| Total current liabilities | 4,326 | | | 4,825 | |
| Other Liabilities: | | | |
| Deferred income taxes, net | 3,687 | | | 3,603 | |
| Non-trading derivative liabilities | 14 | | | 27 | |
| Benefit obligations | 675 | | | 680 | |
| Regulatory liabilities | 3,407 | | | 3,448 | |
| | | |
| Other non-current liabilities | 1,033 | | | 1,019 | |
| Total other liabilities | 8,816 | | | 8,777 | |
| Long-term Debt: | | | |
| VIE Securitization Bonds, net | 499 | | | 536 | |
| Other long-term debt, net | 13,549 | | | 10,985 | |
| Total long-term debt, net | 14,048 | | | 11,521 | |
| Commitments and Contingencies (Note 14) | 0 | | 0 |
| Shareholders’ Equity: | | | |
| Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized, 2,402,400 shares outstanding, $2,402 liquidation preference (Note 19) | 2,363 | | | 2,363 | |
| Common stock, $0.01 par value, 1,000,000,000 shares authorized, 551,865,588 shares and 551,355,861 shares outstanding, respectively | 6 | | | 6 | |
| Additional paid-in capital | 6,916 | | | 6,914 | |
| Accumulated deficit | (482) | | | (845) | |
| Accumulated other comprehensive loss | (87) | | | (90) | |
| Total shareholders’ equity | 8,716 | | | 8,348 | |
| Total Liabilities and Shareholders’ Equity | $ | 35,906 | | | $ | 33,471 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions, except share amounts) |
| Current Liabilities: | | | |
| Current portion of VIE Securitization Bonds long-term debt | $ | 204 |
| | $ | 231 |
|
| Indexed debt, net | 18 |
| | 19 |
|
| Current portion of other long-term debt | 1,204 |
| | 618 |
|
| Indexed debt securities derivative | 758 |
| | 893 |
|
| Accounts payable | 739 |
| | 884 |
|
| Taxes accrued | 177 |
| | 239 |
|
| Interest accrued | 126 |
| | 158 |
|
| Customer deposits | 124 |
| | 124 |
|
| Non-trading derivative liabilities | 9 |
| | 7 |
|
| Current liabilities held for sale | 383 |
| | 455 |
|
| Other | 300 |
| | 350 |
|
| Total current liabilities | 4,042 |
| | 3,978 |
|
| Other Liabilities: | |
| | |
|
| Deferred income taxes, net | 3,562 |
| | 3,928 |
|
| Non-trading derivative liabilities | 14 |
| | 15 |
|
| Benefit obligations | 746 |
| | 750 |
|
| Regulatory liabilities | 3,480 |
| | 3,474 |
|
| Non-current liabilities held for sale | — |
| | 43 |
|
| Other | 751 |
| | 738 |
|
| Total other liabilities | 8,553 |
| | 8,948 |
|
| Long-term Debt: | |
| | |
|
| VIE Securitization Bonds, net | 710 |
| | 746 |
|
| Other long-term debt, net | 13,120 |
| | 13,498 |
|
| Total long-term debt, net | 13,830 |
| | 14,244 |
|
| Commitments and Contingencies (Note 14) |
|
| |
|
|
| Shareholders’ Equity: | |
| | |
|
| Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized |
|
| |
|
|
| Series A Preferred Stock, $0.01 par value, $800 aggregate liquidation preference, 800,000 shares outstanding | 790 |
| | 790 |
|
| Series B Preferred Stock, $0.01 par value, $978 aggregate liquidation preference, 977,500 shares outstanding | 950 |
| | 950 |
|
| Common stock, $0.01 par value, 1,000,000,000 shares authorized, 502,647,495 shares and 502,242,061 shares outstanding, respectively | 5 |
| | 5 |
|
| Additional paid-in capital | 6,086 |
| | 6,080 |
|
| Retained earnings (accumulated deficit) | (761 | ) | | 632 |
|
| Accumulated other comprehensive loss | (100 | ) | | (98 | ) |
| Total shareholders’ equity | 6,970 |
| | 8,359 |
|
| Total Liabilities and Shareholders’ Equity | $ | 33,395 |
| | $ | 35,529 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
| | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2020 | | 2019 | | 2021 | | 2020 |
| | (in millions) | | (in millions) |
| Cash Flows from Operating Activities: | | | | Cash Flows from Operating Activities: | |
| Net income (loss) | $ | (1,199 | ) | | $ | 169 |
| Net income (loss) | $ | 363 | | | $ | (1,199) | |
| | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
| Depreciation and amortization | 282 |
| | 300 |
| Depreciation and amortization | 307 | | | 282 | |
| Depreciation and amortization on assets held for sale | — |
| | 13 |
| |
| | Amortization of deferred financing costs | 7 |
| | 7 |
| Amortization of deferred financing costs | 7 | | | 7 | |
| Amortization of intangible assets in non-utility cost of revenues | 1 |
| | 9 |
| |
| | Deferred income taxes | (377 | ) | | (14 | ) | Deferred income taxes | 66 | | | (377) | |
| | Goodwill impairment and loss from reclassification to held for sale | 214 |
| | — |
| Goodwill impairment and loss from reclassification to held for sale | 0 | | | 214 | |
| Goodwill impairment | 185 |
| | — |
| Goodwill impairment | 0 | | | 185 | |
| Unrealized loss (gain) on marketable securities | 144 |
| | (83 | ) | |
| Loss (gain) on indexed debt securities | (135 | ) | | 86 |
| |
| | Unrealized loss on marketable securities | | Unrealized loss on marketable securities | 23 | | | 144 | |
| Gain on indexed debt securities | | Gain on indexed debt securities | (26) | | | (135) | |
| | Write-down of natural gas inventory | 3 |
| | 1 |
| Write-down of natural gas inventory | 0 | | | 3 | |
| Equity in (earnings) losses of unconsolidated affiliates | 1,475 |
| | (62 | ) | Equity in (earnings) losses of unconsolidated affiliates | (108) | | | 1,475 | |
Distributions from unconsolidated affiliates
| 70 |
| | 74 |
| Distributions from unconsolidated affiliates | 39 | | | 70 | |
| Pension contributions | (2 | ) | | (2 | ) | Pension contributions | (8) | | | (2) | |
| Changes in other assets and liabilities, excluding acquisitions: | | | | Changes in other assets and liabilities, excluding acquisitions: | |
| Accounts receivable and unbilled revenues, net | 236 |
| | 138 |
| Accounts receivable and unbilled revenues, net | 29 | | | 236 | |
| | Inventory | 110 |
| | 120 |
| Inventory | 99 | | | 110 | |
| Taxes receivable | 13 |
| | — |
| Taxes receivable | 3 | | | 13 | |
| Accounts payable | (192 | ) | | (332 | ) | Accounts payable | (55) | | | (192) | |
| Fuel cost recovery | 11 |
| | 58 |
| |
| | Non-trading derivatives, net | (53 | ) | | (40 | ) | Non-trading derivatives, net | (14) | | | (53) | |
| Margin deposits, net | 21 |
| | 19 |
| Margin deposits, net | 0 | | | 21 | |
| Interest and taxes accrued | (95 | ) | | (116 | ) | Interest and taxes accrued | (62) | | | (95) | |
| Net regulatory assets and liabilities | (38 | ) | | (3 | ) | Net regulatory assets and liabilities | (2,297) | | | (27) | |
| Other current assets | (5 | ) | | 16 |
| Other current assets | 0 | | | (5) | |
| Other current liabilities | (37 | ) | | (101 | ) | Other current liabilities | (59) | | | (37) | |
| Other assets | 19 |
| | 58 |
| |
| Other liabilities | 1 |
| | (39 | ) | |
| Other operating activities, net | 3 |
| | (5 | ) | |
| Net cash provided by operating activities | 662 |
| | 271 |
| |
| Other non-current assets | | Other non-current assets | 0 | | | 19 | |
| Other non-current liabilities | | Other non-current liabilities | 17 | | | 1 | |
| Other, net | | Other, net | (5) | | | 4 | |
| | Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | (1,681) | | | 662 | |
| Cash Flows from Investing Activities: | | | | Cash Flows from Investing Activities: | | | |
| Capital expenditures | (664 | ) | | (537 | ) | Capital expenditures | (594) | | | (664) | |
| Acquisitions, net of cash acquired | — |
| | (5,987 | ) | |
| | Distributions from unconsolidated affiliate in excess of cumulative earnings | 7 |
| | — |
| Distributions from unconsolidated affiliate in excess of cumulative earnings | 0 | | | 7 | |
| Other investing activities, net | 3 |
| | (15 | ) | |
| | Other, net | | Other, net | (10) | | | 3 | |
| | Net cash used in investing activities | (654 | ) | | (6,539 | ) | Net cash used in investing activities | (604) | | | (654) | |
| Cash Flows from Financing Activities: | | | | Cash Flows from Financing Activities: | | | |
| | Proceeds from (payments of) commercial paper, net | (828 | ) | | 2,692 |
| Proceeds from (payments of) commercial paper, net | 38 | | | (828) | |
| Proceeds from long-term debt, net | — |
| | 721 |
| |
| Proceeds from long-term debt | | Proceeds from long-term debt | 2,795 | | | 0 | |
| Payments of long-term debt | (63 | ) | | (994 | ) | Payments of long-term debt | (388) | | | (63) | |
| Long-term revolving credit facility, net | 1,050 |
| | 135 |
| |
| Debt issuance costs | — |
| | (8 | ) | |
| Borrowings from revolving credit facilities | | Borrowings from revolving credit facilities | 0 | | | 1,050 | |
| | Payment of debt issuance costs | | Payment of debt issuance costs | (20) | | | 0 | |
| | Payment of dividends on Common Stock | (145 | ) | | (144 | ) | Payment of dividends on Common Stock | (88) | | | (145) | |
| Payment of dividends on Preferred Stock | (42 | ) | | (43 | ) | Payment of dividends on Preferred Stock | (48) | | | (42) | |
| Other financing activities, net | (4 | ) | | (14 | ) | |
| | Other, net | | Other, net | (4) | | | (4) | |
| | Net cash provided by (used in) financing activities | (32 | ) | | 2,345 |
| Net cash provided by (used in) financing activities | 2,285 | | | (32) | |
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | (24 | ) | | (3,923 | ) | Net Decrease in Cash, Cash Equivalents and Restricted Cash | 0 | | | (24) | |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 271 |
| | 4,278 |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 167 | | | 271 | |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 247 |
| | $ | 355 |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 167 | | | $ | 247 | |
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | | | | | Shares | | Amount | | Shares | | Amount |
| | | | | | | | | (in millions of dollars and shares) |
| Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | 3 | | | $ | 2,363 | | | 2 | | | $ | 1,740 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | 3 | | | 2,363 | | | 2 | | | 1,740 | |
| Common Stock, $0.01 par value; authorized 1,000,000,000 shares | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | 551 | | | 6 | | | 502 | | | 5 | |
| | | | | | | | | | | | | | | |
| Issuances related to benefit and investment plans | | | | | | | | | 1 | | | 0 | | | 0 | | | 0 | |
| Balance, end of period | | | | | | | | | 552 | | | 6 | | | 502 | | | 5 | |
| Additional Paid-in-Capital | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 6,914 | | | | | 6,080 | |
| | | | | | | | | | | | | | | |
| Issuances related to benefit and investment plans | | | | | | | | | | | 2 | | | | | 6 | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | | | 6,916 | | | | | 6,086 | |
| Retained Earnings (Accumulated Deficit) | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | (845) | | | | | 632 | |
| Net income (loss) | | | | | | | | | | | 363 | | | | | (1,199) | |
| Common Stock dividends declared (see Note 19) | | | | | | | | | | | 0 | | | | | (145) | |
| Preferred Stock dividends declared (see Note 19) | | | | | | | | | | | 0 | | | | | (42) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Adoption of ASU 2016-13 | | | | | | | | | | | 0 | | | | | (7) | |
| Balance, end of period | | | | | | | | | | | (482) | | | | | (761) | |
| Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | (90) | | | | | (98) | |
| Other comprehensive income (loss) | | | | | | | | | | | 3 | | | | | (2) | |
| Balance, end of period | | | | | | | | | | | (87) | | | | | (100) | |
| Total Shareholders’ Equity | | | | | | | | | | | $ | 8,716 | | | | | $ | 6,970 | |
|
| | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Shares | | Amount | | Shares | | Amount |
| | | |
| Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares | | | | | | | | |
| Balance, beginning of period | | 2 |
| | $ | 1,740 |
| | 2 |
| | $ | 1,740 |
|
| Balance, end of period | | 2 |
| | 1,740 |
| | 2 |
| | 1,740 |
|
| Common Stock, $0.01 par value; authorized 1,000,000,000 shares | | |
| | |
| | |
| | |
|
| Balance, beginning of period | | 502 |
| | 5 |
| | 501 |
| | 5 |
|
| Issuances related to benefit and investment plans | | — |
| | — |
| | 1 |
| | — |
|
| Balance, end of period | | 502 |
| | 5 |
| | 502 |
| | 5 |
|
| Additional Paid-in-Capital | | | | | | |
| | |
|
| Balance, beginning of period | | | | 6,080 |
| | |
| | 6,072 |
|
| Issuances related to benefit and investment plans | | | | 6 |
| | |
| | (12 | ) |
| Balance, end of period | | | | 6,086 |
| | |
| | 6,060 |
|
| Retained Earnings (Accumulated Deficit) | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 632 |
| | |
| | 349 |
|
| Net income (loss) | | | | (1,199 | ) | | |
| | 169 |
|
| Common Stock dividends declared ($0.2900 and $-0- per share, respectively) | | | | (145 | ) | | |
| | — |
|
| Series A Preferred Stock dividends declared ($30.6250 and $-0- per share, respectively) | | | | (25 | ) | | | | — |
|
| Series B Preferred Stock dividends declared ($17.5000 and $-0- per share, respectively) | | | | (17 | ) | | | | — |
|
| Adoption of ASU 2016-13 | | | | (7 | ) | | | | |
| Balance, end of period | | | | (761 | ) | | |
| | 518 |
|
| Accumulated Other Comprehensive Loss | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | (98 | ) | | |
| | (108 | ) |
| Other comprehensive income (loss) | | | | (2 | ) | | |
| | 1 |
|
| Balance, end of period | | | | (100 | ) | | |
| | (107 | ) |
| Total Shareholders’ Equity | | | | $ | 6,970 |
| | |
| | $ | 8,216 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | 2020 | | 2019 | | | | 2021 | | 2020 |
| | (in millions) | | | (in millions) |
| Revenues | | $ | 634 |
| | $ | 686 |
| Revenues | | | $ | 684 | | | $ | 634 | |
| Expenses: | | |
| | |
| Expenses: | | | | | |
| Operation and maintenance | | 359 |
| | 368 |
| Operation and maintenance | | | 373 | | | 359 | |
| Depreciation and amortization | | 129 |
| | 175 |
| Depreciation and amortization | | | 141 | | | 129 | |
| Taxes other than income taxes | | 64 |
| | 62 |
| Taxes other than income taxes | | | 63 | | | 64 | |
| Total | | 552 |
| | 605 |
| Total | | | 577 | | | 552 | |
| Operating Income | | 82 |
| | 81 |
| Operating Income | | | 107 | | | 82 | |
| Other Income (Expense): | | |
| | |
| Other Income (Expense): | | | | | |
| Interest expense and other finance charges | | (41 | ) | | (40 | ) | Interest expense and other finance charges | | | (45) | | | (41) | |
| Interest expense on Securitization Bonds | | (8 | ) | | (12 | ) | Interest expense on Securitization Bonds | | | (6) | | | (8) | |
| Interest income | | 1 |
| | 4 |
| |
| Interest income from Securitization Bonds | | 1 |
| | 2 |
| |
| Other income (expense), net | | 3 |
| | (2 | ) | |
| | Other income, net | | Other income, net | | | 5 | | | 5 | |
| Total | | (44 | ) | | (48 | ) | Total | | | (46) | | | (44) | |
| Income Before Income Taxes | | 38 |
| | 33 |
| Income Before Income Taxes | | | 61 | | | 38 | |
| Income tax expense | | 5 |
| | 6 |
| Income tax expense | | | 8 | | | 5 | |
| Net Income | | $ | 33 |
| | $ | 27 |
| Net Income | | | $ | 53 | | | $ | 33 | |
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Net income | | $ | 33 |
| | $ | 27 |
|
| Other comprehensive loss: | | | | |
| Net deferred loss from cash flow hedges (net of tax of $-0- and $-0-) | | — |
| | (1 | ) |
| Total | | — |
| | (1 | ) |
| Comprehensive income | | $ | 33 |
| | $ | 26 |
|
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Net income | | | | | $ | 53 | | | $ | 33 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Comprehensive income | | | | | $ | 53 | | | $ | 33 | |
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
| | | | | | | | | | | |
| | March 31,
2021 | | December 31,
2020 |
| (in millions) |
| Current Assets: | | | |
| Cash and cash equivalents ($142 and $139 related to VIEs, respectively) | $ | 143 | | | $ | 139 | |
| Accounts receivable ($24 and $23 related to VIEs, respectively), less allowance for credit losses of $1 and $1, respectively | 263 | | | 268 | |
| Accounts and notes receivable–affiliated companies | 674 | | | 7 | |
| Accrued unbilled revenues | 83 | | | 113 | |
| Materials and supplies | 202 | | | 195 | |
| | | |
| | | |
| | | |
| Prepaid expenses and other current assets ($16 and $15 related to VIEs, respectively) | 32 | | | 47 | |
| Total current assets | 1,397 | | | 769 | |
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 13,889 | | | 13,593 | |
| Less: accumulated depreciation and amortization | 3,967 | | | 3,930 | |
| Property, plant and equipment, net | 9,922 | | | 9,663 | |
| Other Assets: | | | |
| Regulatory assets ($597 and $633 related to VIEs, respectively) | 828 | | | 848 | |
| | | |
| Other non-current assets | 38 | | | 36 | |
| Total other assets | 866 | | | 884 | |
| Total Assets | $ | 12,185 | | | $ | 11,316 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions) |
| Current Assets: | | | |
| Cash and cash equivalents ($190 and $216 related to VIEs, respectively) | $ | 196 |
| | $ | 216 |
|
| Accounts and notes receivable ($22 and $26 related to VIEs, respectively), less bad debt reserve of $1 and $1, respectively | 244 |
| | 238 |
|
| Accounts and notes receivable–affiliated companies | 11 |
| | 523 |
|
| Accrued unbilled revenues | 92 |
| | 117 |
|
| Materials and supplies | 157 |
| | 147 |
|
| Prepaid expenses and other current assets ($19 and $19 related to VIEs, respectively) | 36 |
| | 49 |
|
| Total current assets | 736 |
| | 1,290 |
|
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 13,058 |
| | 12,829 |
|
| Less: accumulated depreciation and amortization | 3,844 |
| | 3,797 |
|
| Property, plant and equipment, net | 9,214 |
| | 9,032 |
|
| Other Assets: | |
| | |
|
| Regulatory assets ($758 and $788 related to VIEs, respectively) | 891 |
| | 915 |
|
| Other | 29 |
| | 25 |
|
| Total other assets | 920 |
| | 940 |
|
| Total Assets | $ | 10,870 |
| | $ | 11,262 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
LIABILITIES AND MEMBER’S EQUITY
| | | | | | | | | | | |
| March 31,
2021 | | December 31,
2020 |
| (in millions) |
| Current Liabilities: | | | |
| | | |
| Current portion of VIE Securitization Bonds long-term debt | 212 | | | 211 | |
| Current portion of other long-term debt | 300 | | | 402 | |
| Accounts payable | 333 | | | 281 | |
| Accounts and notes payable–affiliated companies | 41 | | | 96 | |
| Taxes accrued | 103 | | | 158 | |
| Interest accrued | 53 | | | 71 | |
| | | |
| Other current liabilities | 115 | | | 117 | |
| Total current liabilities | 1,157 | | | 1,336 | |
| Other Liabilities: | | | |
| Deferred income taxes, net | 1,051 | | | 1,041 | |
| Benefit obligations | 75 | | | 75 | |
| Regulatory liabilities | 1,187 | | | 1,252 | |
| | | |
| Other non-current liabilities | 95 | | | 95 | |
| Total other liabilities | 2,408 | | | 2,463 | |
| Long-term Debt: | | | |
| VIE Securitization Bonds, net | 499 | | | 536 | |
| Other long-term debt, net | 4,957 | | | 3,870 | |
| Total long-term debt, net | 5,456 | | | 4,406 | |
| Commitments and Contingencies (Note 14) | 0 | | 0 |
| Member’s Equity: | | | |
| Common stock | 0 | | | 0 | |
| Additional paid-in capital | 2,548 | | | 2,548 | |
| Retained earnings | 616 | | | 563 | |
| | | |
| Total member’s equity | 3,164 | | | 3,111 | |
| Total Liabilities and Member’s Equity | $ | 12,185 | | | $ | 11,316 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions) |
| Current Liabilities: | |
| | |
|
| Current portion of VIE Securitization Bonds long-term debt | $ | 204 |
| | $ | 231 |
|
| Accounts payable | 259 |
| | 268 |
|
| Accounts and notes payable–affiliated companies | 175 |
| | 76 |
|
| Taxes accrued | 61 |
| | 123 |
|
| Interest accrued | 51 |
| | 69 |
|
| Other | 78 |
| | 63 |
|
| Total current liabilities | 828 |
| | 830 |
|
| Other Liabilities: | |
| | |
|
| Deferred income taxes, net | 1,036 |
| | 1,030 |
|
| Benefit obligations | 72 |
| | 75 |
|
| Regulatory liabilities | 1,271 |
| | 1,288 |
|
| Other | 80 |
| | 69 |
|
| Total other liabilities | 2,459 |
| | 2,462 |
|
| Long-term Debt: | |
| | |
|
| VIE Securitization Bonds, net | 710 |
| | 746 |
|
| Other, net | 3,974 |
| | 3,973 |
|
| Total long-term debt, net | 4,684 |
| | 4,719 |
|
| Commitments and Contingencies (Note 14) |
| |
|
| Member’s Equity: | | | |
| Common stock | — |
| | — |
|
| Additional paid-in capital | 2,486 |
| | 2,486 |
|
| Retained earnings | 428 |
| | 780 |
|
| Accumulated other comprehensive loss | (15 | ) | | (15 | ) |
| Total member’s equity | 2,899 |
| | 3,251 |
|
| Total Liabilities and Member’s Equity | $ | 10,870 |
| | $ | 11,262 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| (in millions) |
| Cash Flows from Operating Activities: | | | |
| Net income | $ | 53 | | | $ | 33 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 141 | | | 129 | |
| Amortization of deferred financing costs | 3 | | | 3 | |
| Deferred income taxes | (5) | | | (1) | |
| | | |
| | | |
| Changes in other assets and liabilities: | | | |
| Accounts and notes receivable, net | 21 | | | 19 | |
| Accounts receivable/payable–affiliated companies | (49) | | | (3) | |
| Inventory | (7) | | | (10) | |
| Accounts payable | 14 | | | (2) | |
| | | |
| Interest and taxes accrued | (73) | | | (80) | |
| | | |
| Net regulatory assets and liabilities | (63) | | | (11) | |
| Other current assets | 16 | | | 13 | |
| Other current liabilities | (2) | | | 8 | |
| Other assets | 3 | | | 0 | |
| Other liabilities | 0 | | | 8 | |
| Other, net | (5) | | | (3) | |
| Net cash provided by operating activities | 47 | | | 103 | |
| Cash Flows from Investing Activities: | | | |
| Capital expenditures | (314) | | | (286) | |
| Decrease (increase) in notes receivable–affiliated companies | (665) | | | 481 | |
| | | |
| | | |
| Other, net | (3) | | | (3) | |
| Net cash provided by (used in) investing activities | (982) | | | 192 | |
| Cash Flows from Financing Activities: | | | |
| | | |
| | | |
| Proceeds from long-term debt | 1,096 | | | 0 | |
| Payments of long-term debt | (138) | | | (63) | |
| Increase (decrease) in notes payable–affiliated companies | (8) | | | 133 | |
| Dividend to parent | 0 | | | (385) | |
| | | |
| | | |
| Payment of debt issuance costs | (10) | | | 0 | |
| | | |
| Net cash provided by (used in) financing activities | 940 | | | (315) | |
| Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | 5 | | | (20) | |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 154 | | | 235 | |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 159 | | | $ | 215 | |
|
| | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | (in millions) |
| Cash Flows from Operating Activities: | | | |
| Net income | $ | 33 |
| | $ | 27 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
|
| Depreciation and amortization | 129 |
| | 175 |
|
| Amortization of deferred financing costs | 3 |
| | 3 |
|
| Deferred income taxes | (1 | ) | | (15 | ) |
| Changes in other assets and liabilities: | |
| | |
|
| Accounts and notes receivable, net | 19 |
| | 21 |
|
| Accounts receivable/payable–affiliated companies | (3 | ) | | (32 | ) |
| Inventory | (10 | ) | | 1 |
|
| Accounts payable | (2 | ) | | 2 |
|
| Taxes receivable | — |
| | 5 |
|
| Interest and taxes accrued | (80 | ) | | (58 | ) |
| Non-trading derivatives, net | — |
| | (25 | ) |
| Net regulatory assets and liabilities | (11 | ) | | (44 | ) |
| Other current assets | 13 |
| | 13 |
|
| Other current liabilities | 8 |
| | (7 | ) |
| Other assets | — |
| | 3 |
|
| Other liabilities | 8 |
| | (1 | ) |
| Other operating activities, net | (3 | ) | | (2 | ) |
| Net cash provided by operating activities | 103 |
| | 66 |
|
| Cash Flows from Investing Activities: | |
| | |
|
| Capital expenditures | (286 | ) | | (258 | ) |
| Decrease (increase) in notes receivable–affiliated companies | 481 |
| | (979 | ) |
| Other investing activities, net | (3 | ) | | — |
|
| Net cash provided by (used in) investing activities | 192 |
| | (1,237 | ) |
| Cash Flows from Financing Activities: | |
| | |
|
| Proceeds from long-term debt, net | — |
| | 696 |
|
| Payments of long-term debt | (63 | ) | | (175 | ) |
| Increase (decrease) in notes payable–affiliated companies | 133 |
| | (1 | ) |
| Dividend to parent | (385 | ) | | (24 | ) |
| Contribution from parent | — |
| | 590 |
|
| Debt issuance costs | — |
| | (7 | ) |
| Other financing activities, net | — |
| | (1 | ) |
| Net cash provided by (used in) financing activities | (315 | ) | | 1,078 |
|
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | (20 | ) | | (93 | ) |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 235 |
| | 370 |
|
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 215 |
| | $ | 277 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | | | | | Shares | | Amount | | Shares | | Amount |
| | | | | | | | | (in millions, except share amounts) |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Common Stock | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | 1,000 | | | $ | 0 | | | 1,000 | | | $ | 0 | |
| Balance, end of period | | | | | | | | | 1,000 | | | 0 | | | 1,000 | | | 0 | |
| Additional Paid-in-Capital | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 2,548 | | | | | 2,486 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | | | 2,548 | | | | | 2,486 | |
| Retained Earnings | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 563 | | | | | 780 | |
| Net income | | | | | | | | | | | 53 | | | | | 33 | |
| Dividend to parent | | | | | | | | | | | 0 | | | | | (385) | |
| Balance, end of period | | | | | | | | | | | 616 | | | | | 428 | |
| Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 0 | | | | | (15) | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | | | 0 | | | | | (15) | |
| Total Member’s Equity | | | | | | | | | | | $ | 3,164 | | | | | $ | 2,899 | |
|
| | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Shares | | Amount | | Shares | | Amount |
| | | |
| Common Stock | | |
| | |
| | |
| | |
|
| Balance, beginning of period | | 1,000 |
| | $ | — |
| | 1,000 |
| | $ | — |
|
| Balance, end of period | | 1,000 |
| | — |
| | 1,000 |
| | — |
|
| Additional Paid-in-Capital | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 2,486 |
| | |
| | 1,896 |
|
| Contribution from Parent | | | | — |
| | | | 590 |
|
| Balance, end of period | | | | 2,486 |
| | |
| | 2,486 |
|
| Retained Earnings | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 780 |
| | |
| | 800 |
|
| Net income | | | | 33 |
| | |
| | 27 |
|
| Dividend to parent | | | | (385 | ) | | | | (24 | ) |
| Balance, end of period | | | | 428 |
| | |
| | 803 |
|
| Accumulated Other Comprehensive Loss | | | | | | | | |
| Balance, beginning of period | | | | (15 | ) | | | | (14 | ) |
| Other comprehensive loss | | | | — |
| | | | (1 | ) |
| Balance, end of period | | | | (15 | ) | | | | (15 | ) |
| Total Member’s Equity | | | | $ | 2,899 |
| | |
| | $ | 3,274 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Revenues: | | | | | | | |
| Utility revenues | | | | | $ | 1,168 | | | $ | 996 | |
| Non-utility revenues | | | | | 9 | | | 15 | |
| Total | | | | | 1,177 | | | 1,011 | |
| Expenses: | | | | | | | |
| Utility natural gas | | | | | 623 | | | 472 | |
| Non-utility cost of revenues, including natural gas | | | | | 2 | | | 6 | |
| Operation and maintenance | | | | | 198 | | | 209 | |
| Depreciation and amortization | | | | | 80 | | | 74 | |
| Taxes other than income taxes | | | | | 56 | | | 50 | |
| | | | | | | |
| Total | | | | | 959 | | | 811 | |
| Operating Income | | | | | 218 | | | 200 | |
| Other Expense: | | | | | | | |
| Interest expense and other finance charges | | | | | (24) | | | (30) | |
| | | | | | | |
| | | | | | | |
| Other expense, net | | | | | (1) | | | (4) | |
| Total | | | | | (25) | | | (34) | |
| Income From Continuing Operations Before Income Taxes | | | | | 193 | | | 166 | |
| Income tax expense | | | | | 42 | | | 35 | |
| Income From Continuing Operations | | | | | 151 | | | 131 | |
| Loss from Discontinued Operations (net of tax benefit of $-0- and $11, respectively) | | | | | 0 | | | (64) | |
| Net Income | | | | | $ | 151 | | | $ | 67 | |
|
| | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Revenues: | | | | |
| Utility revenues | | $ | 996 |
| | $ | 1,195 |
|
| Non-utility revenues | | 15 |
| | 17 |
|
| Total | | 1,011 |
| | 1,212 |
|
| Expenses: | | |
| | |
|
| Utility natural gas | | 472 |
| | 687 |
|
| Non-utility cost of revenues, including natural gas | | 6 |
| | 10 |
|
| Operation and maintenance | | 209 |
| | 233 |
|
| Depreciation and amortization | | 74 |
| | 73 |
|
| Taxes other than income taxes | | 50 |
| | 49 |
|
| Total | | 811 |
| | 1,052 |
|
| Operating Income | | 200 |
| | 160 |
|
| Other Expense: | | |
| | |
|
| Interest expense and other finance charges | | (30 | ) | | (29 | ) |
| Other expense, net | | (4 | ) | | (3 | ) |
| Total | | (34 | ) | | (32 | ) |
| Income From Continuing Operations Before Income Taxes | | 166 |
| | 128 |
|
| Income tax expense | | 35 |
| | 18 |
|
| Income From Continuing Operations | | 131 |
| | 110 |
|
| Income (loss) from discontinued operations (net of tax expense (benefit) of ($11) and $8, respectively) | | (64 | ) | | 28 |
|
| Net Income | | $ | 67 |
| | $ | 138 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended |
| | | | March 31, |
| | | | | | 2021 | | 2020 |
| | | | (in millions) |
| Net income (loss) | | | | | $ | 151 | | | $ | 67 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Comprehensive income (loss) | | | | | $ | 151 | | | $ | 67 | |
|
| | | | | | | | |
| | | Three Months Ended |
| | | March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Net income | | $ | 67 |
| | $ | 138 |
|
| Comprehensive income | | $ | 67 |
| | $ | 138 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
| | | | | | | | | | | |
| | March 31,
2021 | | December 31,
2020 |
| (in millions) |
Current Assets: | | | |
| Cash and cash equivalents | $ | 1 | | | $ | 1 | |
| Accounts receivable, less allowance for credit losses of $56 and $45, respectively | 349 | | | 233 | |
| Accrued unbilled revenues, less allowance for credit losses of $3 and $4, respectively | 167 | | | 260 | |
| Accounts and notes receivable–affiliated companies | 11 | | | 8 | |
| Materials and supplies | 64 | | | 58 | |
| Natural gas inventory | 27 | | | 121 | |
| | | |
| | | |
| | | |
| | | |
| Prepaid expenses and other current assets | 381 | | | 26 | |
| Total current assets | 1,000 | | | 707 | |
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 9,070 | | | 8,972 | |
| Less: accumulated depreciation and amortization | 2,466 | | | 2,414 | |
| Property, plant and equipment, net | 6,604 | | | 6,558 | |
| Other Assets: | | | |
| Goodwill | 757 | | | 757 | |
| Regulatory assets | 1,947 | | | 220 | |
| | | |
| | | |
| | | |
| | | |
| Other non-current assets | 48 | | | 66 | |
| Total other assets | 2,752 | | | 1,043 | |
| Total Assets | $ | 10,356 | | | $ | 8,308 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions) |
Current Assets: | | | |
| Cash and cash equivalents | $ | 1 |
| | $ | 2 |
|
| Accounts receivable, less bad debt reserve of $24 and $15, respectively | 324 |
| | 322 |
|
| Accrued unbilled revenues, less bad debt reserve of $2 and $-0-, respectively | 140 |
| | 249 |
|
| Accounts and notes receivable–affiliated companies | 11 |
| | 10 |
|
| Materials and supplies | 74 |
| | 71 |
|
| Natural gas inventory | 30 |
| | 135 |
|
| Current assets held for sale | 675 |
| | 691 |
|
| Prepaid expenses and other current assets | 8 |
| | 9 |
|
| Total current assets | 1,263 |
| | 1,489 |
|
| Property, Plant and Equipment: | | | |
| Property, plant and equipment | 8,210 |
| | 8,079 |
|
| Less: accumulated depreciation and amortization | 2,312 |
| | 2,270 |
|
| Property, plant and equipment, net | 5,898 |
| | 5,809 |
|
| Other Assets: | |
| | |
|
| Goodwill | 757 |
| | 757 |
|
| Regulatory assets | 192 |
| | 191 |
|
| Non-current assets held for sale | — |
| | 213 |
|
| Other | 40 |
| | 53 |
|
| Total other assets | 989 |
| | 1,214 |
|
| Total Assets | $ | 8,150 |
| | $ | 8,512 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS – (continued)
(Unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY
| | | | | | | | | | | |
| March 31,
2021 | | December 31,
2020 |
| (in millions) |
| Current Liabilities: | | | |
| Short-term borrowings | $ | 0 | | | $ | 24 | |
| | | |
| Accounts payable | 273 | | | 296 | |
| Accounts and notes payable–affiliated companies | 48 | | | 50 | |
| Taxes accrued | 90 | | | 74 | |
| Interest accrued | 30 | | | 28 | |
| Customer deposits | 76 | | | 76 | |
| | | |
| | | |
| Other current liabilities | 137 | | | 178 | |
| Total current liabilities | 654 | | | 726 | |
| Other Liabilities: | | | |
| Deferred income taxes, net | 632 | | | 584 | |
| | | |
| | | |
| Benefit obligations | 83 | | | 83 | |
| Regulatory liabilities | 1,242 | | | 1,226 | |
| | | |
| Other non-current liabilities | 678 | | | 694 | |
| Total other liabilities | 2,635 | | | 2,587 | |
| Long-Term Debt | 4,349 | | | 2,428 | |
| Commitments and Contingencies (Note 14) | 0 | | 0 |
| Stockholder’s Equity: | | | |
| Common stock | 0 | | | 0 | |
| Additional paid-in capital | 2,046 | | | 2,046 | |
| Retained earnings | 662 | | | 511 | |
| Accumulated other comprehensive income | 10 | | | 10 | |
| Total stockholder’s equity | 2,718 | | | 2,567 | |
| Total Liabilities and Stockholder’s Equity | $ | 10,356 | | | $ | 8,308 | |
|
| | | | | | | |
| | March 31,
2020 | | December 31,
2019 |
| | (in millions) |
| Current Liabilities: | |
| | |
|
| Current portion of long-term debt | $ | 593 |
| | $ | — |
|
| Accounts payable | 235 |
| | 333 |
|
| Accounts and notes payable–affiliated companies | 48 |
| | 47 |
|
| Taxes accrued | 80 |
| | 84 |
|
| Interest accrued | 31 |
| | 38 |
|
| Customer deposits | 75 |
| | 74 |
|
| Current liabilities held for sale | 275 |
| | 368 |
|
| Other | 134 |
| | 167 |
|
| Total current liabilities | 1,471 |
| | 1,111 |
|
| Other Liabilities: | |
| | |
|
| Deferred income taxes, net | 498 |
| | 470 |
|
| Benefit obligations | 80 |
| | 80 |
|
| Regulatory liabilities | 1,235 |
| | 1,219 |
|
| Non-current liabilities held for sale | — |
| | 27 |
|
| Other | 411 |
| | 418 |
|
| Total other liabilities | 2,224 |
| | 2,214 |
|
| Long-Term Debt | 1,784 |
| | 2,546 |
|
| Commitments and Contingencies (Note 14) |
|
| |
|
|
| Stockholder’s Equity: | | | |
| Common stock | — |
| | — |
|
| Additional paid-in capital | 2,116 |
| | 2,116 |
|
| Retained earnings | 545 |
| | 515 |
|
| Accumulated other comprehensive income | 10 |
| | 10 |
|
| Total stockholder’s equity | 2,671 |
| | 2,641 |
|
| Total Liabilities and Stockholder’s Equity | $ | 8,150 |
| | $ | 8,512 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
| | | | Three Months Ended March 31, | | Three Months Ended March 31, |
| | 2020 | | 2019 | | 2021 | | 2020 |
| | (in millions) | | (in millions) |
| Cash Flows from Operating Activities: | | | | Cash Flows from Operating Activities: | | |
| Net income | $ | 67 |
| | $ | 138 |
| Net income | $ | 151 | | | $ | 67 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 74 |
| | 73 |
| Depreciation and amortization | 80 | | | 74 | |
| Depreciation and amortization on assets held for sale | — |
| | 4 |
| |
| | Amortization of deferred financing costs | 3 |
| | 3 |
| Amortization of deferred financing costs | 1 | | | 3 | |
| Deferred income taxes | 23 |
| | 21 |
| Deferred income taxes | 41 | | | 23 | |
| Goodwill impairment and loss from reclassification to held for sale | 132 |
| | — |
| Goodwill impairment and loss from reclassification to held for sale | 0 | | | 132 | |
| | Write-down of natural gas inventory | 3 |
| | 1 |
| Write-down of natural gas inventory | 0 | | | 3 | |
| | Changes in other assets and liabilities: | |
| | |
| Changes in other assets and liabilities: | | | |
| Accounts receivable and unbilled revenues, net | 169 |
| | 102 |
| Accounts receivable and unbilled revenues, net | (41) | | | 169 | |
| Accounts receivable/payable–affiliated companies | — |
| | (18 | ) | Accounts receivable/payable–affiliated companies | (5) | | | 0 | |
| Inventory | 114 |
| | 119 |
| Inventory | 64 | | | 114 | |
| | Accounts payable | (159 | ) | | (255 | ) | Accounts payable | (10) | | | (159) | |
| Fuel cost recovery | 9 |
| | 58 |
| |
| | Interest and taxes accrued | (11 | ) | | (8 | ) | Interest and taxes accrued | 18 | | | (11) | |
| Non-trading derivatives, net | (54 | ) | | (26 | ) | Non-trading derivatives, net | 0 | | | (54) | |
| Margin deposits, net | 21 |
| | 19 |
| Margin deposits, net | 0 | | | 21 | |
| Net regulatory assets and liabilities | 1 |
| | 19 |
| Net regulatory assets and liabilities | (2,065) | | | 10 | |
| Other current assets | (1 | ) | | 7 |
| Other current assets | 2 | | | (1) | |
| Other current liabilities | (13 | ) | | (8 | ) | Other current liabilities | (13) | | | (13) | |
| Other assets | 18 |
| | (12 | ) | Other assets | (2) | | | 18 | |
| Other liabilities | (15 | ) | | 10 |
| Other liabilities | (8) | | | (15) | |
| Other operating activities, net | — |
| | 1 |
| |
| Net cash provided by operating activities | 381 |
| | 248 |
| |
| | Net cash provided by (used in) operating activities | | Net cash provided by (used in) operating activities | (1,787) | | | 381 | |
| Cash Flows from Investing Activities: | |
| | |
| Cash Flows from Investing Activities: | | | |
| Capital expenditures | (176 | ) | | (146 | ) | Capital expenditures | (133) | | | (176) | |
| Increase in notes receivable–affiliated companies | — |
| | (106 | ) | |
| Other investing activities, net | (1 | ) | | 2 |
| |
| | Other, net | | Other, net | 2 | | | (1) | |
| | Net cash used in investing activities | (177 | ) | | (250 | ) | Net cash used in investing activities | (131) | | | (177) | |
| Cash Flows from Financing Activities: | |
| | |
| Cash Flows from Financing Activities: | | | |
| | Proceeds from (payments of) commercial paper, net | (172 | ) | | 11 |
| Proceeds from (payments of) commercial paper, net | 226 | | | (172) | |
| Proceeds from long-term debt | | Proceeds from long-term debt | 1,699 | | | 0 | |
| | Dividends to parent | (32 | ) | | (20 | ) | Dividends to parent | 0 | | | (32) | |
| Other financing activities, net | (1 | ) | | (2 | ) | |
| Net cash used in financing activities | (205 | ) | | (11 | ) | |
| Debt issuance costs | | Debt issuance costs | (6) | | | 0 | |
| | Other, net | | Other, net | (1) | | | (1) | |
| | Net cash provided by (used in) financing activities | | Net cash provided by (used in) financing activities | 1,918 | | | (205) | |
| Net Decrease in Cash, Cash Equivalents and Restricted Cash | (1 | ) | | (13 | ) | Net Decrease in Cash, Cash Equivalents and Restricted Cash | 0 | | | (1) | |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 2 |
| | 25 |
| Cash, Cash Equivalents and Restricted Cash at Beginning of Period | 1 | | | 2 | |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1 |
| | $ | 12 |
| Cash, Cash Equivalents and Restricted Cash at End of Period | $ | 1 | | | $ | 1 | |
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
(AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF CENTERPOINT ENERGY, INC.)
CONDENSED STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | | | | | Shares | | Amount | | Shares | | Amount |
| | | | | | | | | (in millions, except share amounts) |
| Common Stock | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | 1,000 | | | $ | 0 | | | 1,000 | | | $ | 0 | |
| Balance, end of period | | | | | | | | | 1,000 | | | 0 | | | 1,000 | | | 0 | |
| Additional Paid-in-Capital | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 2,046 | | | | | 2,116 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | | | 2,046 | | | | | 2,116 | |
| Retained Earnings | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 511 | | | | | 515 | |
| Net income (loss) | | | | | | | | | | | 151 | | | | | 67 | |
| Dividend to parent | | | | | | | | | | | 0 | | | | | (32) | |
| Adoption of ASU 2016-13 | | | | | | | | | | | — | | | | | (5) | |
| Balance, end of period | | | | | | | | | | | 662 | | | | | 545 | |
| Accumulated Other Comprehensive Income | | | | | | | | | | | | | | | |
| Balance, beginning of period | | | | | | | | | | | 10 | | | | | 10 | |
| | | | | | | | | | | | | | | |
| Balance, end of period | | | | | | | | | | | 10 | | | | | 10 | |
| Total Stockholder’s Equity | | | | | | | | | | | $ | 2,718 | | | | | $ | 2,671 | |
|
| | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Shares | | Amount | | Shares | | Amount |
| | | |
| Common Stock | | | | | | | | |
| Balance, beginning of period | | 1,000 |
| | $ | — |
| | 1,000 |
| | $ | — |
|
| Balance, end of period | | 1,000 |
| | — |
| | 1,000 |
| | — |
|
| Additional Paid-in-Capital | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 2,116 |
| | |
| | 2,015 |
|
| Contribution from parent | | | | — |
| | | | — |
|
| Balance, end of period | | | | 2,116 |
| | |
| | 2,015 |
|
| Retained Earnings | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 515 |
| | |
| | 423 |
|
| Net income | | | | 67 |
| | |
| | 138 |
|
| Dividend to parent | | | | (32 | ) | | |
| | (20 | ) |
| Adoption of ASU 2016-13 | | | | (5 | ) | | | | — |
|
| Balance, end of period | | | | 545 |
| | |
| | 541 |
|
| Accumulated Other Comprehensive Income | | | | |
| | |
| | |
|
| Balance, beginning of period | | | | 10 |
| | |
| | 5 |
|
| Balance, end of period | | | | 10 |
| | |
| | 5 |
|
| Total Stockholder’s Equity | | | | $ | 2,671 |
| | |
| | $ | 2,561 |
|
See Combined Notes to UnauditedInterim Condensed Consolidated Financial Statements
CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES
CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITEDINTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Background and Basis of Presentation
General. This combined Form 10-Q is filed separately by three3 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 Consolidated 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 Combined Notes to the Unaudited Condensed Consolidated Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated. 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 20192020 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, 2020,2021, CenterPoint Energy’s operating subsidiaries reported as continuing operations were as follows:
•Houston Electric owns and operatesprovides electric transmission service to transmission service customers in the ERCOT region and distribution facilities inservice to REPs serving the Texas Gulf Coast area that includes the city of Houston.
•CERC (i) owns and operates natural gas distribution systems in 6 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 three3 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, 2020,2021, CenterPoint Energy, indirectly throughEnergy’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 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 also directly owned an aggregatewhen 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.Units directly owned by CenterPoint Energy, and the Enable owns, operates and develops natural gas and crude oil infrastructure assets.Merger, see Note 9.
As of March 31, 2020,2021, 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 presentation.
Discontinued Operations. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group, which provide underground pipeline construction and repair services through wholly-owned subsidiaries Miller Pipeline, LLC and Minnesota Limited, LLC and serve natural gas utilities across the United States, focusing on recurring integrity, station and maintenance work and opportunities for large transmission pipeline construction projects. The transaction closed on April 9, 2020. See Note 3 for further information.
Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group, which obtains and offers competitive variable and fixed-price physical natural gas supplies and services primarily to commercial and industrial customers and electric and natural gas utilities in over 30 states. The transaction is expected to closereportable segment presentation described in the second quarter of 2020. See Note 3 for further information.
COVID-19 Impacts.On March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020, the United States declared a national emergency. In response to these declarations and the rapid spread of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” orders in the Registrants’ service territories. The Registrants have experienced some resulting disruptions to their business operations, as these restrictions have significantly impacted many sectors of the economy, with businesses curtailing or ceasing normal operations. The ultimate impacts will depend on future developments, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the development of effective treatments, the duration of the outbreak, actions taken by governmental authorities, customers, suppliers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. While the Registrants continue to assess the COVID-19 situation and cannot estimate with any degree of certainty the full impact of the COVID-19 outbreak on their liquidity, financial condition and future results of operations, the Registrants expect the COVID-19 situation to adversely impact future quarters. See Notes 5 and 6 for further information on COVID-19’s impact on the Registrants.
(2) New Accounting Pronouncements
The following table provides an overview of certain recently adopted or issued accounting pronouncements applicable to all the Registrants, unless otherwise noted.
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| | | | | | |
Recently Adopted Accounting Standards |
ASU Number and Name | | Description | | Date of Adoption | | Financial Statement Impact
upon Adoption
|
ASU 2016-13- Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | | This standard, including standards amending this standard, requires a new model called CECL to estimate credit losses for (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments.
Transition method:modified retrospective
| | January 1, 2020 | | The Registrants adopted the standard and recognized a cumulative-effect adjustment of the transition to opening retained earnings and allowance for doubtful accounts with no impact on results of operations and cash flows. See Note 4 for more information.
|
ASU 2018-13- Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement | | This standard eliminates, modifies and adds certain disclosure requirements for fair value measurements.
Transition method: prospective for additions and one modification and retrospective for all other amendments
| | Adoption of eliminations and modifications as of September 30, 2018 and additions as of January 1, 2020
| | The adoption of this standard did not impact the Registrants’ financial position, results of operations or cash flows. Note 8 reflects the disclosures modified and added upon adoption.
|
Accounting Standards Update (ASU) No. 2019-12: Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
| | This standard simplifies accounting for income taxes by eliminating certain exceptions to the guidance for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes that are partially based on income and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.
Transition method: prospective for all amendments that apply to the Registrants
| | January 1, 2020 | | Upon adoption, the Registrants are not required to apply the intraperiod tax allocation exception when there is a current-period loss from continuing operations. Accordingly, CenterPoint Energy determined the tax effect of income from continuing operations without considering the tax effects of items that are not included in continuing operations (i.e., discontinued operations). Additionally, CenterPoint Energy is no longer required to limit the year-to-date tax benefit recognized when the year-to-date benefit exceeds the anticipated full year benefit.
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Management believes that other recently adopted orand 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) Held for Sale and Discontinued OperationsDivestitures (CenterPoint Energy and CERC)
DivestitureCenterPoint Energy completed the sale of the Infrastructure Services (CenterPoint Energy). On February 3,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 VUSI, entered intoCERC Corp., completed the Securities Purchase Agreement to sellsale of the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.
In February 2020, certain assets and liabilities representing the InfrastructureEnergy Services Disposal Group met the heldon June 1, 2020 for sale criteria$286 million in cash and represented allcollected a receivable for $79 million in October 2020 for full and final settlement of the businesses within the reporting unit. In accordanceworking capital adjustment.. The earnings and expenses directly associated with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that was disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was considered an asset sale for tax purposes, requiring net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the Infrastructure Services Disposal Group and to be recognized as a deferred income tax benefit by CenterPoint Energy upon closing.
Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy’s financial statementsthese dispositions for the three months ended March 31, 2020 CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for cost to sell.
Because the Infrastructure Services Disposal Group met the held for sale criteria during the three months ended March 31, 2020 and the proposed sale was completed on April 9, 2020, all Infrastructure Services Disposal Group assets and liabilities as of March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.
Divestiture of Energy Services (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. This transaction does not include CEIP and its assets. The transaction is expected to close in the second quarter of 2020.
In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax asset of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and to be recognized as a deferred tax expense by CenterPoint Energy upon closing.
Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of CenterPoint Energy’s and CERC’s respective financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC recorded a goodwill impairment of approximately $62 million and a loss on assets held for sale of approximately $70 million, plus an additional loss of $6 million for cost to sell recorded only at CenterPoint Energy.
Because the Energy Services Disposal Group met the held for sale criteria and the proposed sale is expected to be completed within one year, all Energy Services Disposal Group assets and liabilities as of March 31, 2020 have been classified as current assets and liabilities held for sale. The assets and liabilities as of December 31, 2019 have been recast as assets and liabilities held for sale and retained their current or long-term classification applicable as of December 31, 2019. Long-lived assets are not depreciated or amortized once they are classified as held for sale.
The assets and liabilities of the Infrastructure Services and Energy Services Disposal Groups classified as held for sale in CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets, as applicable, include the following:
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| | | | | | | | | | | | | | | | |
| | | March 31, 2020 |
| | | CenterPoint Energy | | CERC |
| | | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Total | | Energy Services Disposal Group |
| | | (in millions) |
| Receivables, net | | $ | 216 |
| | $ | 355 |
| | $ | 571 |
| | $ | 355 |
|
| Accrued unbilled revenues | | 57 |
| | 2 |
| | 59 |
| | 2 |
|
| Natural gas inventory | | — |
| | 52 |
| | 52 |
| | 52 |
|
| Materials and supplies | | 6 |
| | — |
| | 6 |
| | — |
|
| Non-trading derivative assets | | — |
| | 213 |
| | 213 |
| | 213 |
|
| Property, plant and equipment, net | | 313 |
| | 29 |
| | 342 |
| | 29 |
|
| Goodwill | | 138 |
| | — |
| | 138 |
| | — |
|
| Loss on assets held for sale | | — |
| | (70 | ) | | (70 | ) | | (70 | ) |
| Other | | 242 |
| | 94 |
| | 336 |
| | 94 |
|
| Total current assets held for sale | | $ | 972 |
| | $ | 675 |
| | $ | 1,647 |
| | $ | 675 |
|
| | | | | | | | | |
| Accounts payable | | $ | 46 |
| | $ | 206 |
| | $ | 252 |
| | $ | 206 |
|
| Taxes accrued | | 2 |
| | — |
| | 2 |
| | — |
|
| Non-trading derivative liabilities | | — |
| | 36 |
| | 36 |
| | 36 |
|
| Benefit obligations | | — |
| | 4 |
| | 4 |
| | 4 |
|
| Other | | 60 |
| | 29 |
| | 89 |
| | 29 |
|
| Total current liabilities held for sale | | $ | 108 |
| | $ | 275 |
| | $ | 383 |
| | $ | 275 |
|
|
| | | | | | | | | | | | | | | | |
| | | December 31, 2019 |
| | | CenterPoint Energy | | CERC |
| | | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Total | | Energy Services Disposal Group |
| | | (in millions) |
| Receivables, net | | $ | 192 |
| | $ | 445 |
| | $ | 637 |
| | $ | 445 |
|
| Accrued unbilled revenues | | 109 |
| | 8 |
| | 117 |
| | 8 |
|
| Natural gas inventory | | — |
| | 67 |
| | 67 |
| | 67 |
|
| Materials and supplies | | 6 |
| | — |
| | 6 |
| | — |
|
| Non-trading derivative assets | | — |
| | 136 |
| | 136 |
| | 136 |
|
| Other | | 4 |
| | 35 |
| | 39 |
| | 35 |
|
| Total current assets held for sale | | 311 |
| | 691 |
| | 1,002 |
| | 691 |
|
| Property, plant and equipment, net | | 295 |
| | 26 |
| | 321 |
| | 26 |
|
Goodwill | | 220 |
| | 62 |
| | 282 |
| | 62 |
|
| Non-trading derivative assets | | — |
| | 58 |
| | 58 |
| | 58 |
|
| Other | | 234 |
| | 67 |
| | 301 |
| | 67 |
|
| Total non-current assets held for sale | | 749 |
| | 213 |
| | 962 |
| | 213 |
|
| Total assets held for sale | | $ | 1,060 |
| | $ | 904 |
| | $ | 1,964 |
| | $ | 904 |
|
| | | | | | | | | |
| Accounts payable | | $ | 45 |
| | $ | 299 |
| | 344 |
| | $ | 299 |
|
| Taxes accrued | | 2 |
| | — |
| | 2 |
| | — |
|
| Non-trading derivative liabilities | | — |
| | 44 |
| | 44 |
| | 44 |
|
| Other | | 40 |
| | 25 |
| | 65 |
| | 25 |
|
| Total current liabilities held for sale | | 87 |
| | 368 |
| | 455 |
| | 368 |
|
| Non-trading derivative liabilities | | — |
| | 14 |
| | 14 |
| | 14 |
|
| Benefit obligations | | — |
| | 4 |
| | 4 |
| | 4 |
|
| Other | | 16 |
| | 9 |
| | 25 |
| | 9 |
|
| Total non-current liabilities held for sale | | 16 |
| | 27 |
| | 43 |
| | 27 |
|
| Total liabilities held for sale | | $ | 103 |
| | $ | 395 |
| | $ | 498 |
| | $ | 395 |
|
Because the Infrastructure Services and Energy Services Disposal Groups met the held for sale criteria and their disposals also represent a strategic shift to CenterPoint Energy and CERC, as applicable, they are reflected as discontinued operations on CenterPoint Energy’s and CERC’s Condensed Statements of Consolidated Income, as applicable, and as a result, prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, netapplicable.
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:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, 2020 |
| | | | CenterPoint Energy | | | | CERC |
| | | | Infrastructure Services Disposal Group | | | | Energy Services Disposal Group | | | | Total | | | | Energy Services Disposal Group |
| | | | (in millions) |
| Revenues | | | | $ | 222 | | | | | $ | 886 | | | | | $ | 1,108 | | | | | $ | 886 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Non-utility cost of revenues | | | | 44 | | | | | 808 | | | | | 852 | | | | | 808 | |
| Operation and maintenance | | | | 163 | | | | | 20 | | | | | 183 | | | | | 20 | |
| | | | | | | | | | | | | | | | |
| Taxes other than income taxes | | | | 1 | | | | | 1 | | | | | 2 | | | | | 1 | |
| Total expenses | | | | 208 | | | | | 829 | | | | | 1,037 | | | | | 829 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Income (loss) from Discontinued Operations before income taxes | | | | 14 | | | | | 57 | | | | | 71 | | | | | 57 | |
Loss on classification to held for sale, net (1) | | | | (96) | | | | | (138) | | | | | (234) | | | | | (132) | |
| Income tax benefit | | | | (5) | | | | | (12) | | | | | (17) | | | | | (11) | |
| Net loss from Discontinued Operations | | | | $ | (77) | | | | | $ | (69) | | | | | $ | (146) | | | | | $ | (64) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 (1) | | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
| | | CenterPoint Energy | | CERC |
| | | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Total | | Energy Services Disposal Group |
| | | (in millions) |
| Revenues | | $ | 222 |
| | $ | 146 |
| | $ | 886 |
| | $ | 1,242 |
| | $ | 1,108 |
| | $ | 1,388 |
| | $ | 886 |
| | $ | 1,242 |
|
| Expenses: | | | | | | | | | | | | — |
| | | | |
| Non-utility cost of revenues | | 44 |
| | 43 |
| | 808 |
| | 1,185 |
| | 852 |
| | 1,228 |
| | 808 |
| | 1,185 |
|
| Operation and maintenance | | 163 |
| | 96 |
| | 20 |
| | 17 |
| | 183 |
| | 113 |
| | 20 |
| | 17 |
|
| Depreciation and amortization | | — |
| | 9 |
| | — |
| | 4 |
| | — |
| | 13 |
| | — |
| | 4 |
|
| Taxes other than income taxes | | 1 |
| | — |
| | 1 |
| | — |
| | 2 |
| | — |
| | 1 |
| | — |
|
| Total | | 208 |
| | 148 |
| | 829 |
| | 1,206 |
| | 1,037 |
| | 1,354 |
| | 829 |
| | 1,206 |
|
| Income (loss) from Discontinued Operations before income taxes | | 14 |
| | (2 | ) | | 57 |
| | 36 |
| | 71 |
| | 34 |
| | 57 |
| | 36 |
|
| Loss from classification to held for sale (2) | | 96 |
| | — |
| | 138 |
| | — |
| | 234 |
| | — |
| | 132 |
| | — |
|
| Income tax expense (benefit) | | (5 | ) | | — |
| | (12 | ) | | 8 |
| | (17 | ) | | 8 |
| | (11 | ) | | 8 |
|
| Net income (loss) from Discontinued Operations | | $ | (77 | ) | | $ | (2 | ) | | $ | (69 | ) | | $ | 28 |
| | $ | (146 | ) | | $ | 26 |
| | $ | (64 | ) | | $ | 28 |
|
(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.
| |
(1) | Reflects February 1, 2019 to March 31, 2019 results only due to the Merger. |
| |
(2) | Loss from classification to held for sale is inclusive of goodwill impairment 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. LUnregulated 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:
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | | CERC |
| | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Energy Services Disposal Group |
| | (in millions) |
| | | | | | |
| | | | | | |
| Write-down of natural gas inventory | | $ | 0 | | | $ | 3 | | | $ | 3 | |
| Capital expenditures | | 16 | | | 1 | | | 1 | |
| Non-cash transactions: | | | | | | |
| Accounts payable related to capital expenditures | | 2 | | | 4 | | | 4 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 | | 2020 | | 2019 | | 2020 | | 2019 |
| | | CenterPoint Energy | | CERC |
| | | Infrastructure Services Disposal Group | | Energy Services Disposal Group | | Energy Services Disposal Group |
| | | (in millions) |
| Depreciation and amortization | | $ | — |
| | $ | 9 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | 4 |
|
| Amortization of intangible assets in Non-utility cost of revenues | | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
| Write-down of natural gas inventory | | — |
| | — |
| | 3 |
| | 1 |
| | 3 |
| | 1 |
|
| Capital expenditures | | 16 |
| | 27 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
| Non-cash transactions: | | | | | | | | | | | | |
| Accounts payable related to capital expenditures | | 2 |
| | 3 |
| | 4 |
| | 6 |
| | 4 |
| | 6 |
|
Other Sale Related Matters (CenterPoint Energy and CERC). CES providesprovided natural gas supply to CenterPoint Energy’s and CERC’s NGDNatural 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 incurred byincluded in continuing operations were as follows:
| | | | | | | | | | | | | | |
| | |
| | | | |
| | |
| | | | |
| | | | |
| | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | | CERC |
| | (in millions) |
| Transportation revenue | | $ | 16 | | | $ | 16 | |
| Natural gas expense | | 45 | | | 44 | |
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 for natural gas transportationhad outstanding obligations related to the AMAs of $-0- and supply are$24 million as follows:of March 31, 2021 and December 31, 2020, respectively.
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| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 | | 2020 | | 2019 |
| | | CenterPoint Energy | | CERC |
| | | (in millions) |
| Transportation revenue | | $ | 16 |
| | $ | 16 |
| | $ | 16 |
| | $ | 16 |
|
| Natural gas expense | | 45 |
| | 64 |
| | 44 |
| | 63 |
|
The Infrastructure Services Disposal Group providesprovided pipeline construction and repair services to CenterPoint Energy’s and CERC’s NGD.Natural Gas. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by NGDNatural Gas utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the NGDNatural 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 NGDNatural Gas for pipeline construction and repair services are as follows:
| | | | | | | | | | | | | | |
| | |
| | | |
| | |
| | | | |
| | | | |
| | | | |
| | Three Months Ended March 31, 2020 |
| | CenterPoint Energy | CERC |
| | (in millions) |
| Pipeline construction and repair services capitalized | | $ | 34 | | | $ | 0 | |
| Pipeline construction and repair service charges in operations and maintenance expense | | 1 | | | 1 | |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 (1) | | 2020 | | 2019 (1) |
| | | CenterPoint Energy | | CERC |
| | | (in millions) |
| Pipeline construction and repair services capitalized | | $ | 34 |
| | $ | 19 |
| | $ | — |
| | $ | 1 |
|
| Pipeline construction and repair service charges in operations and maintenance expense | | 1 |
| | 4 |
| | 1 |
| | 1 |
|
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(1) | Represents charges for the period February 1, 2019 through March 31, 2019 only due to the Merger. |
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 ProvisionAllowance for Doubtful AccountsCredit 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 now reflected as discontinued operations and assets heldprior to the date of closing of each transaction. See Note 3 for sale.
The following tables disaggregate revenues byfurther information. Certain prior year amounts have been reclassified to conform to the current year reportable segment and major source:presentation described in the Registrants’ combined 2020 Form 10-K.
CenterPoint Energy
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| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2020 |
| | | Houston Electric T&D | | Indiana Electric Integrated | | Natural Gas Distribution | | Corporate and Other | | Total |
| | | (in millions) |
| Revenue from contracts | | $ | 638 |
| | $ | 129 |
| | $ | 1,293 |
| | $ | 81 |
| | $ | 2,141 |
|
Other (1) | | — |
| | — |
| | 25 |
| | 1 |
| | 26 |
|
| Total revenues | | $ | 638 |
| | $ | 129 |
| | $ | 1,318 |
| | $ | 82 |
| | $ | 2,167 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2019 |
| | | Houston Electric T&D | | Indiana
Electric Integrated (2) | | Natural Gas Distribution (2) | | Corporate and Other (2) | | Total |
| | | (in millions) |
| Revenue from contracts | | $ | 690 |
| | $ | 83 |
| | $ | 1,413 |
| | $ | 41 |
| | $ | 2,227 |
|
Other (1) | | (1 | ) | | — |
| | 2 |
| | 1 |
| | 2 |
|
| Total revenues | | $ | 689 |
| | $ | 83 |
| | $ | 1,415 |
| | $ | 42 |
| | $ | 2,229 |
|
| |
(1) | Primarily consists of income from ARPs, weather hedge gains (losses) and leases. 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 |
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 |
| | Electric | | Natural Gas | | Corporate
and Other | | Total |
| | (in millions) |
| Revenue from contracts | | $ | 833 | | | $ | 1,655 | | | $ | 53 | | | $ | 2,541 | |
Other (1) | | (3) | | | 8 | | | 1 | | | 6 | |
| | | | | | | | |
| Total revenues | | $ | 830 | | | $ | 1,663 | | | $ | 54 | | | $ | 2,547 | |
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| | Three Months Ended March 31, 2020 |
| | Electric | | Natural Gas | | Corporate
and Other | | Total |
| | (in millions) |
| Revenue from contracts | | $ | 767 | | | $ | 1,296 | | | $ | 78 | | | $ | 2,141 | |
Other (1) | | 0 | | | 25 | | | 1 | | | 26 | |
| | | | | | | | |
| Total revenues | | $ | 767 | | | $ | 1,321 | | | $ | 79 | | | $ | 2,167 | |
(1)Primarily consists of income from ARPs, weather hedge gains (losses) and leases. Total lease income was $1$2 million and $2$1 million for the three months ended March 31, 2021 and 2020, and 2019, respectively.
| |
(2) | Reflects revenues from Vectren subsidiaries for the period from February 1, 2019 to March 31, 2019. |
Houston Electric
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Revenue from contracts | | | | | $ | 687 | | | $ | 638 | |
Other (1) | | | | | (3) | | | (4) | |
| Total revenues | | | | | $ | 684 | | | $ | 634 | |
|
| | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | (in millions) |
| Revenue from contracts | $ | 638 |
| | $ | 690 |
|
Other (1) | (4 | ) | | (4 | ) |
| Total revenues | $ | 634 |
| | $ | 686 |
|
(1)Primarily consists of income from ARPs and leases. Lease income was not significant for the three months ended March 31, 2021 and 2020.
| |
(1) | Primarily consists of income from ARPs, weather hedge gains (losses) and leases. 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. Lease income was not significant for the three months ended March 31, 2020 and 2019. |
CERC
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| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Natural Gas Distribution | | Corporate and Other | | Total | | Natural Gas Distribution | | Corporate and Other | | Total |
| | | (in millions) |
| Revenue from contracts | | $ | 981 |
| | $ | 3 |
| | $ | 984 |
| | $ | 1,205 |
| | $ | 1 |
| | $ | 1,206 |
|
Other (1) | | 27 |
| | — |
| | 27 |
| | 6 |
| | — |
| | 6 |
|
| Total revenues | | $ | 1,008 |
| | $ | 3 |
| | $ | 1,011 |
| | $ | 1,211 |
| | $ | 1 |
| | $ | 1,212 |
|
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(1) | Primarily consists of income from ARPs, weather hedge gains (losses) and leases. 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. Lease income was not significant for the three months ended March 31, 2020 and 2019. |
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| | Three Months Ended March 31, |
| | 2021 | | 2020 |
| | (in millions) |
| Revenue from contracts | | $ | 1,172 | | | $ | 984 | | |
Other (1) | | 5 | | | 27 | | |
| | | | | |
| Total revenues | | $ | 1,177 | | | $ | 1,011 | | |
Houston
(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 T&D (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 PUCT.regulator. Payments are received on a monthly basis.
Indiana Electric Integrated (CenterPoint Energy).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, is recognized as electricity is delivered and represents amounts both billed and unbilled. Customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.
Natural Gas Distribution (CenterPoint Energy and CERC). CenterPoint Energy and CERC distributesdistribute and transportstransport 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, 2020, the2021, 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, 2020,2021, 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 for the three months endedas of December 31, 2020 and March 31, 20202021, respectively, are as follows:
CenterPoint Energy
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| Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract
Assets | | Contract Liabilities |
| (in millions) |
| Opening balance as of December 31, 2020 | $ | 604 | | | $ | 505 | | | $ | 27 | | | $ | 18 | |
| Closing balance as of March 31, 2021 | 675 | | | 343 | | | 23 | | | 23 | |
| Increase (decrease) | $ | 71 | | | $ | (162) | | | $ | (4) | | | $ | 5 | |
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| | Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract Assets | | Contract Liabilities |
| | (in millions) |
| Opening balance as of December 31, 2019 | $ | 566 |
| | $ | 469 |
| | $ | 6 |
| | $ | 30 |
|
| Closing balance as of March 31, 2020 | 612 |
| | 320 |
| | 13 |
| | 23 |
|
| Increase (decrease) | $ | 46 |
| | $ | (149 | ) | | $ | 7 |
| | $ | (7 | ) |
The amount of revenue recognized in the three-month period ended March 31, 20202021 that was included in the opening contract liability was $25$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 | |
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| | Accounts Receivable | | Other Accrued Unbilled Revenues | | Contract Liabilities |
| | (in millions) |
| Opening balance as of December 31, 2019 | $ | 210 |
| | $ | 117 |
| | $ | 3 |
|
| Closing balance as of March 31, 2020 | 209 |
| | 92 |
| | 8 |
|
| Increase | $ | (1 | ) | | $ | (25 | ) | | $ | 5 |
|
The amount of revenue recognized in the three-month period ended March 31, 20202021 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) | | | | | | | |
|
| | | | | | | |
| | Accounts Receivable | | Other Accrued Unbilled Revenues |
| | (in millions) |
| Opening balance as of December 31, 2019 | $ | 222 |
| | $ | 249 |
|
| Closing balance as of March 31, 2020 | 265 |
| | 140 |
|
| Decrease | $ | 43 |
| | $ | (109 | ) |
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 | | | |
|
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| | Rolling 12 Months | | Thereafter | | Total |
| | (in millions) |
| Revenue expected to be recognized on contracts in place as of March 31, 2020: | | | | | |
| Corporate and Other | $ | 218 |
| | $ | 569 |
| | $ | 787 |
|
| | $ | 218 |
| | $ | 569 |
| | $ | 787 |
|
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.
The Registrants adopted ASU 2016-13, Financial Instruments—Allowance for Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and all related amendments on January 1, 2020 using a modified retrospective method. ASU 2016-13 replaces the “incurred loss” model with a CECL model for financial assets measured at amortized cost and for certain off-balance sheet credit exposures. Adoption of this standard did not have a material impact on the Registrants’ respective consolidated financial statements. CenterPoint Energy and CERC applied the $5 million cumulative-effect adjustment of the transition to opening retained earnings as of the effective date, which included $2 million related to the Energy Services Disposal Group. There was no material cumulative-effect adjustment for Houston Electric. The disclosures for periods prior to adoption will be presented in accordance with accounting standards in effect for those periods.
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 had no material changes in its methodology to recognizerecognizes losses on financial assets that fall under the scope of Topic 326,326. Losses on financial assets are primarily duerecoverable 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 nature of its customers and regulatory environment.
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 | |
| | | | | | | |
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| Net periodic cost | | | | | $ | 8 | | | $ | 11 | |
|
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| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Service cost (1) | | $ | 10 |
| | $ | 10 |
|
| Interest cost (2) | | 19 |
| | 23 |
|
| Expected return on plan assets (2) | | (28 | ) | | (25 | ) |
| Amortization of prior service cost (2) | | — |
| | 2 |
|
| Amortization of net loss (2) | | 10 |
| | 13 |
|
| Curtailment gain (2) (3) | | — |
| | (1 | ) |
| Net periodic cost | | $ | 11 |
| | $ | 22 |
|
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(1) | Amounts presented in the table 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. |
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(2) | Amounts presented in the table above are included in Other income (expense), net in each of the Registrants’ respective Condensed Statements of Consolidated Income, net of regulatory deferrals. |
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(3) | A curtailment gain or loss is required when the expected future services of a significant number of employees are reduced or eliminated for the accrual of benefits. In February 2019, CenterPoint Energy recognized a pension curtailment gain of $1 million related to Vectren employees whose employment was terminated after the Merger closed. |
Postretirement Benefits |
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| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Service cost (1) | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| Interest cost (2) | 3 |
| | 1 |
| | 1 |
| | 4 |
| | 2 |
| | 1 |
|
| Expected return on plan assets (2) | (1 | ) | | (1 | ) | | — |
| | (2 | ) | | (1 | ) | | — |
|
| Amortization of prior service cost (credit) (2) | (1 | ) | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
|
| Net periodic cost (income) | $ | 1 |
| | $ | (1 | ) | | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | 1 |
|
(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.
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(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. |
Postretirement Benefits
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| Three Months Ended March 31, |
| 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
| Service cost (1) | $ | 1 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 0 | |
| Interest cost (2) | 2 | | | 1 | | | 1 | | | 3 | | | 1 | | | 1 | |
| Expected return on plan assets (2) | (1) | | | (1) | | | 0 | | | (1) | | | (1) | | | 0 | |
| Amortization of prior service cost (credit) (2) | (1) | | | (1) | | | 0 | | | (1) | | | (1) | | | 0 | |
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| Net periodic cost (income) | $ | 1 | | | $ | (1) | | | $ | 1 | | | $ | 1 | | | $ | (1) | | | $ | 1 | |
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(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. |
(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 2020:2021:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
| Expected minimum contribution to pension plans during 2021 | $ | 61 | | | $ | 0 | | | $ | 0 | |
| Expected contribution to postretirement benefit plans in 2021 | 9 | | | 1 | | | 3 | |
|
| | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Expected minimum contribution to pension plans during 2020 | $ | 83 |
| | $ | — |
| | $ | — |
|
| Expected contribution to postretirement benefit plans in 2020 | 17 |
| | 10 |
| | 4 |
|
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 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, 2021 |
| | | | | | | CenterPoint Energy | | Houston Electric | | CERC |
| | | | | | (in millions) |
| Pension plans | | | | | | | $ | 8 | | | $ | 0 | | | $ | 0 | |
| Postretirement benefit plans | | | | | | | 3 | | | 0 | | | 1 | |
|
| | | | | | | | | | | | |
| | | Three Months Ended March 31, 2020 |
| | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Pension plans | | $ | 2 |
| | $ | — |
| | $ | — |
|
| Postretirement benefit plans | | 4 |
| | 2 |
| | 1 |
|
(6) Regulatory Matters
COVID-19 Impacts.
Equity Return
The Registrants remeasureare at times allowed by a regulator to defer an equity return as part of the funded statusrecoverable carrying costs of each plan as of December 31 each year, and at an interim period when a curtailment, settlement, or material plan amendment occurs. On the measurement date, actuarial gains or losses are recognized in accumulated other comprehensive income, or when cost is recovered through regulated rates, as a regulatory asset or liability. Duringasset. A deferred equity return is capitalized for rate-making purposes, but it is not included in the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. The fair value of pension planRegistrant’s regulatory assets on the plan remeasurement date impacts the funded status, net period cost, and the required cash contributions; however, changes to pension plan assets do not impactits Condensed Consolidated Balance Sheets. The allowed equity return is recognized in the Condensed Statements of Consolidated Income or Condensed Consolidated Balance Sheets in interim periods when a plan remeasurement is not required. An interim remeasurement of the plans was not required, and therefore did not occur, during the three months ended March 31, 2020.
(6) Regulatory Matters
Equity Return (CenterPoint Energy and Houston Electric)
As of March 31, 2020, CenterPoint Energy and Houston Electric have not recognized an allowed equity return of $162 million because such return will be recognized as it is recovered in future rates. The timing ofrecoverable 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 and allowed equity return on post in-service carrying cost generally associated with federally mandated investments in Indiana.
(2)Houston Electric’s recognition of theallowed equity return will vary each period based on amounts actually collected during that period.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.
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | CenterPoint Energy | | Houston Electric | | CenterPoint Energy | | Houston Electric |
| | | (in millions) |
| Allowed equity return recognized | | $ | 6 |
| | $ | 6 |
| | $ | 11 |
| | $ | 11 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | $ | 0 | | | $ | 7 | | | $ | 6 | | | $ | 0 | |
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 Base Rate Case (CenterPoint Energydoes not own or operate any electric generation facilities. It transmits and Houston Electric)
On April 5, 2019,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 subsequently adjustedregional reliability coordinator for member electric power systems in errata filings in May and June 2019,most of Texas. To comply with ERCOT’s orders, Houston Electric filedimplemented controlled outages across its base rate applicationservice 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 citiesreduction in its service areaavailable natural gas capacity and impacts to change its rates, seeking approval for revenue increasesCenterPoint Energy’s and CERC’s natural gas supply portfolio activities, and the effects of approximately $194 million,weather on their systems and their ability to transport natural gas, among other requests.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 January 23, 2020, Houston Electric filedFebruary 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility to record in a Stipulation and Settlement Agreementregulatory asset the extraordinary expenses associated with the PUCTFebruary 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 providedmay impact the amounts recovered. Amounts for the following, among other things:
an overall revenue requirement increase of approximately $13 million;
an ROE of 9.4%;
a capital structure of 57.5% debt/42.5% equity;
a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and
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 retail transmission related costs throughamounts deferred in the TCRF.non-current regulatory asset associated with the February 2021 Winter Storm Event.
Also, Houston Electric is not requiredOn February 21, 2021, in response to makethe 2021 February Winter Storm Event, the PUCT issued an order prohibiting REPs from sending a one-time refundrequest to TDUs to disconnect such REPs’ customers for non-payment, effective February 21, 2021. As a result of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are required to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate application must be filed for Houston Electric no later than four years from the date of the PUCT’s finalthis order, in the proceeding. Additionally,event a request for disconnect is received from a REP, Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceeding withexecute any such disconnect request until the PUCT be instituted regarding EDIT on Houston Electric’s securitized assets. Furthermore, underissues orders for disconnects to resume. As of March 31, 2021, as authorized by the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy. The PUCT, approved the Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the final order. The rates were implemented on April 23, 2020.
CenterPoint Energy and Houston Electric record pre-tax expenseestablished a regulatory asset of $14 million for (i) probable disallowancesbad debt expenses resulting from REPs’ default on their obligation to pay delivery charges to Houston Electric net of capital investmentscollateral. Additionally, CenterPoint Energy and (ii) customer refund obligationsHouston Electric recorded a regulatory asset of $14 million to defer operations and maintenance costs deferred in regulatory assets when recovery of such amounts is no longer considered probable.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 have issued a number of different orders related to the COVID-19 pandemic. On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset expenses resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request for recovery of the regulatory asset is reasonable and necessary in a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in light of the disaster declarations issued by the Governor of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory.
The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of the COVID-19 ERP. The transmission and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete cost recovery and disburse all reimbursement amounts or remaining balances.
Similarly, regulatory authorities have issuedpandemic, including orders addressing customer non-payment and disconnection. In Indiana,Although the IURC issued an order that, among other things, permits utilities to voluntarily suspend or waive late fees and reconnection fees and reconnect customers whodisconnect moratoriums have been disconnected due to non-payment, provided that such actions are taken on a non-discriminatory basis and apply to all customers. Commissionsexpired in other states have issued similar orders. In CenterPoint Energy’s and CERC’s NGDcertain of the Registrants’ service territories, and for Indiana Electric, CenterPoint Energy and CERC, as applicable, have temporarily suspended disconnections for non-payment and will continuecontinues 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 other 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 savings.
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 physical forward contracts, swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows.
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 is expected to close in the second quarter of 2020. The following disclosures include the Energy Services Disposal Group and are identified as held for sale or discontinued operations.(a)Non-Trading Activities
| |
(a) | Non-Trading Activities |
Commodity Derivative Instruments (CenterPoint Energy and CERC)Energy). CenterPoint Energy, through itsthe Indiana Utilities, and CERC, through the Energy Services Disposal Group, enterenters into certain derivative instruments to mitigate the effects of commodity price movements. Certain financial instruments used to hedge portions of the natural gas inventory of the Energy Services Disposal Group are designated as fair value hedges for accounting purposes. 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. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges.
Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as economiccash flow hedges or cash flowaccounted 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. For the impacts of cash flow hedges to Accumulated other comprehensive income, see Note 19.
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 | | | |
| | | | | | | | |
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| Hedging Classification | Notional Principal |
| | CenterPoint Energy (1) | | Houston Electric | | CenterPoint Energy (1) | | Houston Electric |
| | (in millions) |
| Economic hedge | $ | 84 |
| | $ | — |
| | $ | 84 |
| | $ | — |
|
(1)Relates to interest rate derivative instruments at SIGECO.
| |
(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 NGDNatural Gas in Arkansas, Indiana, Louisiana, Mississippi, Minnesota, Ohio and Oklahoma, as applicable. CenterPoint Energy’s and CERC’s NGDNatural 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 NGDNatural 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 NGD’sNatural 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 NGDNatural 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 |
(b)Derivative Fair Values and Income Statement Impacts
The following tables present information about derivative instruments and hedging activities. The first three tables providetable provides a balance sheet overview of Derivative Assets and Liabilities, while the last two tables providetable provides a breakdown of the related income statement impacts. The Energy Services Disposal Group’s derivative balances are reported in assets or liabilities held for sale. See Note 3 for further information.
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 | |
CenterPoint Energy
|
| | | | | | | | | | | | | | | | | |
| | | | March 31, 2020 | | December 31, 2019 |
| | Balance Sheet Location | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value |
| | | | (in millions) |
| Derivatives designated as fair value hedges: | | | | | | | | |
Natural gas derivatives (1) (2) (3) | Current Liabilities: Current liabilities held for sale | | 18 |
| | — |
| | 12 |
| | — |
|
| Derivatives not designated as hedging instruments: | | | | | | | | |
Natural gas derivatives (1) (2) (3) | Current Assets: Current assets held for sale | | 215 |
| | 2 |
| | 139 |
| | 3 |
|
Natural gas derivatives (1) (2) (3) | Other Assets: Non-current assets held for sale | | — |
| | — |
| | 58 |
| | — |
|
Natural gas derivatives (1) (2) (3) | Current Liabilities: Non-trading derivative liabilities | | — |
| | 9 |
| | — |
| | 7 |
|
Natural gas derivatives (1) (2) (3) | Current Liabilities: Current liabilities held for sale | | 113 |
| | 217 |
| | 73 |
| | 177 |
|
Natural gas derivatives (1) (2) (3) | Other Liabilities: Non-trading derivative liabilities | | — |
| | 14 |
| | — |
| | 15 |
|
Natural gas derivatives (1) (2) (3) | Other Liabilities: Non-current liabilities held for sale | | — |
| | — |
| | 10 |
| | 39 |
|
| Interest rate derivatives | Other Liabilities | | — |
| | 26 |
| | — |
| | 10 |
|
| Indexed debt securities derivative | Current Liabilities | | — |
| | 758 |
| | — |
| | 893 |
|
| Total CenterPoint Energy | | $ | 346 |
| | $ | 1,026 |
| | $ | 292 |
| | $ | 1,144 |
|
| |
(1) | The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 2,126 Bcf or a net 232 Bcf long position and 2,226 Bcf or a net 374 Bcf long position as of March 31, 2020 and December 31, 2019, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure. |
| |
(2) | Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due. The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below. |
| |
(3) | Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable. |
CERC
|
| | | | | | | | | | | | | | | | | | |
| | | | | March 31, 2020 | | December 31, 2019 |
| | | Balance Sheet Location | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value | | Derivative Assets Fair Value | | Derivative Liabilities Fair Value |
| | | | | (in millions) |
| Derivatives designated as fair value hedges: | | | | | | | | |
Natural gas derivatives (1) (2) (3) | | Current Liabilities: Current liabilities held for sale | | $ | 18 |
| | $ | — |
| | $ | 12 |
| | $ | — |
|
| Derivatives not designated as hedging instruments: | | | | | | | | |
Natural gas derivatives (1) (2) (3) | | Current Assets: Current assets held for sale | | 215 |
| | 2 |
| | 139 |
| | 3 |
|
Natural gas derivatives (1) (2) (3) | | Other Assets: Non-current assets held for sale | | — |
| | — |
| | 58 |
| | — |
|
Natural gas derivatives (1) (2) (3) | | Current Liabilities: Current liabilities held for sale | | 113 |
| | 217 |
| | 73 |
| | 177 |
|
Natural gas derivatives (1) (2) (3) | | Other Liabilities: Non-current liabilities held for sale | | — |
| | — |
| | 10 |
| | 39 |
|
| Total CERC | | $ | 346 |
| | $ | 219 |
| | $ | 292 |
| | $ | 219 |
|
| |
(1) | The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 2,126 Bcf or a net 232 Bcf long position and 2,226 Bcf or a net 374 Bcf long position as of March 31, 2020 and December 31, 2019, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure. |
| |
(2) | Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below. |
| |
(3) | Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable. |
Cumulative Basis Adjustment(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 Fair Value Hedges (CenterPoint Energy and CERC)further information.
|
| | | | | | | | | | | | | | | | | |
| | | | March 31, 2020 |
| | Balance Sheet Location | | Carrying Amount of Hedged Assets/(Liabilities) | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item |
| | | | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | | | (in millions) |
| Hedged items in fair value hedge relationship: | | | | | | | | |
| Natural gas inventory | Current Assets: Current assets held for sale | | $ | 45 |
| | $ | 45 |
| | $ | (19 | ) | | $ | (19 | ) |
| Borrowed natural gas | Current Liabilities: Current liabilities held for sale | | (2 | ) | | (2 | ) | | — |
| | — |
|
| Gas imbalance receivable | Current Assets: Current assets held for sale | | 2 |
| | 2 |
| | (2 | ) | | (2 | ) |
| Gas imbalance payable | Current Liabilities: Current liabilities held for sale | | — |
| | — |
| | 1 |
| | 1 |
|
| Total | | $ | 45 |
| | $ | 45 |
| | $ | (20 | ) | | $ | (20 | ) |
|
| | | | | | | | | | | | | | | | | |
| | | | December 31, 2019 |
| | Balance Sheet Location | | Carrying Amount of Hedged Assets/(Liabilities) | | Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item |
| | | | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | | | (in millions) |
| Hedged items in fair value hedge relationship: | | | | | | | | |
| Natural gas inventory | Current Assets: Current assets held for sale | | $ | 47 |
| | $ | 47 |
| | $ | (13 | ) | | $ | (13 | ) |
| Total | | $ | 47 |
| | $ | 47 |
| | $ | (13 | ) | | $ | (13 | ) |
Offsetting of Natural Gas Derivative Assets and Liabilities (CenterPoint Energy and CERC)
CenterPoint Energy
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | Gross Amounts Recognized (1) | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount Presented in the Consolidated Balance Sheets (2) | | Gross Amounts Recognized (1) | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount Presented in the Consolidated Balance Sheets (2) |
| | (in millions) |
| Current Assets: Current assets held for sale | $ | 346 |
| | $ | (133 | ) | | $ | 213 |
| | $ | 224 |
| | $ | (88 | ) | | $ | 136 |
|
| Other Assets: Non-current assets held for sale | — |
| | — |
| | — |
| | 68 |
| | (10 | ) | | 58 |
|
| Current Liabilities: Non-trading derivative liabilities | (9 | ) | | — |
| | (9 | ) | | (7 | ) | | — |
| | (7 | ) |
| Current Liabilities: Current liabilities held for sale | (219 | ) | | 183 |
| | (36 | ) | | (180 | ) | | 136 |
| | (44 | ) |
| Other Liabilities: Non-trading derivative liabilities | (14 | ) | | — |
| | (14 | ) | | (15 | ) | | — |
| | (15 | ) |
| Other Liabilities: Non-current liabilities held for sale | — |
| | — |
| | — |
| | (39 | ) | | 25 |
| | (14 | ) |
| Total CenterPoint Energy | $ | 104 |
| | $ | 50 |
| | $ | 154 |
| | $ | 51 |
| | $ | 63 |
| | $ | 114 |
|
CERC
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | Gross Amounts Recognized (1) | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount Presented in the Consolidated Balance Sheets (2) | | Gross Amounts Recognized (1) | | Gross Amounts Offset in the Consolidated Balance Sheets | | Net Amount Presented in the Consolidated Balance Sheets (2) |
| | (in millions) |
| Current Assets: Current assets held for sale | $ | 346 |
| | $ | (133 | ) | | $ | 213 |
| | $ | 224 |
| | $ | (88 | ) | | $ | 136 |
|
| Other Assets: Non-current assets held for sale | — |
| | — |
| | — |
| | 68 |
| | (10 | ) | | 58 |
|
| Current Liabilities: Current liabilities held for sale | (219 | ) | | 183 |
| | (36 | ) | | (180 | ) | | 136 |
| | (44 | ) |
| Other Liabilities: Non-current liabilities held for sale | — |
| | — |
| | — |
| | (39 | ) | | 25 |
| | (14 | ) |
| Total CERC | $ | 127 |
| | $ | 50 |
| | $ | 177 |
| | $ | 73 |
| | $ | 63 |
| | $ | 136 |
|
| |
(1) | Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements. |
| |
(2) | The derivative assets and liabilities on the Registrant’s respective Condensed Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default. |
Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy and CERC)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 | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1) |
| | Income from discontinued operations |
| | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | (in millions) |
| Total amounts presented in the statements of income in which the effects of hedges are recorded | $ | 887 |
| | $ | 786 |
| | $ | 1,251 |
| | $ | 1,171 |
|
| Gain (loss) on fair value hedging relationships: | | | | | | | |
| Commodity contracts: | | | | | | | |
| Hedged items in fair value hedging relationships | (7 | ) | | (7 | ) | | (6 | ) | | (6 | ) |
| Derivatives designated as hedging instruments | 7 |
| | 7 |
| | 6 |
| | 6 |
|
| Amounts excluded from effectiveness testing recognized in earnings immediately | (38 | ) | | (38 | ) | | (14 | ) | | (14 | ) |
| |
(1) | Income statement impact associated with cash flow hedge activity is related to gains and losses reclassified from Accumulated other comprehensive income into income. Amounts are immaterial for each Registrant in the three months ended March 31, 2020 and 2019, respectively. |
CenterPoint Energy
|
| | | | | | | | | | |
| | | | | Three Months Ended March 31, |
| | | Income Statement Location | | 2020 | | 2019 |
| | | | (in millions) |
| Effects of derivatives not designated as hedging instruments on the income statement: | | | | |
| Commodity contracts | | Income from discontinued operations | | $ | 75 |
| | $ | 4 |
|
| Indexed debt securities derivative | | Gain (loss) on indexed debt securities | | 135 |
| | (86 | ) |
| Total CenterPoint Energy | | $ | 210 |
| | $ | (82 | ) |
CERC
|
| | | | | | | | | | |
| | | | | Three Months Ended March 31, |
| | | Income Statement Location | | 2020 | | 2019 |
| | | | (in millions) |
| Effects of derivatives not designated as hedging instruments on the income statement: | | | | |
| Commodity contracts | | Income from discontinued operations | | $ | 75 |
| | $ | 4 |
|
| Total CERC | | $ | 75 |
| | $ | 4 |
|
| |
(c) | Credit Risk Contingent Features (CenterPoint Energy and CERC) |
Certain of CenterPoint Energy and CERC enter into financialEnergy’s derivative contracts containing material adverse change provisions. Theseinstruments contain provisions couldthat require CenterPoint Energy or CERCEnergy’s debt to post additional collateral ifmaintain 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 S&P or Moody’s credit ratings of CenterPoint Energy, Inc. or its subsidiaries, including CERC Corp., are downgraded. 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 | |
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | (in millions) |
| Aggregate fair value of derivatives containing material adverse change provisions in a net liability position | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
|
| Additional collateral required to be posted if credit risk contingent features triggered | 1 |
| | 1 |
| | 1 |
| | 1 |
|
(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, as well as natural gas inventory that has been designated as the hedged item in a fair value hedge.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. A market approach is utilized to value the Registrants’ Level 3 assets or liabilities. As of March 31, 2020, CenterPoint Energy’s and CERC’s Level 3 assets and liabilities are comprised of physical natural gas forward contracts and options. Level 3 physical natural gas forward contracts and options are valued using a discounted cash flow model which includes illiquid forward price curve locations (ranging from $1.15 to $4.83 per MMBtu for CenterPoint Energy, with a volumetrically weighted average of $2.22 per MMBtu, and from $1.15 to $4.83 per MMBtu for CERC, with a volumetrically weighted average of $2.22 per MMBtu) as an unobservable input. CenterPoint Energy’s and CERC’s Level 3 physical natural gas forward contracts and options derivative assets and liabilities consist of both long and short positions (forwards and options). Forward price decreases (increases) as of March 31, 2020 would have resulted in lower (higher) values, respectively, for long forwards and options and higher (lower) values, respectively, for short forwards and options.
The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis. The Registrants also recognize purchases of Level 3 financial assets and liabilities at their fair value at the end of the reporting period.
The following tables present information about the Registrants’ assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of March 31, 20202021 and December 31, 20192020 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 | | | $ | 0 | | | $ | 0 | | | | | $ | 850 | | | $ | 873 | | | $ | 0 | | | $ | 0 | | | | $ | 873 | |
Investments, including money market funds (1) | 43 | | | 0 | | | 0 | | | | | 43 | | | 43 | | | 0 | | | 0 | | | | 43 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Total assets | $ | 893 | | | $ | 0 | | | $ | 0 | | | | | $ | 893 | | | $ | 916 | | | $ | 0 | | | $ | 0 | | | | $ | 916 | |
| Liabilities | | | | | | | | | | | | | | | | | | |
| Indexed debt securities derivative | $ | 0 | | | $ | 927 | | | $ | 0 | | | | | $ | 927 | | | $ | 0 | | | $ | 953 | | | $ | 0 | | | | $ | 953 | |
| Interest rate derivatives | 0 | | | 9 | | | 0 | | | | | 9 | | | 0 | | | 20 | | | 0 | | | | 20 | |
| Natural gas derivatives | 0 | | | 7 | | | 0 | | | | | 7 | | | 0 | | | 10 | | | 0 | | | | 10 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Total liabilities | $ | 0 | | | $ | 943 | | | $ | 0 | | | | | $ | 943 | | | $ | 0 | | | $ | 983 | | | $ | 0 | | | | $ | 983 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| |
Level 1 | | Level 2 | | Level 3 | | Netting (1) | | Total | |
Level 1 | | Level 2 | | Level 3 | | Netting (1) | | Total |
| Assets | (in millions) |
| Corporate equities | $ | 680 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 680 |
| | $ | 825 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 825 |
|
Investments, including money market funds (2) | 48 |
| | — |
| | — |
| | — |
| | 48 |
| | 49 |
| | — |
| | — |
| | — |
| | 49 |
|
Natural gas derivatives (3)(4)(5) | — |
| | 305 |
| | 41 |
| | (133 | ) | | 213 |
| | — |
| | 250 |
| | 42 |
| | (98 | ) | | 194 |
|
| Hedged portion of gas imbalance payable | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total assets | $ | 729 |
| | $ | 305 |
| | $ | 41 |
| | $ | (133 | ) | | $ | 942 |
| | $ | 874 |
| | $ | 250 |
| | $ | 42 |
| | $ | (98 | ) | | $ | 1,068 |
|
| Liabilities | |
| | |
| | |
| | |
| | |
| | | | | | | | | | |
| Indexed debt securities derivative | $ | — |
| | $ | 758 |
| | $ | — |
| | $ | — |
| | $ | 758 |
| | $ | — |
| | $ | 893 |
| | $ | — |
| | $ | — |
| | $ | 893 |
|
| Interest rate derivatives | — |
| | 26 |
| | — |
| | — |
| | 26 |
| | — |
| | 10 |
| | — |
| | — |
| | 10 |
|
| Natural gas derivatives | — |
| | 23 |
| | — |
| | — |
| | 23 |
| | — |
| | 22 |
| | — |
| | — |
| | 22 |
|
Natural gas derivatives (3)(4)(5) | — |
| | 201 |
| | 18 |
| | (183 | ) | | 36 |
| | — |
| | 195 |
| | 24 |
| | (161 | ) | | 58 |
|
Hedged portion of natural gas inventory (5) | 19 |
| | — |
| | — |
| | — |
| | 19 |
| | 13 |
| | — |
| | — |
| | — |
| | 13 |
|
| Hedged portion of gas imbalance receivable | 2 |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total liabilities | $ | 21 |
| | $ | 1,008 |
| | $ | 18 |
| | $ | (183 | ) | | $ | 864 |
| | $ | 13 |
| | $ | 1,120 |
| | $ | 24 |
| | $ | (161 | ) | | $ | 996 |
|
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 | | | $ | 0 | | | $ | 0 | | | | | $ | 27 | | | $ | 26 | | | $ | 0 | | | $ | 0 | | | | | $ | 26 | |
| | | | | | | | | | | | | | | | | | | |
| Total assets | $ | 27 | | | $ | 0 | | | $ | 0 | | | | | $ | 27 | | | $ | 26 | | | $ | 0 | | | $ | 0 | | | | | $ | 26 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| |
Level 1 | | Level 2 | | Level 3 | | Netting | | Total | |
Level 1 | | Level 2 | | Level 3 | | Netting | | Total |
| Assets | (in millions) |
Investments, including money market funds (2) | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 31 |
| | $ | 32 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 32 |
|
| Total assets | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 31 |
| | $ | 32 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 32 |
|
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 | | | $ | 0 | | | $ | 0 | | | | | $ | 2 | | | $ | 2 | | | $ | 0 | | | $ | 0 | | | | $ | 2 | |
Investments, including money market funds (1) | 11 | | | 0 | | | 0 | | | | | 11 | | | 11 | | | 0 | | | 0 | | | | 11 | |
| Total assets | $ | 13 | | | $ | 0 | | | $ | 0 | | | | | $ | 13 | | | $ | 13 | | | $ | 0 | | | $ | 0 | | | | $ | 13 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| |
Level 1 | | Level 2 | | Level 3 | | Netting (1) | | Total | |
Level 1 | | Level 2 | | Level 3 | | Netting (1) | | Total |
| Assets | (in millions) |
| Corporate equities | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2 |
|
Investments, including money market funds (2) | 11 |
| | — |
| | — |
| | — |
| | 11 |
| | 11 |
| | — |
| | — |
| | — |
| | 11 |
|
Natural gas derivatives (3)(4)(5) | — |
|
| 305 |
|
| 41 |
|
| (133 | ) | | 213 |
| | — |
| | 250 |
| | 42 |
| | (98 | ) | | 194 |
|
| Hedged portion of gas imbalance payable | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total assets | $ | 13 |
| | $ | 305 |
| | $ | 41 |
| | $ | (133 | ) | | $ | 226 |
| | $ | 13 |
| | $ | 250 |
| | $ | 42 |
| | $ | (98 | ) | | $ | 207 |
|
| Liabilities | |
| | |
| | |
| | |
| | |
| | | | | | | | | | |
Natural gas derivatives (3)(4)(5) | $ | — |
|
| $ | 201 |
|
| $ | 18 |
|
| $ | (183 | ) | | $ | 36 |
| | $ | — |
| | $ | 195 |
| | $ | 24 |
| | $ | (161 | ) | | $ | 58 |
|
Hedged portion of natural gas inventory (5) | 19 |
| | — |
| | — |
| | — |
| | 19 |
| | 13 |
| | — |
| | — |
| | — |
| | 13 |
|
| Hedged portion of gas imbalance receivable | 2 |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total liabilities | $ | 21 |
| | $ | 201 |
| | $ | 18 |
| | $ | (183 | ) | | $ | 57 |
| | $ | 13 |
| | $ | 195 |
| | $ | 24 |
| | $ | (161 | ) | | $ | 71 |
|
| |
(1) | Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy and CERC to settle positive and negative positions and also include cash collateral posted with the same counterparties as follows: |
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | (in millions) |
| Cash collateral posted with the same counterparties | $ | 50 |
| | $ | 50 |
| | $ | 63 |
| | $ | 63 |
|
| |
(2) | Amounts are included in Prepaid expenses and other current assets in the Condensed Consolidated Balance Sheets. |
| |
(3) | Natural gas derivatives include no material amounts related to physical forward transactions with Enable. |
| |
(4) | Level 1 natural gas derivatives include exchange-traded derivatives cleared by the CME, which deems that financial instruments cleared by the CME are settled daily in connection with posted cash payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes and are presented in Level 1 net of posted cash; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis. |
| |
(5) | Amounts are classified as held for sale in the Registrants’ respective Condensed Consolidated Balance Sheets. |
The following table presents additional information about assets or liabilities, including derivatives that are measured at fair value on a recurring basis for which CenterPoint Energy and CERC have utilized Level 3 inputs to determine fair value:
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | CenterPoint Energy | | CERC | | CenterPoint Energy | | CERC |
| | (in millions) |
| Beginning balance | | $ | 18 |
| | $ | 18 |
| | $ | 30 |
| | $ | 30 |
|
| Total gains (losses) | | 15 |
| | 15 |
| | (1 | ) | | (1 | ) |
| Total settlements | | (10 | ) | | (10 | ) | | (15 | ) | | (15 | ) |
| Transfers into Level 3 | | — |
| | — |
| | 1 |
| | 1 |
|
| Transfers out of Level 3 | | — |
| | — |
| | (2 | ) | | (2 | ) |
| Ending balance (1) | | $ | 23 |
| | $ | 23 |
| | $ | 13 |
| | $ | 13 |
|
| | | | | | | | | |
| The amount of total gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date: |
| | | $ | 14 |
| | $ | 14 |
| | $ | (2 | ) | | $ | (2 | ) |
| |
(1) | CenterPoint Energy and CERC did not have significant Level 3 purchases or sales during the three months ended March 31, 2020 or 2019. The Level 3 assets and liabilities as of March 31, 2020 and 2019 are classified in the CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets as held for sale. |
Items Measured at Fair Value on a Nonrecurring Basis
Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 primarily due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. The impairment analysis compared the estimated fair value of CenterPoint Energy’s investment in Enable to its carrying value. The fair value of the investment was determined using multiple valuation methodologies under both the market and income approaches. Both of these approaches incorporate significant estimates and assumptions, including:
Market Approach
• quoted price of Enable’s common units;
• recent market transactions of comparable companies; and
• EBITDA to total enterprise multiples for comparable companies.
Income Approach
• Enable’s forecasted cash distributions;
• projected cash flows of incentive distribution rights;
• forecasted growth rate of Enable’s cash distributions; and
• determination of the cost of equity, including market risk premiums.
Weighting of the Different Approaches
Significant unobservable inputs used include the growth rate applied to the projected cash distributions beyond 2020 and the discount rate used to determine the present value of the estimated future cash flows. Based on the significant unobservable estimates and assumptions required, CenterPoint Energy concluded that the fair value estimate should be classified as a Level 3 measurement within the fair value hierarchy. As a result of this analysis, CenterPoint Energy recorded an other than temporary impairment on its investment in Enable of $1,541 million, reducing the fair value of the investment to $848 million. See Note 9 for further discussion of the impairment.
As of March 31, 2020, CenterPoint Energy recorded a goodwill impairment charge of $185 million in the Indiana Electric Integrated reporting unit. See Note 10 for further information.
CenterPoint Energy recognized a goodwill impairment charge of $82 million upon classifying the Infrastructure Services Disposal Group as held for sale and CenterPoint Energy and CERC recognized a goodwill impairment charge of approximately $62 million and a loss on assets held for sale of approximately $70 million upon classifying the Energy Services Disposal Group as held for sale. Using a market approach, the fair value of the Infrastructure Services Disposal Group as of March 31, 2020 is determined to be approximately $864 million and the fair value of the Energy Services Disposal Group as of March 31, 2020 is determined to be approximately $402 million. For both Disposal Groups, CenterPoint Energy and CERC, as applicable, used the contractual sales price adjusted for estimated working capital, and other contractual purchase price adjustments, which are Level 2 inputs. See Note 3 for further information.
Estimated Fair Value of Financial Instruments
The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading”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 | |
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
| | (in millions) |
| CenterPoint Energy | | | | | | | |
Long-term debt, including current maturities (1) | $ | 15,238 |
| | $ | 16,047 |
| | $ | 15,093 |
| | $ | 16,067 |
|
| Houston Electric | | | | | | | |
Long-term debt, including current maturities (1) | $ | 4,888 |
| | $ | 5,368 |
| | $ | 4,950 |
| | $ | 5,457 |
|
| CERC | | | | | | | |
| Long-term debt, including current maturities | $ | 2,377 |
| | $ | 2,637 |
| | $ | 2,546 |
| | $ | 2,803 |
|
| |
(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, 2020,2021, 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 | |
|
| | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (in millions) |
| Enable | $ | 848 |
| | $ | 2,406 |
|
| Other | 2 |
| | 2 |
|
| Total | $ | 850 |
| | $ | 2,408 |
|
CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in the valueAs of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline inMarch 31, 2021, Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributionsclosed at $6.48 per common unit by 50%, and the market outlook indicating excess supply of crude oil and natural gas and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units. See Note 8 for further discussion of the determination of fair value of CenterPoint Energy’s investment in Enable.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) | |
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Enable | | $ | (1,475 | ) | | $ | 62 |
|
| Other | | — |
| | — |
|
| Total | | $ | (1,475 | ) | | $ | 62 |
|
CenterPoint Energy recognized a loss of $1,475 million from its investment in Enable for the three months ended March 31, 2020. This loss included(1)Included an impairment charge on itsCenterPoint Energy’s investment in Enable of $1,541 million.
Limited Partner Interest and Units Held in Enable (CenterPoint Energy):
|
| | | | | | | | |
| | March 31, 2020 |
| | Limited Partner Interest (1) | | Common Units (2) | | Enable Series A Preferred Units (3) |
| CenterPoint Energy | 53.7 | % | | 233,856,623 |
| | 14,520,000 |
|
| OGE | 25.5 | % | | 110,982,805 |
| | — |
|
| Public unitholders | 20.8 | % | | 90,604,066 |
| | — |
|
| Total units outstanding | 100.0 | % | | 435,443,494 |
| | 14,520,000 |
|
| |
(1) | Excludes the Enable Series A Preferred Units owned by 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 | | | 0 | | |
| Public unitholders | 20.8 | % | | 91,007,338 | | | 0 | | |
| | | | | | |
| Total units outstanding | 100.0 | % | | 435,846,766 | | | 14,520,000 | | |
| |
(2) | Held indirectly through CNP Midstream by CenterPoint Energy. |
(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. NaN 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.
| |
(3) | 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 March 31, 2020 and $363 million as of December 31, 2019. No impairment charges or adjustment due to observable price changes were required or recorded during the current or prior reporting periods. |
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):
|
| | | | | |
| | March 31, 2020 |
| | 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) | Enable previously expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to Enable GP and its affiliates, within 60 days after the end of each quarter. 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. |
| | | | | | | | | | | |
| 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, 0 incentive distributions have been made.
(3)Held indirectly through CNP Midstream.
Distributions Received from Enable (CenterPoint Energy):
CenterPoint Energy
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Per Unit | | Cash Distribution | | Per Unit | | Cash Distribution |
| | | |
Enable common units (1) | | $ | 0.3305 |
| | $ | 77 |
| | $ | 0.3180 |
| | $ | 74 |
|
| Enable Series A Preferred Units | | 0.6250 |
| | 9 |
| | 0.6250 |
| | 9 |
|
| Total CenterPoint Energy | | | | $ | 86 |
| | | | $ | 83 |
|
| |
(1) | On April 1, 2020, Enable announced a 50% reduction in its quarterly distribution per common unit from $0.3305 to $0.16525. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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, which are now reflected as discontinued operations and liabilities held for sale.Group.
| | | | | | | | | | | | | | | | | |
| | | | CenterPoint Energy and CERC |
| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Natural gas expenses, includes transportation and storage costs | | | | | $ | 32 | | | $ | 27 | |
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| CenterPoint Energy | |
| Natural gas expenses, includes transportation and storage costs | | $ | 27 |
| | $ | 27 |
|
| CERC | | | | |
| Natural gas expenses, includes transportation and storage costs | | 27 |
| | 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 | |
|
| | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (in millions) |
| CenterPoint Energy | | | |
| Accounts payable for natural gas purchases from Enable | $ | 9 |
| | $ | 9 |
|
| CERC | | | |
| Accounts payable for natural gas purchases from Enable | 9 |
| | 9 |
|
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 | | | | | 0 | | | 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 | | | | | 0 | | | (1) | |
| Impairment of CenterPoint Energy’s equity method investment in Enable | | | | | 0 | | | (1,541) | |
| CenterPoint Energy’s equity in earnings (losses), net | | | | | $ | 108 | | | $ | (1,475) | |
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 |
| 2019 |
| | (in millions) |
| Operating revenues | | $ | 648 |
| | $ | 795 |
|
| Cost of sales, excluding depreciation and amortization | | 226 |
| | 378 |
|
| Depreciation and amortization | | 104 |
| | 105 |
|
| Goodwill and long-lived assets impairments | | 28 |
| | — |
|
| Operating income | | 146 |
| | 165 |
|
| Net income attributable to Enable common units | | 103 |
| | 113 |
|
| Reconciliation of Equity in Earnings (Losses), net: | | | | |
| CenterPoint Energy’s interest | | $ | 55 |
| | $ | 61 |
|
Basis difference amortization (1) | | 12 |
| | 12 |
|
| Loss on dilution, net of proportional basis difference recognition | | (1 | ) | | (11 | ) |
| Impairment of CenterPoint Energy’s equity method investment in Enable | | (1,541 | ) | | — |
|
| CenterPoint Energy’s equity in earnings, net | | $ | (1,475 | ) | | $ | 62 |
|
| |
(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. |
Summarized unaudited consolidated balance sheet information for Enable is as follows:
|
| | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (in millions) |
| Current assets | $ | 333 |
| | $ | 389 |
|
| Non-current assets | 11,784 |
| | 11,877 |
|
| Current liabilities | 391 |
| | 780 |
|
| Non-current liabilities | 4,374 |
| | 4,077 |
|
| Non-controlling interest | 27 |
| | 37 |
|
| Preferred equity | 362 |
| | 362 |
|
| Accumulated other comprehensive loss | (9 | ) | | (3 | ) |
| Enable partners’ equity | 6,972 |
| | 7,013 |
|
| Reconciliation of Investment in Enable: | | | |
| CenterPoint Energy’s ownership interest in Enable partners’ equity | $ | 3,739 |
| | $ | 3,767 |
|
CenterPoint Energy’s basis difference (1) | (2,891 | ) | | (1,361 | ) |
| CenterPoint Energy’s equity method investment in Enable | $ | 848 |
| | $ | 2,406 |
|
| |
(1) | 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. The basis difference is being amortized through the year 2048. |
| | | | | | | | | | | |
| 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 and CERC)Energy)
Goodwill and intangible assets related to the Infrastructure Services and Energy Services Disposal Groups are classified as held for sale on CenterPoint Energy’s and CERC’s respective Condensed Consolidated Balance Sheets, as applicable, and are excluded from the tabular disclosures below. See Note 3 for further information.
CenterPoint Energy’s goodwill by reportable segment as of March 31, 20202021 and December 31, 20192020 is as follows:
|
| | | | | | | | | | | | |
| | | December 31, 2019 | | Impairment | | March 31,
2020 |
| | (in millions) |
| Indiana Electric Integrated | | $ | 1,121 |
| | $ | 185 |
| | $ | 936 |
|
| Natural Gas Distribution | | 3,312 |
| | — |
| | 3,312 |
|
| Corporate and Other | | 449 |
| | — |
| | 449 |
|
| Total | | $ | 4,882 |
| | $ | 185 |
| | $ | 4,697 |
|
| | | | | | | | |
| | |
| | (in millions) |
Electric (1) | | $ | 936 | |
| Natural Gas | | 3,323 | |
| Corporate and Other | | 438 | |
| | |
| Total | | $ | 4,697 | |
CERC’s goodwill by reportable segment as(1)Amount presented is net of March 31, 2020 and December 31, 2019 is as follows:
|
| | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (in millions) |
| Natural Gas Distribution | $ | 746 |
| | $ | 746 |
|
| Corporate and Other | 11 |
| | 11 |
|
| Total | $ | 757 |
| | $ | 757 |
|
CenterPoint Energy and CERC performthe accumulated goodwill impairment tests at least annually and evaluate goodwill when events or changes in circumstances indicate that its carrying value may not be recoverable. The impairment evaluation for goodwill is performed by comparing the fair value of each reporting unit with the carrying amount of the reporting unit, including goodwill. The reporting units approximate the reportable segments, with the exception of ESG, which is a separate reporting unit but included in CenterPoint Energy’s Corporate and Other. The estimated fair value of the reporting unit is primarily determined based on an income approach or a weighted combination of income and market approaches. If the carrying amount is in excess of the estimated fair value of the reporting unit, then the excess amount is the impairment charge that should be recorded, not to exceed the carrying amount of goodwill.
In connection with their preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units due to the macroeconomic conditions related in part to the COVID-19 pandemic and the resulting decrease in CenterPoint Energy’s enterprise market capitalization below book value from the decline in CenterPoint Energy’s common stock price.
CenterPoint Energy’s interim impairment test in the first quarter of 2020 resulted in a non-cash goodwill impairment charge
in the amount of $185 million for the Indiana Electric Integrated reportable segment. The Indiana Electric Integrated reporting unit fair value analysis resulted in an implied fair value of goodwill of $936 million for this reporting unit, and as a result, the non-cash impairment charge was recorded in the three months ended March 31, 2020.
CenterPoint Energy estimated the value of the Indiana Electric Integrated reporting unit using primarily an income approach. Under the income approach, the fair value of the reporting unit is determined by using the present value of future expected cash flows, which include management’s projections of the amount and timing of future capital expenditures and the cash inflows from the related regulatory recovery. These estimated future cash flows are then discounted using a rate that approximates the weighted average cost of capital of a market participant. The selection of the discount rate requires significant judgment.
With the exception of Indiana Electric Integrated discussed above, the fair value of each of CenterPoint Energy’s and CERC’s reporting units exceeded their carrying value, resulting in no goodwill impairment from the March 31, 2020 interim impairment test. See Note 3 for goodwill impairments included within discontinued operations.
The tables below present information on CenterPoint Energy’s other 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) | | | 0 | | | 5 | | | (5) | | | 0 | |
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 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Balance | | Gross Carrying Amount | | Accumulated Amortization | | Net Balance |
| | (in millions) |
| Customer relationships | $ | 33 |
| | $ | (5 | ) | | $ | 28 |
| | $ | 33 |
| | $ | (4 | ) | | $ | 29 |
|
| Trade names | 16 |
| | (1 | ) | | 15 |
| | 16 |
| | (1 | ) | | 15 |
|
Construction backlog (1) | 5 |
| | (4 | ) | | 1 |
| | 5 |
| | (4 | ) | | 1 |
|
Operation and maintenance agreements (1) | 12 |
| | (1 | ) | | 11 |
| | 12 |
| | — |
| | 12 |
|
| Other | 2 |
| | (1 | ) | | 1 |
| | 2 |
| | (1 | ) | | 1 |
|
| Total | $ | 68 |
| | $ | (12 | ) | | $ | 56 |
| | $ | 68 |
| | $ | (10 | ) | | $ | 58 |
|
34
| |
(1) |
(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, |
| | | 2020 | | 2019 |
| | (in millions) |
| Amortization expense of intangible assets recorded in Depreciation and amortization | | $ | 1 |
| | $ | — |
|
| Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas | | 1 |
| | 7 |
|
| | | | | | | | | | | | | | | | | | |
| | | 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 | | | | | 0 | | | 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 | |
|
| | | |
| | Amortization Expense |
| | (in millions) |
| Remaining nine months of 2020 | $ | 6 |
|
| 2021 | 6 |
|
| 2022 | 6 |
|
| 2023 | 6 |
|
| 2024 | 5 |
|
| 2025 | 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 classified as trading 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 | |
| | | |
| | | |
|
| | | | | |
| | Shares Held |
| | March 31, 2020 | | December 31, 2019 |
| 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, 2020.2021. 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 | |
| | | |
| | | |
|
| | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | (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, 2020,2021, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $70$52 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the reference shares attributable to the ZENS.
(12) Short-term Borrowings and Long-term Debt
| |
(a) | Short-term Borrowings (CenterPoint Energy and CERC) |
Inventory FinancingFinancing. . NGD hasCenterPoint Energy’s and CERC’s Natural Gas had AMAs associated with itstheir utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group that expired in March 2021. The expired AMAs were replaced with new third-party AMAs beginning in April 2021. CenterPoint Energy’s and CERC’s Natural Gas have AMAs with third parties associated with their utility distribution service in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. The AMAs have varying terms, the longest of which expires in 2021.2027. Pursuant to the provisions of the agreements, NGDCenterPoint Energy’s and CERC’s Natural Gas either sells natural gas to the asset manager and agrees to repurchase an equivalent amount of natural gas duringthroughout the winter heating seasonsyear at the same cost.cost, or simply purchases its full natural gas requirements at each delivery point from the asset manager. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had no$-0- and $24 million outstanding obligations related to the AMAs as of both March 31, 20202021 and December 31, 2019.2020, 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, 2020:2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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. |
| | | | | | | | | | | | | | |
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, 2020 (2) | | Termination Date |
| | | | | (in millions) | | | | | | | | |
| March 3, 2016 | | CenterPoint Energy | | $ | 3,300 |
| | 1.500% | | 65% | (3) | 59.0% | | March 3, 2022 |
| July 14, 2017 | | CenterPoint Energy (4) | | 400 |
| | 1.125% | | 65% | | 50.4% | | July 14, 2022 |
| July 14, 2017 | | CenterPoint Energy (5) | | 200 |
| | 1.250% | | 65% | | 56.5% | | July 14, 2022 |
| March 3, 2016 | | Houston Electric | | 300 |
| | 1.250% | | 65% | (3) | 53.4% | | March 3, 2022 |
| March 3, 2016 | | CERC | | 900 |
| | 1.250% | | 65% | | 43.6% | | March 3, 2022 |
| | | Total | | $ | 5,100 |
| | | | | | | | |
(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.
| |
(1) | Based on current credit ratings. |
| |
(2) | As defined in the revolving credit facility agreements, excluding Securitization Bonds. |
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(3) | For CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase from 65% 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. |
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(4) | This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $10 million swing line sublimit and a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program. |
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(5) | This credit facility was issued by VCC, is guaranteed by Vectren and includes a $40 million swing line sublimit and an $80 million letter of credit sublimit. |
The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of March 31, 2020.2021.
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) | | $ | 0 | | | $ | 11 | | | $ | 772 | | | 0.21 | % | | | $ | 0 | | | $ | 11 | | | $ | 1,078 | | | 0.23 | % |
CenterPoint Energy (2) | | 0 | | | 0 | | | 210 | | | 0.18 | % | | | 0 | | | 0 | | | 92 | | | 0.22 | % |
| | | | | | | | | | | | | | | | | |
| Houston Electric | | 0 | | | 0 | | | 0 | | | 0 | % | | | 0 | | | 0 | | | 0 | | | 0 | % |
| CERC | | 0 | | | 0 | | | 573 | | | 0.21 | % | | | 0 | | | 0 | | | 347 | | | 0.23 | % |
| Total | | $ | 0 | | | $ | 11 | | | $ | 1,555 | | | | | | $ | 0 | | | $ | 11 | | | $ | 1,517 | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| 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) | $ | 900 |
| | $ | 6 |
| | $ | 1,169 |
| | 2.17 | % | | $ | — |
| | $ | 6 |
| | $ | 1,633 |
| | 1.95 | % |
CenterPoint Energy (2) | 150 |
| | — |
| | 76 |
| | 2.19 | % | | — |
| | — |
| | 268 |
| | 2.08 | % |
CenterPoint Energy (3) | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | — |
| | — | % |
| Houston Electric | — |
| | — |
| | — |
| | — | % | | — |
| | — |
| | — |
| | — | % |
| CERC | — |
| | 1 |
| | 205 |
| | 2.80 | % | | — |
| | 1 |
| | 377 |
| | 1.94 | % |
| Total | $ | 1,050 |
| | $ | 7 |
| | $ | 1,450 |
| | | | $ | — |
| | $ | 7 |
| | $ | 2,278 |
| | |
| |
(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.
| |
(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, 0 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.
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(3) | This credit facility was issued by VCC and is guaranteed by Vectren. |
Other. As of March 31, 2020,2021, certain financial institutions agreed to issue, from time to time, up to $50$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, 2020.2021. As of March 31, 2020,2021, such financial institutions had issued $20$1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.
Houston Electric had $68 million and $68 million of general mortgage bonds outstanding as of March 31, 2020 and December 31, 2019, respectively, as collateral for long-term debt of CenterPoint Energy that matures in 2028. These bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations.
(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) | | | | | 0 | % | | 10 | % |
| Houston Electric | | | | | 13 | % | | 13 | % |
CERC - Continuing operations (3) | | | | | 22 | % | | 21 | % |
CERC - Discontinued operations (4) | | | | | 0 | % | | 15 | % |
|
| | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
CenterPoint Energy - Continuing operations (1) | | 25 | % | | 9 | % |
CenterPoint Energy - Discontinued operations (2) | | 10 | % | | 24 | % |
Houston Electric (3) | | 13 | % | | 18 | % |
CERC - Continuing operations (4) | | 21 | % | | 14 | % |
CERC - Discontinued operations (5) | | 15 | % | | 22 | % |
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(1) | CenterPoint Energy’s higher effective tax rate on the loss from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 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 Integrated 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 effective 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) | Houston Electric's lower effective tax rate for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to an increase in the amount of amortization of the net regulatory EDIT liability. |
| |
(4) | CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT liability. |
| |
(5) | CERC’s lower effective tax rate on the loss from discontinued operations for the three months ended March 31, 2020 was due to the non-deductible portion of the goodwill impairment on the Energy Services Disposal Group. |
(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. The tax effects of changes in tax laws are recognized inBased on the period in whichCARES Act NOL carryback provision, during the law is enacted. As such,three months ended March 31, 2020, CenterPoint Energy recorded a $19 million benefit resulting from carryback claims expected to be filed to refund taxes paid in prior years.paid.
The RegistrantsCenterPoint Energy reported a net uncertain tax liability, inclusive of interest and penalties, of $8$10 million as of March 31, 2020. A net2021. Interest and penalties of $1 million decrease from Decemberwere recorded on the uncertain tax liability for the three month period ending March 31, 2019 was primarily driven by a favorable court of appeals decision resulting in a reduction of the associated state tax reserve.2021. The Registrants believe that it is reasonably possible that a decrease of up to $5$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 filing
acceptance of applicationsan application for an accounting method changes.change. For CenterPoint Energy, tax years through 20172018 have been audited and settled with the IRS. For the 2018-20202019 through 2021 tax years CenterPoint Energy is a participant in the IRS’s Compliance Assurance Process. Legacy Vectren is not currently under audit with the IRS, and the 2017-2019Vectren’s pre-Merger 2017 through 2019 tax years are still open.
(14) Commitments and Contingencies
(a)Purchase Obligations (CenterPoint Energy and CERC)
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(a) | Purchase Obligations (CenterPoint Energy and CERC) |
Commitments include minimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas Distribution reportable segment and CenterPoint Energy’s Indiana Electric Integrated 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, 20202021 and December 31, 2019.2020. 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, 2020,2021, undiscounted minimum purchase obligations are approximately:
| | | | | | | | | | | | | | | | | |
| 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 | |
|
| | | | | | | |
| | CenterPoint Energy (1) | | CERC (1) |
| | (in millions) |
| Remaining nine months of 2020 | $ | 464 |
| | $ | 309 |
|
| 2021 | 601 |
| | 417 |
|
| 2022 | 409 |
| | 234 |
|
| 2023 | 327 |
| | 175 |
|
| 2024 | 263 |
| | 168 |
|
| 2025 | 208 |
| | 163 |
|
| 2026 and beyond | 1,622 |
| | 1,329 |
|
| |
(1) | Excludes Energy Services Disposal Group obligations. |
Excluded from the table above are estimates for cash outlays from other PPAs through Indiana Electric Integrated also has other purchased power agreements 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.
CenterPoint Energy’s(b) Guarantees and CERC’s NGD have AMAs associated with their utility distribution service in Arkansas, Louisiana and Oklahoma with the Energy Services Disposal Group. The AMAs have varying terms, the longest of which expires in 2021. For further information, see Note 3.Product Warranties (CenterPoint Energy)
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(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, 2020,2021, there were 6251 open surety bonds supporting future performance with an aggregate face amount of approximately $563$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, 2020,2021, approximately 34%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, 20202021 and no0 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, 2020,2021, 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 $513$517 million as of March 31, 2020.2021. 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.
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(c) | (c)Guarantees and Product Warranties (CenterPoint Energy and CERC) |
In the normal course of business, the Energy Services Disposal Group trades natural gas under supply contracts and enters into natural gas related transactions under transportation, storage and other contracts. In connection with the Energy Services Disposal Group’s business activities, CERC Corp. has issued guarantees to the Energy Services Disposal Group’s counterparties to guarantee the payment of the Energy Services Disposal Group’s obligations. While the Energy Services Disposal Group remains wholly-owned by CERC Corp., these guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of the Energy Services Disposal Group’s obligations to allow the Energy Services Disposal Group to conduct business without posting other forms of assurance. As of March 31, 2020, the face amount of CERC Corp.’s guarantees of the Energy Services Disposal Group’s obligations was approximately $1.5 billion.
A CERC Corp. guarantee primarily has a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by the Energy Services Disposal Group prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Since CERC Corp. has owned the Energy Services Disposal Group, CERC Corp. has not paid any amounts under any guarantees of the Energy Services Disposal Group’s obligations. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.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, AthenaSymmetry Energy ServicesSolutions 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 sale.transaction. Additionally, to the extent that CERC Corp. retains any exposure relating to thecertain guarantees of the Energy Services Disposal GroupCES’s obligations 90 days after closing Athenaof the transaction, Symmetry Energy ServicesSolutions 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. NaN 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 0 amounts on their respective Condensed Consolidated Balance Sheets as of March 31, 20202021 and December 31, 20192020 related to the performance of these guarantees.
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(d) | Legal, Environmental and Other Matters |
(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, certain of its subsidiaries, including CERC, and the contractor company working in the school have been named in litigation arising out of this incident. CenterPoint Energy and CERC have reached confidential settlement agreements on all wrongful death and property damage claims and with some personal injury claimants. Additionally, 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, seven7 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 seven7 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, two2 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.
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(i) | (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.
. 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.
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(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 five 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.
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| |
(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.
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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.
| | | | | | | | | | | |
| 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 | |
|
| | | | | | | |
| | March 31, 2020 |
| | CenterPoint Energy | | CERC |
| | (in millions, except years) |
| Amount accrued for remediation | $ | 11 |
| | $ | 7 |
|
| Minimum estimated remediation costs | 7 |
| | 5 |
|
| Maximum estimated remediation costs | 53 |
| | 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. While the EPA Phase I Reconsideration moves forward, the existing CCR compliance obligations remain in effect. In August 2019, the EPA proposed additional “Part A” amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. TheseFurther “Part B” amendments, have not yet been finalized.which related to alternate liners for CCR surface impoundments and the surface impoundment closure process, were published in March 2020. The proposed revisions wouldPart 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 three3 ash ponds, two2 at the F.B. Culley facility (Culley East and Culley West) and one1 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, with bottom ash handling conversions completed.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. In March 2018, Indiana Electric began posting ground water dataPreliminary groundwater monitoring reports annually to its public website in accordance with the requirements of the CCR Rule. This data preliminarily 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 October 31, 2020.April 11, 2021. CenterPoint Energy plans to seekhas applied for the extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through December 31,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 commencedcompleted closure activities. CenterPoint Energy believes the language inOn August 14, 2019, Indiana Electric filed its petition with the IURC order is favorable for future recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs forassociated 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 remaining ponds.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.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. In March 2019, Indiana Electric entered into agreements with third parties for the excavation and beneficial reuse of the ash at the A.B. Brown ash pond. 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 the ponded ash. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR Rule. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.
As of March 31, 2020,2021, CenterPoint Energy has recorded an approximate $69$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. Basic
| | | | | | | | | | | | | | | | | |
| | | 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 | | | 0 | |
| 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 | | | | | 0 | | | (146) | |
| Add back: Series B Preferred Stock dividend | | | | | 17 | | 0 | |
| Add back: Undistributed earnings allocated to preferred shareholders | | | | | 23 | | 0 | |
| 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 | | | 0 | |
Series B Preferred Stock (2) | | | | | 35,937,000 | | | 0 | |
| Series C Preferred Stock | | | | | 40,823,000 | | | 0 | |
| 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 | | | (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 | | | (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 is determined by dividing Income available to common shareholders - basic by the Weighted average common shares outstanding - basic for the applicable period. Diluted earnings per common share is determined by the inclusion ofthree months ended March 31, 2020 excludes 35,923,000 potentially dilutive common stock equivalent shares that may occur if securities to issue Common Stock were exercised or converted into Common Stock.from the denominator, because the shares would be anti-dilutive.
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | |
| Continuing Operations Numerator: | | | | |
| Income (loss) from continuing operations | | $ | (1,053 | ) | | $ | 143 |
|
| Less: Preferred stock dividend requirement | | 29 |
| | 29 |
|
| Income (loss) available to common shareholders - basic | | (1,082 | ) | | 114 |
|
Add back: Series B Preferred Stock dividend (2) | | — |
| | — |
|
| Income (loss) available to common shareholders from continuing operations - diluted | | $ | (1,082 | ) | | $ | 114 |
|
| Discontinued Operations Numerator: | | | | |
| Income (loss) from discontinued operations | | $ | (146 | ) | | $ | 26 |
|
| | | | | |
| Denominator: | | | | |
| Weighted average common shares outstanding - basic | | 502,388,000 |
| | 501,521,000 |
|
| Plus: Incremental shares from assumed conversions: | | | | |
Restricted stock (1) | | — |
| | 2,423,000 |
|
Series B Preferred Stock (2) | | — |
| | — |
|
| Weighted average common shares outstanding - diluted | | 502,388,000 |
| | 503,944,000 |
|
| | | | | |
| Earnings (loss) per common share: | | | | |
| Basic earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
|
| Basic earnings (loss)per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Basic Earnings (Loss) Per Common Share | | $ | (2.44 | ) | | $ | 0.28 |
|
| | | | | |
| Diluted earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
|
| Diluted earnings (loss) per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Diluted Earnings (Loss) Per Common Share | | $ | (2.44 | ) | | $ | 0.28 |
|
| |
(1) | 2,567,000 incremental 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 potentially dilutive impact from Series B Preferred Stock applies the if-converted method in calculating diluted earnings per common share. Under this method, diluted earnings per common share is adjusted for the more dilutive effect of the Series B Preferred Stock as a result of either its accumulated dividend for the period in the numerator or the assumed-converted common share equivalent in the denominator. The computation of diluted earnings per common share outstanding for the three months ended March 31, 2020 and 2019 excludes Series B Preferred Stock dividends of $17 million and $17 million, respectively, and 35,923,000 and 34,354,000 potentially dilutive shares, respectively, because to include them would be anti-dilutive. However, these could be potentially dilutive in the future. |
(16)
Reportable Segments
The Registrants’ determination of reportable segments considers the strategic operating units under which the Registrants’its CODM manages sales, allocates resources and assesses performance of various products and services to wholesale or retail customers in differing regulatory environments. As of January 1, 2020, the Registrants’Each Registrant’s CODM views net income as the measure of profit or loss for the reportable segments rather than the previous measure of operating income.segments. Certain prior year amounts have been reclassified to conform to the current year presentation.reportable segment presentation described in the Registrants’ combined 2020 Form 10-K.
As of March 31, 2020,2021, reportable segments by Registrant were as follows:
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| | | | | | | | |
Registrants | | Houston Electric T&D | | Indiana Electric Integrated | | Natural Gas Distribution | | Midstream Investments |
CenterPoint Energy | | X | | X | | X | | X |
Houston Electric | | X | | | | | | |
CERC | | | | | | X | | |
CenterPoint Energy
•CenterPoint Energy’s and Houston Electric’s Houston Electric T&D reportable segment consists of electric transmission services to transmission service customers in the ERCOT region and distribution services into REPs serving the Texas Gulf Coast area.
CenterPoint Energy’s Indiana Electric Integrated reportable segment consists ofarea and electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.
•CenterPoint Energy’s Natural Gas Distribution 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, formerly included in the Energy Services reportable segment;CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES, formerly includedMES.
•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 Energy Services reportable segment.ERCOT region and distribution services to REPs serving the Texas Gulf Coast area.
CERC
•CERC’s Natural Gas Distributionsingle 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, formerly included in the Energy Services reportable segment;CEIP; and (iii) temporary delivery of LNG and CNG throughout the contiguous 48 states through MES, formerly included in the Energy Services reportable segment.MES.
CenterPoint Energy’s Midstream Investments reportable segment consists of the equity investment in Enable (excluding the Enable Series A Preferred Units).
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.
CERC’s Corporate and Other consists primarily of corporate operations which support all of the business operations of CERC.
Discontinued Operations
On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group, which consists of underground pipeline construction and repair services. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. See Note 3 for further information.
Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group, which consists of non-rate regulated natural gas sales and service operations. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. See Note 3 for further information.
Financial data for reportable segments is as follows:follows, including Corporate and Other, and Discontinued Operations for reconciliation purposes:
CenterPoint Energy
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 |
| | Revenues from External Customers | | Equity in Earnings of Unconsolidated Affiliates | | Depreciation and Amortization | | Interest Income | | Interest Expense | | Income Tax Expense (Benefit) | | Net Income (Loss) |
| | (in millions) |
| Houston Electric T&D | $ | 638 |
| (3) | $ | — |
| | $ | 129 |
| | $ | 1 |
| (1) | $ | (41 | ) | (2) | $ | 5 |
| | $ | 37 |
|
| Indiana Electric Integrated | 129 |
| | — |
| | 25 |
| | — |
| | (6 | ) | | 3 |
| | (171 | ) |
| Natural Gas Distribution | 1,318 |
| | — |
| | 111 |
| | 1 |
| | (32 | ) | | 56 |
| | 204 |
|
| Midstream Investments | — |
| | (1,475 | ) | | — |
| | — |
| | (14 | ) | | (361 | ) | | (1,127 | ) |
| Corporate and Other | 82 |
| | — |
| | 17 |
| | 48 |
| | (96 | ) | | (50 | ) | | 4 |
|
| Eliminations | — |
| | — |
| | — |
| | (50 | ) | | 50 |
| | — |
| | — |
|
| Continuing Operations | $ | 2,167 |
| | $ | (1,475 | ) | | $ | 282 |
| | $ | — |
| | $ | (139 | ) | | $ | (347 | ) | | (1,053 | ) |
| Discontinued Operations, net | | | | | | | | | | | | | (146 | ) |
| Consolidated | | | | | | | | | | | | | $ | (1,199 | ) |
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2019 |
| | Revenues from External Customers | | Equity in Earnings of Unconsolidated Affiliates | | Depreciation and Amortization | | Interest Income | | Interest Expense | | Income Tax Expense (Benefit) | | Net Income (Loss) |
| | (in millions) |
| Houston Electric T&D | $ | 689 |
| (3) | $ | — |
| | $ | 175 |
| | $ | 4 |
| (1) | $ | (40 | ) | (2) | $ | 6 |
| | $ | 30 |
|
| Indiana Electric Integrated | 83 |
| | — |
| | 16 |
| | — |
| | (3 | ) | | (2 | ) | | (9 | ) |
| Natural Gas Distribution | 1,415 |
| | — |
| | 95 |
| | 1 |
| | (23 | ) | | 26 |
| | 120 |
|
| Midstream Investments | — |
| | 62 |
| | — |
| | 2 |
| | (12 | ) | | 28 |
| | 24 |
|
| Corporate and Other | 42 |
| | — |
| | 14 |
| | 46 |
| | (84 | ) | | (44 | ) | | (22 | ) |
| Eliminations | — |
| | — |
| | — |
| | (41 | ) | | 41 |
| | — |
| | — |
|
| Consolidated | $ | 2,229 |
| | $ | 62 |
| | $ | 300 |
| | $ | 12 |
| | $ | (121 | ) | | $ | 14 |
| | 143 |
|
| Discontinued Operations, net | | | | | | | | | | | | | 26 |
|
| Consolidated | | | | | | | | | | | | | $ | 169 |
|
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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) | $ | 0 | | | $ | 75 | | | $ | 767 | | (1) | $ | 0 | | | $ | (134) | | | | | | | | |
| Natural Gas | 1,663 | | | 0 | | | 229 | | | 1,321 | | | 0 | | | 201 | | | | | | | | |
Midstream Investments (2) | 0 | | | 108 | | | 71 | | | 0 | | | (1,475) | | | (1,127) | | | | | | | | |
| Corporate and Other | 54 | | | 0 | | | (12) | | | 79 | | | 0 | | | 7 | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Continuing Operations | $ | 2,547 | | | $ | 108 | | | 363 | | | $ | 2,167 | | | $ | (1,475) | | | (1,053) | | | | | | | | |
| Discontinued Operations, net | | | | | 0 | | | | | | | (146) | | | | | | | | |
| Consolidated | | | | | $ | 363 | | | | | | | $ | (1,199) | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Excludes interest income from Securitization Bonds of $1 million and $2 million for the three months ended March 31, 2020 and 2019, respectively. |
| | | | | | | | | | | |
(2) | Excludes interest expense on Securitization Bonds of $8 million and $12 million for the three months ended March 31, 2020 and 2019, respectively. |
| | | | | | | | | | | |
(3) | CenterPoint Energy’s Houston Electric T&D’s revenues from major external customers are as follows: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
(1)Houston Electric revenues from major external customers are as follows (CenterPoint Energy and Houston Electric):
| | | | | Three Months Ended March 31, | | | | Three Months Ended March 31, |
| | | 2020 | | 2019 | | | | 2021 | | 2020 |
| | | (in millions) | | | (in millions) |
| Affiliates of NRG | | $ | 156 |
| | $ | 151 |
| Affiliates of NRG | | | $ | 195 | | | $ | 156 | |
| Affiliates of Vistra Energy Corp. | | 81 |
| | 54 |
| Affiliates of Vistra Energy Corp. | | | 88 | | | 81 | |
| | | | | | | | | | | |
| 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 | |
| | | |
| |
| | | |
| | | |
| |
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| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
(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.
Houston Electric’s T&D revenues from major external customers are as follows:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | (in millions) |
| Affiliates of NRG | | $ | 156 |
| | $ | 151 |
|
| Affiliates of Vistra Energy Corp. | | 81 |
| | 54 |
|
CERC
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 |
| | Revenues from External Customers | | Depreciation and Amortization | | Interest Income | | Interest Expense | | Income Tax Expense (Benefit) | | Net Income (Loss) |
| | (in millions) |
| Natural Gas Distribution | $ | 1,008 |
| | $ | 74 |
| | $ | 1 |
| | $ | (21 | ) | | $ | 44 |
| | $ | 134 |
|
| Corporate and Other | 3 |
| | — |
| | 21 |
| | (31 | ) | | (9 | ) | | (3 | ) |
| Eliminations | — |
| | — |
| | (22 | ) | | 22 |
| | — |
| | — |
|
| Continuing Operations | $ | 1,011 |
| | $ | 74 |
| | $ | — |
| | $ | (30 | ) | | $ | 35 |
| | 131 |
|
| Discontinued Operations, net | | | | | | | | | | | (64 | ) |
| Consolidated | | | | | | | | | | | $ | 67 |
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2019 |
| | Revenues from External Customers | | Depreciation and Amortization | | Interest Income | | Interest Expense | | Income Tax Expense (Benefit) | | Net Income (Loss) |
| | (in millions) |
| Natural Gas Distribution | $ | 1,211 |
| | $ | 73 |
| | $ | 1 |
| | $ | (19 | ) | | $ | 26 |
| | $ | 119 |
|
| Corporate and Other | 1 |
| | — |
| | 20 |
| | (31 | ) | | (8 | ) | | (9 | ) |
| Eliminations | — |
| | — |
| | (21 | ) | | 21 |
| | — |
| | — |
|
| Continuing Operations | $ | 1,212 |
| | $ | 73 |
| | $ | — |
| | $ | (29 | ) | | $ | 18 |
| | 110 |
|
| Discontinued Operations, net | | | | | | | | | | | 28 |
|
| Consolidated | | | | | | | | | | | $ | 138 |
|
CenterPoint Energy and CERC
|
| | | | | | | | | | | | | | | |
| | Total Assets |
| | March 31, 2020 | | December 31, 2019 |
| | CenterPoint Energy | | CERC | | CenterPoint
Energy | | CERC |
| | (in millions) |
| Houston Electric T&D | $ | 10,870 |
| | $ | — |
| | $ | 11,264 |
| | $ | — |
|
| Indiana Electric Integrated | 3,015 |
| | — |
| | 3,168 |
| | — |
|
| Natural Gas Distribution | 13,979 |
| | 7,562 |
| | 14,105 |
| | 7,698 |
|
| Midstream Investments | 915 |
| | — |
| | 2,473 |
| | — |
|
| Corporate and Other, net of eliminations | 2,969 |
| | (87 | ) | | 2,555 |
| | (90 | ) |
| Continuing Operations | 31,748 |
| | 7,475 |
| | 33,565 |
| | 7,608 |
|
| Assets Held for Sale | 1,647 |
| | 675 |
| | 1,964 |
| | 904 |
|
| Consolidated | $ | 33,395 |
| | $ | 8,150 |
| | $ | 35,529 |
| | $ | 8,512 |
|
(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. See Note 3 for certain supplemental cash flow disclosures related to the Infrastructure Services and Energy Services Disposal Groups. 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.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) | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | |
| Non-cash transactions: | | | | | | | | | | | |
| Accounts payable related to capital expenditures | 166 | | | 140 | | | 56 | | | 200 | | | 110 | | | 66 | |
| ROU assets obtained in exchange for lease liabilities | 1 | | | 0 | | | 0 | | | 14 | | | 0 | | | 5 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Cash Payments/Receipts: | | | | | | | | | | | |
| Interest, net of capitalized interest | $ | 148 |
| | $ | 68 |
| | $ | 35 |
| | $ | 154 |
| | $ | 86 |
| | $ | 35 |
|
| Income tax refunds, net | — |
| | — |
| | — |
| | (4 | ) | | — |
| | — |
|
| Non-cash transactions: | | | | | | | | | |
| | |
| Accounts payable related to capital expenditures | 200 |
| | 110 |
| | 66 |
| | 166 |
| | 98 |
| | 49 |
|
ROU assets obtained in exchange for lease liabilities (1) | 14 |
| | — |
| | 5 |
| | 29 |
| | 1 |
| | 26 |
|
| |
(1) | 2019 includes the transition impact of adoption of ASU 2016-02 Leases. |
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 and has not been recast to exclude the Infrastructure Services and Energy Services Disposal Groups.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 | | | 0 | | | 20 | | | 15 | | | 0 | |
| | | | | | | | | | | |
| Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | $ | 167 | | | $ | 159 | | | $ | 1 | | | $ | 167 | | | $ | 154 | | | $ | 1 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 | | December 31, 2019 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Cash and cash equivalents | $ | 220 |
| | $ | 196 |
| | $ | 1 |
| | $ | 241 |
| | $ | 216 |
| | $ | 2 |
|
| Restricted cash included in Prepaid expenses and other current assets | 27 |
| | 19 |
| | — |
| | 30 |
| | 19 |
| | — |
|
| Total cash, cash equivalents and restricted cash shown in Condensed Statements of Consolidated Cash Flows | $ | 247 |
| | $ | 215 |
| | $ | 1 |
| | $ | 271 |
| | $ | 235 |
| | $ | 2 |
|
(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 | | | $ | 0 | | | $ | (8) | | | $ | 0 | |
| Weighted average interest rate | 0.21 | % | | 0.21 | % | | 0.24 | % | | 0.24 | % |
|
| | | | | | | | | | | | | | | |
| | March 31, 2020 |
| December 31, 2019 |
| | Houston Electric |
| CERC |
| Houston Electric |
| CERC |
| | (in millions, except interest rates) |
Money pool investments (borrowings) (1) | $ | (133 | ) | | $ | — |
| | $ | 481 |
| | $ | — |
|
| Weighted average interest rate | 1.98 | % | | 1.98 | % | | 1.98 | % | | 1.98 | % |
| |
(1) | Included in Accounts and notes receivable (payable)–affiliated companies on Houston Electric’s and CERC’s respective Condensed Consolidated Balance Sheets. |
Houston Electric and CERC affiliate related net interest income (expense) were as follows:
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | |
| Interest income (expense) (1) | | $ | 1 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
|
| |
(1) | Interest income is included in Other income (expense), net and interest expense is included in Interest and other finance charges on Houston Electric’s and CERC’s respective Condensed Statements of Consolidated Income. |
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 negotiated 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 | |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | (in millions) |
| Corporate service charges | | $ | 49 |
| | $ | 55 |
| | $ | 52 |
| | $ | 43 |
|
| Net affiliate service charges (billings) | | (6 | ) | | 6 |
| | (2 | ) | | 2 |
|
The table below presents transactions among Houston Electric, CERC and their parent, Utility Holding.CenterPoint Energy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2021 | | 2020 |
| | | | | | | | | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | | | | | | | (in millions) |
| Cash dividends paid to parent | | | | | | | | | | $ | 0 | | | $ | 0 | | | $ | 385 | | | $ | 32 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | Houston Electric | | CERC | | Houston Electric | | CERC |
| | | |
| Cash dividends paid to parent | | $ | 385 |
| | $ | 32 |
| | $ | 24 |
| | $ | 20 |
|
| Cash contribution from parent | | — |
| | — |
| | 590 |
| | — |
|
(19) Equity
(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 | | | $ | 0.2900 | | | | | | | $ | 0.1600 | | | $ | 0.2900 | |
| Series A Preferred Stock | | | | | | 0 | | | 30.6250 | | | | | | | 30.6250 | | | 30.6250 | |
| Series B Preferred Stock | | | | | | 0 | | | 17.5000 | | | | | | | 17.5000 | | | 17.5000 | |
Series C Preferred Stock (1) | | | | | | 0 | | | 0 | | | | | | | 0.1600 | | | 0 | |
CenterPoint Energy paid dividends on its Common Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
|
| | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Per Share | | Total (in millions) |
February 3, 2020 | | February 20, 2020 | | March 12, 2020 | | $ | 0.2900 |
| | $ | 145 |
|
| Total 2020 | | | | | | $ | 0.2900 |
| | $ | 145 |
|
| | | | | | | | | |
December 12, 2018 | | February 21, 2019 | | March 14, 2019 | | $ | 0.2875 |
| | $ | 144 |
|
| Total 2019 | | | | | | $ | 0.2875 |
| | $ | 144 |
|
CenterPoint Energy paid dividends on its Series A Preferred Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
|
| | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Per Share | | Total (in millions) |
February 3, 2020 | | February 14, 2020 | | March 2, 2020 | | $ | 30.6250 |
| | $ | 25 |
|
| Total 2020 | | | | | | $ | 30.6250 |
| | $ | 25 |
|
| | | | | | | | | |
December 12, 2018 | | February 15, 2019 | | March 1, 2019 | | $ | 32.1563 |
| | $ | 26 |
|
| Total 2019 | | | | | | $ | 32.1563 |
| | $ | 26 |
|
CenterPoint Energy paid dividends on its Series B Preferred Stock during the three months ended March 31, 2020 and 2019 as presented in the table below:
|
| | | | | | | | | | | | |
| Declaration Date | | Record Date | | Payment Date | | Per Share | | Total (in millions) |
February 3, 2020 | | February 14, 2020 | | March 2, 2020 | | $ | 17.5000 |
| | $ | 17 |
|
| Total 2020 | | | | | | $ | 17.5000 |
| | $ | 17 |
|
| | | | | | | | | |
December 12, 2018 | | February 15, 2019 | | March 1, 2019 | | $ | 17.5000 |
| | $ | 17 |
|
| Total 2019 | | | | | | $ | 17.5000 |
| | $ | 17 |
|
Dividend Requirement on Preferred Stock (CenterPoint Energy)
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Series A Preferred Stock | | $ | 12 |
| | $ | 12 |
|
| Series B Preferred Stock | | 17 |
| | 17 |
|
| Total preferred stock dividend requirement | | $ | 29 |
| | $ | 29 |
|
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated comprehensive income (loss) are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Beginning Balance | $ | (98 | ) | | $ | (15 | ) | | $ | 10 |
| | $ | (108 | ) | | $ | (14 | ) | | $ | 5 |
|
| Other comprehensive income (loss) before reclassifications: | | | | | | | | | | | |
| Deferred gain (loss) from interest rate derivatives (1) | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | — |
|
| Other comprehensive loss from unconsolidated affiliates | (3 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Amounts reclassified from accumulated other comprehensive loss: | | | | | | | | | | | |
| Actuarial losses (2) | 2 |
| | — |
| | — |
| | 2 |
| | — |
| | — |
|
| Reclassification of deferred loss from cash flow hedges realized in net income | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Tax expense | (1 | ) | | — |
| | — |
| | (1 | ) | | — |
| | — |
|
| Net current period other comprehensive income (loss) | (2 | ) | | — |
| | — |
| | 1 |
| | (1 | ) | | — |
|
| Ending Balance | $ | (100 | ) | | $ | (15 | ) | | $ | 10 |
| | $ | (107 | ) | | $ | (15 | ) | | $ | 5 |
|
| |
(1) | Gains and losses are reclassified from Accumulated other comprehensive income into income when the hedged transactions affect earnings. The reclassification amounts are included in Interest and other finance charges in each of the Registrants’ respective Statements of Consolidated Income. Over the next twelve months estimated amortization from Accumulated Comprehensive Income into income is expected to be immaterial. |
| |
(2) | 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. |
Series C Preferred Stock Private Placement (CenterPoint Energy)
On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 725,000 shares of its Series C Preferred Stock, at a price of $1,000 share, resulting in gross proceeds of $725 million.
(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. At liquidation,The per share amount reflects the dividend per share of Common Stock as if the Series C Preferred Stock will rank pari passu to the existing Series A were converted into Common Stock.
Preferred Stock and Series B Preferred Stock and senior to the Common Stock, but will participate in a liquidation only on an as-converted to Common Stock basis.
Conversion of the Series C Preferred Stock is mandatory upon the occurrence of any of the following triggers: (i) the 12-month anniversary date of the preferred stock purchase agreements, (ii) a bankruptcy event, and (iii) a fundamental change in CenterPoint Energy, including, among other things certain change of control events. Upon a mandatory conversion, each share of Series C Preferred Stock will convert into the number of Common Stock equal to the quotient of $1,000 divided by the prevailing conversion price, which is initially $15.31. In a conversion at the 12-month anniversary date, in lieu of issuing Common Stock, CenterPoint Energy may, at its election, make a cash payment equal to the product of (i) the then current market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion. Following the six-month anniversary date of the issuance of the Series C Preferred Stock, holders of Series C Preferred Stock also have an optional right to convert their holdings to Common Stock at any time, subject to a limit on conversion of no more than 4.9% of the outstanding Common Stock. The conversion price is subject to adjustment for subdivisions and combinations, dividends or distributions payable in common stock. If all of the 725,000 shares of Series C Preferred Stock converted at the current conversion price, CenterPoint Energy would issue an incremental 47,354,670 shares of Common Stock.
CenterPoint Energy may not issue more than a specified amount of outstanding Common Stock upon conversion of Preferred Stock. Once such specified amount has been reached, each Series C Preferred Stock holder electing to convert or subject to mandatory conversion will receive a cash payment equal to the product of (i) the market price of the Common Stock multiplied by (ii) the number of shares of Common Stock that such holder would have been entitled to receive in a conversion.
Series C Preferred Stock holders have no voting rights, except that the affirmative vote of a majority of outstanding Series C Preferred Stock is required for the company to (i) create any class or series of securities that is senior to the Series C Preferred Stock; (ii) reclassify or amend any authorized securities of CenterPoint Energy if reclassification would render the relevant security on a parity with or senior to the Series C Preferred Stock; or (iii) increase the authorized amount or issue any additional shares of Series C Preferred Stock.
The vote of at least 66 2/3% of the outstanding shares of Series C Preferred Stock is needed to amend the terms of the Series C Preferred Stock in any manner that would adversely alter or change the rights of the Series C Preferred Stock, subject to certain exceptions.
Common Stock Private Placement (CenterPoint Energy)
On May 6, 2020, CenterPoint Energy entered into agreements for the private placement of 41,977,612 shares of its Common Stock, at a price of $16.08 share, resulting in gross proceeds of $675 million.
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| | 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)
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| | | Three Months Ended March 31, |
| | | | | 2021 | | 2020 |
| | | | (in millions) |
| Series A Preferred Stock | | | | | $ | 12 | | | $ | 12 | |
| Series B Preferred Stock | | | | | 17 | | | 17 | |
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| Total income allocated to preferred shareholders | | | | | $ | 29 | | | $ | 29 | |
Accumulated Other Comprehensive Income (Loss)
Changes in accumulated comprehensive income (loss) are as follows:
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| Three Months Ended March 31, |
| 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
| Beginning Balance | $ | (90) | | | $ | 0 | | | $ | 10 | | | $ | (98) | | | $ | (15) | | | $ | 10 | |
| Other comprehensive loss before reclassifications: | | | | | | | | | | | |
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| Other comprehensive income (loss) from unconsolidated affiliates | 1 | | | 0 | | | 0 | | | (3) | | | 0 | | | 0 | |
| Amounts reclassified from accumulated other comprehensive loss: | | | | | | | | | | | |
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Actuarial losses (1) | 2 | | | 0 | | | 0 | | | 2 | | | 0 | | | 0 | |
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| Tax expense | 0 | | | 0 | | | 0 | | | (1) | | | 0 | | | 0 | |
| Net current period other comprehensive income (loss) | 3 | | | 0 | | | 0 | | | (2) | | | 0 | | | 0 | |
| Ending Balance | $ | (87) | | | $ | 0 | | | $ | 10 | | | $ | (100) | | | $ | (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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| Equity Instrument | | Declaration Date | | Record Date | | Payment Date | | Per Share |
Common Stock (1) | | April 24, 2020 | | May 21, 2020 | | June 11, 2020 | | $ | 0.1500 |
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| Series B Preferred Stock | | April 24, 2020 | | May 15, 2020 | | June 1, 2020 | | 17.5000 |
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(1)Equity Instrument | On | Declaration Date | | Record Date | | Payment Date | | Per Share | | |
| Common Stock | | April 23, 2021 | | May 20, 2021 | | June 10, 2021 | | $ | 0.1600 | | | |
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| Series B Preferred Stock | | April 23, 2021 | | May 15, 2021 | | June 1, 2020, in response to the reduction in cash flow related to the reduction in Enable quarterly common unit distributions announced by Enable on April 1, 2020, CenterPoint Energy announced a reduction of its quarterly common stock dividend per share from $0.2900 to $0.1500.2021 | | 17.5000 | | | |
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Enable Distributions Declarations (CenterPoint Energy)
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| 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 | |
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| Equity Instrument | | Declaration Date | | Record Date | | Payment Date | | Per Unit Distribution | | Expected Cash Distribution (in millions) |
Enable common units (1) | | May 5, 2020 | | May 19, 2020 | | May 27, 2020 | | $ | 0.16525 |
| | $ | 39 |
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| Enable Series A Preferred Units | | May 5, 2020 | | May 5, 2020 | | May 15, 2020 | | 0.62500 |
| | 9 |
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(1) | On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. |
Divestiture of Infrastructure Services (CenterPoint Energy)
On
In April 9, 2020,2021, CenterPoint Energy completed the previously announced salereceived two notifications of the Infrastructure Services Disposal Groupintent by shareholders to PowerTeam Services for $850 million in cash, subject to an adjustment for working capital and other contractual adjustments. The net proceeds of the sale were used to repay a portion of outstanding CenterPoint Energy debt. See Note 3 for further information.
ERCOT Loan Agreement (CenterPoint Energy and Houston Electric)
On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, Houston Electric entered into a no-interest loan agreement with ERCOT to provide for an initial fund balance for reimbursement for approximately $5 million.
Private Placements
On May 6, 2020, CenterPoint Energy entered into agreements for the private placements of itsconvert their Series C Preferred Stock and itsto Common Stock. ForThe table below details the two notifications.
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| 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 information aboutthan half a million customers. The transaction is anticipated to close by the private placements, see Note 19.end of 2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance and state regulatory approvals.
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Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES |
Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CENTERPOINT ENERGY, INC. AND SUBSIDIARIES
The following combined discussion and analysis should be read in combination with the Interim Condensed Financial Statements contained in this combined Form 10-Q and the Registrants’ combined 20192020 Form 10-K. When discussing CenterPoint Energy’s consolidated financial information, it includes the results of Houston Electric and CERC, which, along with CenterPoint Energy, are collectively referred to as the Registrants. Where appropriate, information relating to a specific Registrant has been segregated and labeled as such. In this combined Form 10-Q, the terms “our,” “we” and “us” are used as abbreviated references to CenterPoint Energy, Inc. together with its consolidated subsidiaries. No Registrant makes any representations as to the information related solely to CenterPoint Energy or the subsidiaries of CenterPoint Energy other than itself.
RECENT EVENTS
COVID-19 Impacts. February 2021 Winter Storm EventOn March 11, 2020, the World Health Organization declared the current COVID-19 outbreak to be a global pandemic, and on March 13, 2020,. In February 2021, portions of the United States declared a national emergency. In response to these declarationsexperienced an extreme and the rapid spreadunprecedented winter weather event resulting in corresponding electricity generation shortages, including in Texas, and natural gas shortages and increased wholesale prices of COVID-19, federal, state and local governments have imposed varying degrees of restrictions on business and social activities to contain COVID-19, including quarantine and “stay-at-home” ordersnatural gas in our service territories. CenterPoint Energy has experienced some resulting disruptions to its business operations, as these restrictions have significantly impacted many sectors of the economy with various businesses curtailing or ceasing normal operations. For example, since mid-March, we have had to restrict access to our administrative offices around the United States. However, we continueMany customers of Houston Electric’s REPs and, to be productive through alternate work arrangements, leveraging a strong technology platform to support our employees working remotely at home to perform their duties or directly from their vehicles to serve our customers. Where we must maintainlesser extent, of CERC were severely impacted by outages in electricity and natural gas delivery during the February 2021 Winter Storm Event. As a presence in the field, we have adjusted our operational protocols to minimize exposure and risk to our field personnel, customers and the communities we serve, including, among other things, modifying our work schedules and reporting locations, delaying certain work types, such as maintenance and capital projects, and adjusting project scope and scale to adhere to safety protocols, while continuing to maintain the work activities necessary for safe and reliable service to our customers with increased safety precautions.
Our first priority in our response to this crisis has been the health and safety of our employees, our customers and other business counterparties. Because we provide a critical service to our customers, it is paramount that we keep our employees who operate our business safe and informed, and we have taken and are updating precautions for that purpose. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers’ operations under the circumstances. In addition, we have assessed and updated our existing business continuity plans for each of our business units in the contextresult of this pandemic. We haveweather event, the governors of Texas, Oklahoma and Louisiana declared states of either disaster or emergencies in their respective states. Subsequently, President Biden also approved major disaster declarations for all or parts of Texas, Oklahoma and Louisiana.
CenterPoint Energy has a corporate response planning team whocomprised of employees across the organization, including members of senior management, that assesses risks to theits business, including for health, safety and environmental matters and personnel issues, and addresseshas addressed various impacts of the situation, as theyFebruary 2021 Winter Storm Event. The corporate response planning team coordinated additional support for operations and other personnel that responded directly to the February 2021 Winter Storm Event.
The February 2021 Winter Storm Event has had, and may continue to have, been developing. We also have modified certain business practices (including thosefinancial impacts on CenterPoint Energy, Houston Electric and CERC, including substantial increases in prices for natural gas, decreased revenues at Houston Electric due to ERCOT-mandated outages, additional interest expense related to employee travel, employee work locations and cancellation of physical participation in meetings, events and conferences)external financing to conform to government restrictions and best practices encouraged by the Centerspay for Disease Control and Prevention, the World Health Organization and other governmental and regulatory authorities. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, and this includes changes to comply with health-related guidelines as they are modified and supplemented. We are alsonatural gas working with our suppliers to understand thecapital, potential impacts to our supply chain, including identifying any negativecredit metrics, significant impacts to material supplies, workingthe REPs, including the REPs’ ability to mitigate them and pre-planning for longer-term emergency response protocols. This is a rapidly evolving situation and could lead to extended disruption of economic activity in our markets; we will continue to monitor developments affecting our workforce, our customers and our suppliers and take additional precautions as we believe are warranted.
An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively impacted under the current economic conditions. In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment will be temporarily suspended. Forpay invoices from Houston Electric, we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. To the extent these conditionsincreases in our service territories persist, our bad debt expense, issues with counterparties and customers, litigation and investigations or inquiries from uncollectible accounts could increase, negatively impacting ourgovernment or regulatory agencies and entities, and other financial condition, results of operations and cash flows. With respectimpacts. CenterPoint Energy does not anticipate meaningful long-term changes to our regulatory proceedings, we could experience significant delays in scheduling proceedingsits credit profile or hearings and in obtaining orders from regulatory agencies. Any such delays could adversely affect our future results of operations.
Duecredit ratings given its access to current macroeconomic conditionsexternal financing sources and the declineregulatory mechanisms that are in our common stock price, we identified a triggering eventplace to perform an interim goodwill impairment testseek recovery of these excess costs. For more information regarding regulatory impacts, debt transactions and recognized a non-cash goodwill impairment charge of $185 million in our Indiana Electric Integrated reporting unit for the three months ended March 31, 2020. For further discussion of this impairment,litigation, see Note 10Notes 6, 12 and 14 to the Interim Condensed Financial Statements.
As of the date of this Form 10-Q, our efforts to respond to the challenges presented by the conditions described aboveStatements and minimize the impacts to our business have yielded results. Our electric facilities and natural gas distribution systems have remained operational and our customers have continued to receive service. Although we continue to assess the COVID-19 situation, we cannot estimate with any degree of certainty the full financial impact of the COVID-19 pandemic on our business. Nor can we predict the effect that the significant disruption and volatility currently being experienced in the markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time. However, we expect the COVID-19 pandemic to adversely impact us in future quarters due to the considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, closures or disruptions, among other things. The ultimate impacts to our business, financial condition, results of operations, liquidity and cash flows will depend on future developments, including, among others, the ultimate duration and geographic spread of COVID-19, the consequences of governmental and other measures designed to prevent the spread of COVID-19, the development of effective treatments, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume. For additional discussion regarding risks associated with the COVID-19 pandemic, see “Risk Factors” in Item 1A of Part II of this Form 10-Q.
Enable Quarterly Distributions. The price of, and global demand for, natural gas, NGLs and crude oil have declined significantly as a result of the ongoing spread and economic effects of the COVID-19 pandemic and the significant governmental measures being implemented to control the spread of COVID-19. In addition, the recent dispute over crude oil production levels between Russia and members of the Organization of the Petroleum Exporting Countries led by Saudi Arabia have exacerbated the sharp decline in the price of NGLs and crude oil. Despite the subsequent agreement in April 2020 by a coalition of nations including Russia and Saudi Arabia to reduce production of crude oil, the price of NGLs and crude oil have remained significantly depressed and, in the case of crude oil, have at times reached a negative price. Further, financial market declines and volatility, together with deteriorating credit, liquidity concerns, decreasing production, and increasing inventories, are conditions that are associated with a general economic downturn. Producers have announced and begun to implement plans to reduce production and decrease the drilling and completion of wells in response to these conditions, which include reductions in the exploration, development and production activity across Enable’s areas of operation. As a result, the effects of the COVID-19 pandemic and the decline in demand and price for natural gas, NGLs and crude oil have begun and may continue to negatively impact the demand for midstream services. In response to the impacts of these developments on its business, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. For further information, see “—Liquidity and Capital Resources—Future SourcesResources” below.
Sale of Arkansas and Uses of Cash” below.
CenterPoint Energy Financial Measures.Oklahoma Natural Gas Businesses. On April 1, 2020, in response to the current business environment and to strengthen its financial position and adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions, CenterPoint Energy announced targeted reductions in (i) its quarterly common stock dividend to $0.1500 per share; (ii) 2020 operation and maintenance expenses, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets; and (iii) 2020 capital spending. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.
Enable Investment Impairment. CenterPoint Energy recognized a loss of $1,475 million on its investment in Enable for the three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million. For further discussion, see Note 9 to the Interim Condensed Financial Statements.
CenterPoint EnergyLeadership Transition. On February 19, 2020, the Board of Directors appointed John W. Somerhalder II to the position of Interim President and Chief Executive Officer. On April 1, 2020, the Board of Directors appointed Kristie L. Colvin to the position of Interim Executive Vice President and Chief Financial Officer in addition to her position as Chief Accounting Officer. In conjunction with their respective appointments, Mr. Somerhalder and Ms. Colvin also have been appointed to serve on the Board of Directors of Enable GP.
Business Divestitures. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020. On February 24, 2020,29, 2021, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equityan 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 Energy Services Disposal Group.February 2021 Winter Storm Event, subject to certain adjustments set forth in the Asset Purchase Agreement. The transaction is expectedanticipated to close inby the second quarterend of 2020.2021, subject to satisfaction of customary closing conditions. For further information, see Note 320 to the Interim Condensed Financial Statements.
Enable Merger Agreement. 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 more information, see Notes 1 and 9 to the Interim Condensed Financial Statements.
Regulatory Proceedings. On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates.A settlement has been reached and a final order from the PUCT was received on March 9, 2020 and were implemented on April 23, 2020. For details related to
our pending and completed regulatory proceedings and orders related to the TCJA to date in 2020,2021, see “—Liquidity and Capital Resources —Regulatory Matters” below.
Private Placements.
Debt Transactions. On May 6, 2020,In February 2021, each of CenterPoint Energy, entered into agreementsHouston Electric, CERC Corp. and VUHI replaced their existing revolving credit facilities with new amended and restated credit facilities. Also, 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 $1.7 billion aggregate principal amount of senior notes and Houston Electric issued $1.1 billion aggregate principal amount of general mortgage bonds. Upon the
consummation of its senior notes offerings, in March 2021, CERC Corp. terminated all of the commitments for the private placements364-day term loan facility. Additionally, in March 2021, Houston Electric repaid all of its remaining outstanding $102 million first mortgage bonds at maturity. In April 2021, Houston Electric provided notice of redemption relating to $300 million aggregate principal amount of its outstanding general mortgage bonds (which were redeemed on May 1, 2021) and CenterPoint Energy amended its existing term loan agreement to provide for a 30-day extension of its maturity date. For more information, see Note 12 to the Interim Condensed Financial Statements.
Series C Preferred Stock and itsConversions. In April 2021, CenterPoint Energy received two notifications of intent by shareholders to convert their Series C Preferred Stock to Common Stock. For morefurther information, about the private placements, see Note 1920 to the Interim Condensed Financial Statements.
New Directors and Board of Directors Committee. On May 6, 2020, at the recommendation of the Governance Committee, the Board of Directors appointed David J. Lesar and Barry T. Smitherman to the Board of Directors effective immediately. Messrs. Lesar and Smitherman have been elected to serve as directors of CenterPoint Energy until the expiration of their respective terms on the date of its annual meeting of shareholders in 2021 and until their successors are elected and qualified. Messrs. Lesar and Smitherman are expected to stand for election as directors at the annual meeting of shareholders in 2021. Messrs. Lesar and Smitherman will serve on the Board of Directors’ newly established Business Review and Evaluation Committee, which will assist the Board in evaluating and optimizing the various businesses, assets and ownership interests currently held by CenterPoint Energy.
CENTERPOINT ENERGY CONSOLIDATED RESULTS OF OPERATIONS
For information regarding factors that may affect the future results of our consolidated operations, please read “Risk Factors” in Item 1A of Part I of the Registrants’ combined 20192020 Form 10-K10-K.
Income (loss) available to common shareholders for the three months ended March 31, 2021 and 2020 was as follows:
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| | | | Three Months Ended March 31, | |
| | | | | | | | 2021 | | 2020 | | Favorable (Unfavorable) | |
| | | | | | | (in millions) | |
| Electric | | | | | | | | 75 | | | (134) | | | $ | 209 | | |
| Natural Gas | | | | | | | | 229 | | | 201 | | | 28 | | |
| Total Utility Operations | | | | | | | | 304 | | | 67 | | | 237 | | |
Midstream Investments (1) | | | | | | | | 71 | | | (1,127) | | | 1,198 | | |
Corporate & Other (2) | | | | | | | | (41) | | | (22) | | | (19) | | |
| Discontinued Operations | | | | | | | | — | | | (146) | | | 146 | | |
| Total CenterPoint Energy | | | | | | | | $ | 334 | | | $ | (1,228) | | | 1,562 | | |
(1)For a discussion of the components of equity in Item 1Aearnings from CenterPoint Energy’s equity investment in Enable, see Note 9 to the Interim Condensed Financial Statements.
(2)Includes energy performance contracting and sustainable infrastructure services through ESG, unallocated corporate costs, interest income and interest expense, intercompany eliminations and the reduction of Part II of this Form 10-Q.income allocated to preferred shareholders.
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| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
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| Revenues | | $ | 2,167 |
| | $ | 2,229 |
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| Expenses | | 1,950 |
| | 2,018 |
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| Operating Income | | 217 |
| | 211 |
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| Interest Expense and Other Finance Charges | | (139 | ) | | (121 | ) |
| Interest Expense on Securitization Bonds | | (8 | ) | | (12 | ) |
| Equity in Earnings of Unconsolidated Affiliates, net | | (1,475 | ) | | 62 |
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| Interest Income | | — |
| | 12 |
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| Interest Income from Securitization Bonds | | 1 |
| | 2 |
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| Other Income (Expense), net | | 4 |
| | 3 |
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| Income (Loss) from Continuing Operations Before Income Taxes | | (1,400 | ) | | 157 |
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| Income Tax Expense (Benefit) | | (347 | ) | | 14 |
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| Income (Loss) from Continuing Operations | | (1,053 | ) | | 143 |
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| Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($17) and $8, respectively) | | (146 | ) | | 26 |
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| Net Income (Loss) | | (1,199 | ) | | 169 |
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| Preferred Stock Dividend Requirement | | 29 |
| | 29 |
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| Income (Loss) Available to Common Shareholders | | $ | (1,228 | ) | | $ | 140 |
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| Basic Earnings (Loss) Per Common Share: | | | | |
| Basic earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
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| Basic earnings (loss) per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Basic Earnings (Loss) Per Common Share | | $ | (2.44 | ) | | $ | 0.28 |
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| Diluted Earnings (Loss) Per Common Share: | | | | |
| Diluted earnings (loss) per common share - continuing operations | | $ | (2.15 | ) | | $ | 0.23 |
|
| Diluted earnings (loss) per common share - discontinued operations | | (0.29 | ) | | 0.05 |
|
| Diluted Earnings (Loss) Per Common Share | | $ | (2.44 | ) | | $ | 0.28 |
|
Three months ended March 31, 20202021 compared to three months ended March 31, 20192020
CenterPoint Energy reported a lossIncome available to common shareholders increased $1,562 million primarily due to the following items in the first quarter of $1,2282020 which did not repeat in the first quarter of 2021:
•the impairment of our investment in Enable further discussed in Note 9 to the Interim Condensed Financial Statements;
•impairment of Indiana Electric;
•losses from discontinued operations;
•partially offset by the favorable income tax impact of the CARES Act.
Excluding those items, income available to common shareholders increased $73 million ($2.44primarily due to the following key factors:
•rate relief, net of increases in depreciation and amortization and taxes other than income taxes;
•favorable weather and usage, net of the impacts of COVID-19;
•continued customer growth;
•operation and maintenance expense discipline;
•reduced interest expense; and
•increased earnings at Enable.
Income Tax Expense. For a discussion of effective tax rate per period, see Note 13 to the Interim Condensed Financial Statements.
CENTERPOINT ENERGY’S RESULTS OF OPERATIONS BY REPORTABLE SEGMENT
CenterPoint Energy’s CODM views net income as the measure of profit or loss per diluted common share)for the reportable segments. Segment results include inter-segment interest income and expense, which may result in inter-segment profit and loss. Certain prior year amounts have been reclassified to conform to the current year presentation described in the Registrants’ combined 2020 Form 10-K.
The following discussion of results of operations by reportable segment concentrates on CenterPoint Energy’s Utility Operations, conducted through two reportable segments, Electric and Natural Gas. A discussion of CenterPoint Energy’s Midstream Investments reportable segment results is included in the discussion of CenterPoint Energy’s consolidated results above.
Electric (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of the Electric reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2020 Form 10-K.
The following table provides summary data of the Electric reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | 2021 | | 2020 | | Favorable (Unfavorable) |
| | | | | | (in millions, except operating statistics) |
| Revenues | | | | | | | $ | 830 | | | $ | 767 | | | $ | 63 | |
Cost of revenues (1) | | | | | | | 45 | | | 35 | | | (10) | |
| Revenues less Cost of revenues | | | | | | | 785 | | | 732 | | | 53 | |
| Expenses: | | | | | | | | | | | |
| Operation and maintenance | | | | | | | 416 | | | 403 | | | (13) | |
| Depreciation and amortization | | | | | | | 169 | | | 154 | | | (15) | |
| Taxes other than income taxes | | | | | | | 67 | | | 68 | | | 1 | |
| Goodwill impairment | | | | | | | — | | | 185 | | | 185 | |
| Total expenses | | | | | | | 652 | | | 810 | | | 158 | |
| Operating Income | | | | | | | 133 | | | (78) | | | 211 | |
| Other Income (Expense) | | | | | | | | | | | |
| Interest expense and other finance charges | | | | | | | (56) | | | (55) | | | (1) | |
| | | | | | | | | | | |
| Other income, net | | | | | | | 7 | | | 7 | | | — | |
| Income (Loss) from Continuing Operations Before Income Taxes | | | | | | | 84 | | | (126) | | | 210 | |
| Income tax expense | | | | | | | 9 | | | 8 | | | (1) | |
| Net Income (Loss) | | | | | | | $ | 75 | | | $ | (134) | | | 209 | |
| Throughput (in GWh): | | | | | | | | | | | |
| Residential | | | | | | | 6,070 | | 5,679 | | 7 | % |
| Total | | | | | | | 21,241 | | 21,243 | | — | % |
| Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
| Cooling degree days | | | | | | | 109 | % | | 187 | % | | (78) | % |
| Heating degree days | | | | | | | 95 | % | | 80 | % | | 15 | % |
| Number of metered customers at end of period: | | | | | | | | | | | |
| Residential | | | | | | | 2,448,439 | | 2,389,585 | | 2 | % |
| Total | | | | | | | 2,765,496 | | 2,701,004 | | 2 | % |
(1)Includes Utility natural gas, fuel and purchased power.
The following table provides variance explanations for the three months ended March 31, 20202021 compared to three months ended March 31, 2020 by major income availablestatement caption for the Electric reportable segment:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) |
| Revenues less Cost of revenues | | | | |
| Transmission Revenues, including TCOS and TCRF and impact of the change in rate design, inclusive of costs billed by transmission providers, partially offset in operation and maintenance | | | | $ | 136 | |
| Customer growth | | | | 8 | |
| Bond Companies, offset in other line items | | | | 6 | |
| Weather impacts and other usage | | | | 3 | |
| Impacts from increased peak demand in 2020, collected in rates in 2021 | | | | 2 | |
| Bond Companies equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | | | 1 | |
| Energy efficiency, offset in operation and maintenance | | | | 1 | |
| Miscellaneous revenues, primarily related right-of-way revenue | | | | (3) | |
| Refund of protected and unprotected EDIT, offset in income tax expense | | | | (10) | |
| Impacts on usage of COVID-19 | | | | (12) | |
| Customer rates and impact of the change in rate design | | | | (79) | |
| Total | | | | $ | 53 | |
| Operation and maintenance | | | | |
| Support services | | | | $ | 7 | |
| Contract services | | | | 5 | |
| Labor and benefits | | | | 1 | |
| Energy efficiency, offset in revenues | | | | (1) | |
| Bond Companies, offset in other line items | | | | (1) | |
| All other operation and maintenance expense, including materials and supplies and insurance | | | | (3) | |
| | | | |
| Transmission costs billed by transmission providers, offset in revenues less cost of revenues | | | | (21) | |
| Total | | | | $ | (13) | |
| Depreciation and amortization | | | | |
| Bond Companies, offset in other line items | | | | $ | (6) | |
| Ongoing additions to plant-in-service | | | | (9) | |
| Total | | | | $ | (15) | |
| Taxes other than income taxes | | | | |
| Franchise fees and other taxes | | | | $ | 2 | |
| Incremental capital projects placed in service | | | | (1) | |
| Total | | | | $ | 1 | |
| Goodwill Impairment | | | | |
| Indiana Electric goodwill impairment charge in 2020 | | | | $ | 185 | |
| | | | $ | 185 | |
| Interest expense and other finance charges | | | | |
| Bond Companies, offset in other line items | | | | $ | 2 | |
| Debt to fund incremental capital projects | | | | (3) | |
| Total | | | | $ | (1) | |
| | | | |
| | | | |
| | | | |
| | | | |
| Other income (expense), net | | | | |
| Reduction to non-service benefit cost | | | | $ | 2 | |
| | | | |
| Investments in CenterPoint Energy Money Pool interest income | | | | (1) | |
| Bond Companies interest income, offset in other line items | | | | (1) | |
| Total | | | | $ | — | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate per period by Registrant, see Note 13 to common shareholdersthe Interim Condensed Financial Statements.
Natural Gas (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of CenterPoint Energy’s Natural Gas reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas' Business,” “— Risk Factors Affecting Our Businesses” and “— General Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2020 Form 10-K.
The following table provides summary data of CenterPoint Energy’s Natural Gas reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | 2021 | | 2020 | | Favorable (Unfavorable) |
| | | | | | | (in millions, except operating statistics) |
| Revenues | | | | | | | $ | 1,663 | | | $ | 1,321 | | | $ | 342 | |
Cost of revenues (1) | | | | | | | 893 | | | 580 | | | (313) | |
| Revenues less Cost of revenues | | | | | | | 770 | | | 741 | | | 29 | |
| Expenses: | | | | | | | | | | | |
| Operation and maintenance | | | | | | | 256 | | | 272 | | | 16 | |
| Depreciation and amortization | | | | | | | 122 | | | 111 | | | (11) | |
| Taxes other than income taxes | | | | | | | 74 | | | 67 | | | (7) | |
| Total expenses | | | | | | | 452 | | | 450 | | | (2) | |
| Operating Income | | | | | | | 318 | | | 291 | | | 27 | |
| Other Income (Expense) | | | | | | | | | | | |
| Interest expense and other finance charges | | | | | | | (33) | | | (41) | | | 8 | |
| | | | | | | | | | | |
| Other expense, net | | | | | | | — | | | (2) | | | 2 | |
| Income from Continuing Operations Before Income Taxes | | | | | | | 285 | | | 248 | | | 37 | |
| Income tax expense | | | | | | | 56 | | | 47 | | | (9) | |
| Net Income | | | | | | | $ | 229 | | | $ | 201 | | | 28 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Throughput (in Bcf): | | | | | | | | | | | |
| Residential | | | | | | | 128 | | 107 | | 20 | % |
| Commercial and Industrial | | | | | | | 145 | | 146 | | (1) | % |
| Total | | | | | | | 273 | | 253 | | 8 | % |
| Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
| Heating degree days | | | | | | | 103 | % | | 85 | % | | 18 | % |
| Number of metered customers at end of period: | | | | | | | | | | | |
| Residential | | | | | | | 4,343,863 | | 4,266,685 | | 2 | % |
| Commercial and Industrial | | | | | | | 351,363 | | 350,009 | | — | % |
| Total | | | | | | | 4,695,226 | | 4,616,694 | | 2 | % |
(1)Includes Utility natural gas, fuel and purchased power and Non-utility cost of revenues, including natural gas.
The following table provides variance explanations for the three months ended March 31, 2019.
The decrease of $1,368 million in income available2021 compared to common shareholders was primarily due to the following key factors:
a $1,151 million decrease in net income from the Midstream Investments reportable segment further discussed under Results of Operations by Reportable Segment below;
a $172 million increase in loss from discontinued operations, net related to the Infrastructure Services and Energy Services Disposal Groups further discussed in Note 3 to the Interim Condensed Financial Statements; and
a $162 million decrease in net income from the Indiana Electric Integrated reportable segment further discussed under Results of Operations by Reportable Segment below.
These decreases were partially offset by the following:
an $84 million increase in net income from the Natural Gas Distribution reportable segment further discussed under Results of Operations by Reportable Segment below;
a $26 million increase in net income from Corporate and Other further discussed under Results of Operations by Reportable Segment below; and
a $7 million increase in net income from the Houston Electric T&D reportable segment further discussed under Results of Operations by Reportable Segment below.
Income Tax Expense - Continuing Operations
CenterPoint Energy’s effective tax rate from continuing operations reported for the three months ended March 31, 2020 was 25% compared to 9%by major income statement caption for the three months ended March 31, 2019. The higherNatural Gas reportable segment:
| | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) |
| Revenues less Cost of revenues | | | | |
| Weather and usage, excluding impacts from COVID-19 | | | | $ | 21 | |
| | | | |
| Customer growth | | | | 7 | |
| Gross receipts tax, offset in taxes other than income taxes | | | | 5 | |
| Energy efficiency, offset in operation and maintenance | | | | 3 | |
| Customer rates and impact of the change in rate design, exclusive of the TCJA impact | | | | 1 | |
| Refund of protected and unprotected EDIT, offset in income tax expense | | | | (2) | |
| Impacts of COVID-19, including usage and other miscellaneous charges | | | | (3) | |
| Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19 | | | | (3) | |
| Total | | | | $ | 29 | |
| Operation and maintenance | | | | |
| | | | |
| Other operating and maintenance expenses | | | | $ | 7 | |
| | | | |
| Support Services | | | | 4 | |
| Merger related expenses, primarily severance and technology | | | | 2 | |
| Contracted services | | | | 2 | |
| Materials and supplies | | | | 2 | |
| Bad Debt | | | | 1 | |
| Insurance | | | | 1 | |
| Energy efficiency, offset in revenues less cost of revenues | | | | (3) | |
| Total | | | | $ | 16 | |
| Depreciation and amortization | | | | |
| Incremental capital projects placed in service | | | | (11) | |
| Total | | | | $ | (11) | |
| Taxes other than income taxes | | | | |
| Incremental capital projects placed in service | | | | $ | (2) | |
| Gross receipts tax, offset in revenues less cost of revenues | | | | (5) | |
| Total | | | | $ | (7) | |
| Interest expense and other finance charges | | | | |
| Reduced interest rates on outstanding borrowings, partially offset by incremental borrowings for capital expenditures | | | | $ | 8 | |
| | | | |
| Total | | | | $ | 8 | |
| | | | |
| | | | |
| | | | |
| Other expense, net | | | | |
| Reduction to non-service benefit cost | | | | $ | 1 | |
| Money pool investments with CenterPoint Energy interest income | | | | 1 | |
| Total | | | | $ | 2 | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
Income Tax Expense. For a discussion of effective tax rate 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 Integrated 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 compoundedper period by the book loss in the three months ended March 31, 2020.
Income Tax Expense - Discontinued Operations
CenterPoint Energy’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 10% compared to 24% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was primarily dueRegistrant, see Note 13 to the non-deductible portionsInterim Condensed Financial Statements.
HOUSTON ELECTRIC’S MANAGEMENT’S NARRATIVE ANALYSIS
OF CONSOLIDATED RESULTS OF OPERATIONS
Houston Electric’s CODM views net income as the measure of profit or loss for its reportable segment. Houston Electric consists of a single reportable segment. Houston Electric’s results of operations are affected by seasonal fluctuations in the demand for electricity. Houston Electric’s results of operations are also affected by, among other things, the actions of various governmental authorities having jurisdiction over rates Houston Electric charges, debt service costs, income tax expense, Houston Electric’s ability to collect receivables from REPs and Houston Electric’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations of Houston Electric’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses,” “— Risk Factors Affecting Our Businesses” and “— OtherGeneral Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 20192020 Form 10-K and in Item 1A of Part II of this Form 10-Q.10-K.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | 2021 | | 2020 | | Favorable (Unfavorable) |
| | | | | | (in millions, except operating statistics) |
| Revenues: | | | | | | | | | | | |
| TDU | | | | | | | $ | 640 | | | $ | 596 | | | 44 | |
| Bond Companies | | | | | | | 44 | | | 38 | | | 6 | |
| Total revenues | | | | | | | 684 | | | 634 | | | 50 | |
| Expenses: | | | | | | | | | | | |
| Operation and maintenance, excluding Bond Companies | | | | | | | 371 | | | 358 | | | (13) | |
| Depreciation and amortization, excluding Bond Companies | | | | | | | 105 | | | 99 | | | (6) | |
| Taxes other than income taxes | | | | | | | 63 | | | 64 | | | 1 | |
| Bond Companies | | | | | | | 38 | | | 31 | | | (7) | |
| Total expenses | | | | | | | 577 | | | 552 | | | (25) | |
| Operating Income | | | | | | | 107 | | | 82 | | | 25 | |
| Other Income (Expense) | | | | | | | | | | | |
| Interest expense and other finance charges | | | | | | | (45) | | | (41) | | | (4) | |
| Interest expense on Securitization Bonds | | | | | | | (6) | | | (8) | | | 2 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other income, net | | | | | | | 5 | | | 5 | | | — | |
| Income from Continuing Operations Before Income Taxes | | | | | | | 61 | | | 38 | | | 23 | |
| Income tax expense | | | | | | | 8 | | | 5 | | | (3) | |
| Net Income | | | | | | | $ | 53 | | | $ | 33 | | | 20 | |
| Throughput (in GWh): | | | | | | | | | | | |
| Residential | | | | | | | 5,701 | | 5,351 | | 7 | % |
| Total | | | | | | | 19,739 | | 20,102 | | (2) | % |
| Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
| Cooling degree days | | | | | | | 112 | % | | 185 | % | | (73) | % |
| Heating degree days | | | | | | | 104 | % | | 68 | % | | 36 | % |
| Number of metered customers at end of period: | | | | | | | | | | | |
| Residential | | | | | | | 2,318,030 | | 2,260,352 | | 3 | % |
| Total | | | | | | | 2,615,917 | | 2,552,739 | | 2 | % |
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
Revenues (1) |
| $ | 634 |
|
| $ | 686 |
|
| Expenses |
| 552 |
|
| 605 |
|
| Operating Income |
| 82 |
|
| 81 |
|
| Interest Expense and Other Finance Charges | | (41 | ) | | (40 | ) |
| Interest Expense on Securitization Bonds | | (8 | ) | | (12 | ) |
| Interest Income | | 1 |
| | 4 |
|
| Interest Income from Securitization Bonds | | 1 |
| | 2 |
|
| Other Income (Expense), net | | 3 |
| | (2 | ) |
| Income before Income Taxes |
| 38 |
|
| 33 |
|
| Income Tax Expense | | 5 |
| | 6 |
|
| Net Income |
| $ | 33 |
|
| $ | 27 |
|
57
| |
(1) | Excludes weather hedge gains of $4 million and $3 millionThe following table provides variance explanations for the three months ended March 31, 2020 and 2019, respectively, recorded in Utility revenues on CenterPoint Energy’s Condensed Statements of Consolidated Income. See Note 7(a) to the Interim Condensed Financial Statements for more information on the weather hedge. |
Three months ended March 31, 20202021 compared to three months ended March 31, 20192020 by major income statement caption for Houston Electric:
Houston Electric reported net income of $33 million for the three months ended March 31, 2020 compared to net income of $27 million for the three months ended March 31, 2019. | | | | | | | | | | | | |
| | | Favorable (Unfavorable) |
| | | | |
| | | (in millions) |
| Revenues | | | | |
| Transmission Revenues, including TCOS and TCRF and impact of the change in rate design, inclusive of costs billed by transmission providers | | | | $ | 136 | |
| Customer growth | | | | 8 | |
| Weather impacts and other usage | | | | 6 | |
| Bond Companies, offset in other line items | | | | 6 | |
| Impacts from increased peak demand in 2020, collected in rates in 2021 | | | | 2 | |
| Equity return, related to the annual true-up of transition charges for amounts over or under collected in prior periods | | | | 1 | |
| Energy efficiency, offset in operation and maintenance | | | | 1 | |
| Miscellaneous revenues, primarily related to right-of-way revenues | | | | (5) | |
| Refund of protected and unprotected EDIT, offset in income tax expense | | | | (10) | |
| Impacts on usage of COVID-19 | | | | (12) | |
| Customer rates and impact of the change in rate design | | | | (83) | |
| Total | | | | $ | 50 | |
| Operation and maintenance, excluding Bond Companies | | | | |
| Support services | | | | $ | 6 | |
| Contract services | | | | 2 | |
| Labor and benefits | | | | 1 | |
| Energy efficiency, offset in revenues | | | | (1) | |
| | | | |
| | | | |
| Transmission costs billed by transmission providers, offset in revenues | | | | (21) | |
| Total | | | | $ | (13) | |
| Depreciation and amortization, excluding Bond Companies | | | | |
| Ongoing additions to plant-in-service | | | | $ | (6) | |
| Total | | | | $ | (6) | |
| Taxes other than income taxes | | | | |
| Franchise fees and other taxes | | | | $ | 2 | |
| Incremental capital projects placed in service | | | | (1) | |
| Total | | | | $ | 1 | |
| Bond Companies expense | | | | |
| Operations and maintenance and depreciation expense, offset in other line items | | | | $ | (7) | |
| | | | $ | (7) | |
| Interest expense and other finance charges | | | | |
| Debt to fund incremental capital projects | | | | $ | (4) | |
| Total | | | | $ | (4) | |
| | | | |
| | | | |
| | | | |
| | | | |
| Interest expense on Securitization Bonds | | | | |
| Lower outstanding principal balance, offset in other line items | | | | $ | 2 | |
| Total | | | | $ | 2 | |
| Other income (expense), net | | | | |
| Reduction to non-service benefit cost | | | | $ | 2 | |
| Investments in CenterPoint Energy Money Pool interest income | | | | (1) | |
| Bond Companies interest income, offset in other line items | | | | (1) | |
| | | | |
| Total | | | | $ | — | |
| | | | |
| | | | |
| | | | |
| | | | |
The increase of $6 million in net income from the Houston Electric T&D reportable segment is discussed below in Results of Operations by Reportable Segment, exclusive of weather hedges recorded at CenterPoint Energy.
Income Tax Expense
Houston Electric’sExpense. For a discussion of effective tax rate reported forper period, see Note 13 to the three months ended March 31, 2020 was 13% compared to 18% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was primarily due to an increase in the amountInterim Condensed Financial Statements.
CERC’S MANAGEMENT’S NARRATIVE ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS
CERC’s CODM views net income as the measure of profit or loss for its reportable segment. CERC’s results of operations are affected by seasonal fluctuations in the demand for natural gas and price movements of energy commodities as well as the optimization of margins through natural gas basis differentials.gas. CERC’s results of operations are also affected by, among other things, the actions of various federal, state and local governmental authorities having jurisdiction over rates CERC charges, competition in CERC’s various business operations, the effectiveness of CERC’s risk management activities, debt service costs and income tax expense.expense, CERC’s ability to collect receivables from customers and CERC’s ability to recover its regulatory assets. For more information regarding factors that may affect the future results of operations for CERC’s business, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy ServicesGas’ Business,” “— Risk Factors Affecting Our Businesses” and “— OtherGeneral Risk Factors Affecting Our Businesses and/or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 20192020 Form 10-K10-K.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | | | 2021 | | 2020 | | Favorable (Unfavorable) |
| | | | | | | (in millions, except operating statistics) |
| Revenues | | | | | | | $ | 1,177 | | | $ | 1,011 | | | $ | 166 | |
Cost of revenues (1) | | | | | | | 625 | | | 478 | | | (147) | |
| Revenues less Cost of revenues | | | | | | | 552 | | | 533 | | | 19 | |
| Expenses: | | | | | | | | | | | |
| Operation and maintenance | | | | | | | 198 | | | 209 | | | 11 | |
| Depreciation and amortization | | | | | | | 80 | | | 74 | | | (6) | |
| Taxes other than income taxes | | | | | | | 56 | | | 50 | | | (6) | |
| Total expenses | | | | | | | 334 | | | 333 | | | (1) | |
| Operating Income | | | | | | | 218 | | | 200 | | | 18 | |
| Other Income (Expense) | | | | | | | | | | | |
| Interest expense and other finance charges | | | | | | | (24) | | | (30) | | | 6 | |
| | | | | | | | | | | |
| Other expense, net | | | | | | | (1) | | | (4) | | | 3 | |
| Income from Continuing Operations Before Income Taxes | | | | | | | 193 | | | 166 | | | 27 | |
| Income tax expense | | | | | | | 42 | | | 35 | | | (7) | |
| Income From Continuing Operations | | | | | | | 151 | | | 131 | | | 20 | |
| Loss from Discontinued Operations (net of tax benefit of $-0- and $11, respectively) | | | | | | | — | | | (64) | | | 64 | |
| Net Income | | | | | | | $ | 151 | | | $ | 67 | | | 84 | |
| Throughput (in Bcf): | | | | | | | | | | | |
| Residential | | | | | | | 93 | | 74 | | 26 | % |
| Commercial and Industrial | | | | | | | 87 | | 90 | | (3) | % |
| Total | | | | | | | 180 | | 164 | | 10 | % |
| Weather (percentage of 10-year average for service area): | | | | | | | | | | | |
| Heating degree days | | | | | | | 102 | % | | 86 | % | | 16 | % |
| Number of metered customers at end of period: | | | | | | | | | | | |
| Residential | | | | | | | 3,362,902 | | 3,299,011 | | 2 | % |
| Commercial and Industrial | | | | | | | 261,944 | | 261,120 | | — | % |
| Total | | | | | | | 3,624,846 | | 3,560,131 | | 2 | % |
(1)Includes Utility natural gas and in Item 1ANon-utility cost of Part IIrevenues, including natural gas.
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Revenues | | $ | 1,011 |
| | $ | 1,212 |
|
| Expenses | | 811 |
| | 1,052 |
|
| Operating Income | | 200 |
| | 160 |
|
| Interest Expense and Other Finance Charges | | (30 | ) | | (29 | ) |
| Other Expense, net | | (4 | ) | | (3 | ) |
| Income from Continuing Operations Before Income Taxes | | 166 |
| | 128 |
|
| Income Tax Expense | | 35 |
| | 18 |
|
| Income from Continuing Operations | | 131 |
| | 110 |
|
| Income (Loss) from Discontinued Operations (net of tax expense (benefit) of ($11) and $8, respectively) | | (64 | ) | | 28 |
|
| Net Income | | $ | 67 |
| | $ | 138 |
|
ThreeThe following table provides variance explanations for the three months ended March 31, 20202021 compared to three months ended March 31, 2019
CERC reported net2020 by major income of $67 millionstatement caption for the three months ended March 31, 2020 compared to net income of $138 million for the three months ended March 31, 2019.
The decrease in net income of $71 million was primarily due to a $92 million decrease in income from discontinued operations, net of tax, discussed further in Note 3 to the Interim Condensed Financial Statements.
This decrease in net income was partially offset by the following:
a $15 million increase in net income from the Natural Gas Distribution reportable segment discussed further under Results of Operations by Reportable Segment below; and
a $6 million increase in net income from Corporate and Other.
Income Tax Expense - Continuing Operations
CERC’s effective tax rate on income from continuing operations for the three months ended March 31, 2020 was 21% compared to 14% for the three months ended March 31, 2019. CERC’s higher effective tax rate on income from continuing operations for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 was primarily due to a decrease in the amount of amortization of the net regulatory EDIT liability.
Income Tax Expense - Discontinued Operations
CERC’s effective tax rate from discontinued operations reported for the three months ended March 31, 2020 was 15% compared to 22% for the three months ended March 31, 2019. The lower effective tax rate for the three months ended March 31, 2020 was due to the non-deductible portion of goodwill impairment on the Energy Services Disposal Group.
RESULTS OF OPERATIONS BY REPORTABLE SEGMENT
As of January 1, 2020, the Registrants’ CODM views net income as the measure of profit or loss for the reportable segments rather than the previous measure of operating income. Certain prior year amounts have been reclassified to conform to the current year presentation.
Discontinued Operations.
On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. Accordingly, the previously reported Infrastructure Services reportable segment has been eliminated. The transaction closed on April 9, 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.
Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. Accordingly, the previously reported Energy Services reportable segment has been eliminated. The transaction is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.
As of March 31, 2020, reportable segments by Registrant were as follows:
|
| | | | | | | | | | | |
Registrants | | Houston Electric T&D | | Indiana Electric Integrated | | Natural Gas Distribution | | Midstream InvestmentsFavorable (Unfavorable) |
CenterPoint Energy | | X | | X | | X | | X |
Houston Electric | | X | | | | | | (in millions) |
CERCRevenues less Cost of revenues | | | | |
| Weather and usage, excluding impacts from COVID-19 | | X | | $ | 17 | |
| | | | |
| Customer growth | | | | 5 | |
| Gross receipts tax, offset in taxes other than income taxes | | | | 5 | |
| Energy efficiency, offset in operation and maintenance | | | | 4 | |
| Non-volumetric and miscellaneous revenue, excluding impacts from COVID-19 | | | | (1) | |
| Refund of protected and unprotected EDIT, offset in income tax expense | | | | (2) | |
| Impacts of COVID-19, including usage and other miscellaneous charges | | | | (3) | |
| Customer rates and impact of the change in rate design, exclusive of the TCJA impact | | | | (6) | |
| Total | | | | $ | 19 | |
| Operation and maintenance | | | | |
| Other operating and maintenance expense and support services | | | | $ | 6 | |
| Merger related expenses, primarily severance and technology | | | | 2 | |
| Materials and supplies | | | | 2 | |
| Contracted services | | | | 2 | |
| Labor and benefits | | | | 1 | |
| Bad Debt | | | | 1 | |
| Insurance | | | | 1 | |
| Energy efficiency, offset in revenues less cost of revenues | | | | (4) | |
| | | | |
| Total | | | | $ | 11 | |
| Depreciation and amortization | | | | |
| Incremental capital projects placed in service | | | | $ | (6) | |
| Total | | | | $ | (6) | |
| Taxes other than income taxes | | | | |
| Incremental capital projects placed in service | | | | $ | (1) | |
| Gross receipts tax, offset in revenues less cost of revenues | | | | (5) | |
| Total | | | | $ | (6) | |
| Interest expense and other finance charges | | | | |
| Reduced interest rates on outstanding borrowings, partially offset by incremental borrowings for capital expenditures | | | | $ | 6 | |
| Total | | | | $ | 6 | |
| | | | |
| | | | |
| | | | |
| Other expense, net | | | | |
| Reduction to non-service benefit cost | | | | $ | 2 | |
| Money pool investments with CenterPoint Energy interest income | | | | 1 | |
| Total | | | | $ | 3 | |
Included in revenues are intersegment sales, which are accounted for as if the sales were to third parties at current market prices. SeeIncome Tax Expense. For a discussion of effective tax rate per period, see Note 1613 to the Interim Condensed Financial Statements for details of reportable segments by Registrant.
Houston Electric T&D (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of the Houston Electric T&D reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
The following table provides summary data of the Houston Electric T&D reportable segment:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | |
| Utility Revenues: | | | | |
TDU (1) | | $ | 600 |
| | $ | 595 |
|
| Bond Companies | | 38 |
| | 94 |
|
| Total utility revenues | | 638 |
| | 689 |
|
| Expenses: | | | | |
| Operation and maintenance, excluding Bond Companies | | 358 |
| | 366 |
|
| Depreciation and amortization, excluding Bond Companies | | 99 |
| | 93 |
|
| Taxes other than income taxes | | 64 |
| | 62 |
|
| Bond Companies | | 31 |
| | 84 |
|
| Total expenses | | 552 |
| | 605 |
|
| Operating Income | | 86 |
| | 84 |
|
| Other Income (Expense) | | | | |
| Interest expense and other finance charges | | (41 | ) | | (40 | ) |
| Interest expense on Securitization Bonds | | (8 | ) | | (12 | ) |
| Interest income | | 1 |
| | 4 |
|
| Interest income from Securitization Bonds | | 1 |
| | 2 |
|
| Other income (expense), net | | 3 |
| | (2 | ) |
| Income from Continuing Operations Before Income Taxes | | 42 |
| | 36 |
|
| Income tax expense | | 5 |
| | 6 |
|
Net Income (1) | | $ | 37 |
| | $ | 30 |
|
| Throughput (in GWh): | | | | |
| Residential | | 5,351 |
| | 5,183 |
|
| Total | | 20,102 |
| | 19,019 |
|
| Number of metered customers at end of period: | | | | |
| Residential | | 2,260,352 |
| | 2,206,563 |
|
| Total | | 2,552,739 |
| | 2,494,761 |
|
| |
(1) | Net income for CenterPoint Energy’s Houston Electric T&D reportable segment differs from net income for Houston Electric due to weather hedge gains (losses) recorded at CenterPoint Energy that are not recorded at Houston Electric. Utility revenues in CenterPoint Energy’s Condensed Statements of Consolidated Income included weather hedge gains (losses) of $4 million and $3 million for the three months ended March 31, 2020 and 2019, respectively, for CenterPoint Energy’s Houston Electric T&D reportable segment. See Note 7(a) to the Interim Condensed Financial Statements for more information on weather hedges. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
CenterPoint Energy’s Houston Electric T&D reportable segment reported net income of $37 million for the three months ended March 31, 2020, compared to $30 million for the three months ended March 31, 2019.
Net income increased $7 million, primarily due to the following key factors:
decreased operation and maintenance expenses of $17 million, inclusive of a $6 million decrease in severance costs, primarily due to lower labor and benefits costs, lower support services costs, and lower contract services costs;
•customer growth of $7 million from the addition of almost 58,000 customers; and
a $5 million increase in Other income (expense), net due to income associated with corporate-owned life insurance.
These increases to net income were partially offset by the following:
higher depreciation and amortization expense, primarily because of ongoing additions to plant in service, and other taxes of $9 million;
lower equity return of $5 million, primarily related to the annual true-up of transition charges to correct over-collections that occurred during the preceding 12 months;
lower miscellaneous revenues of $3 million, primarily related to right-of-way revenues;
decreased interest income of $3 million, primarily due to lower investments in the CenterPoint Energy money pool; and
higher transmission costs billed by transmission providers of $9 million, partially offset by higher transmission-related revenues of $7 million.
Lower depreciation and amortization expenses related to AMS of $1 million were offset by a corresponding decrease in related revenues.
Indiana Electric Integrated (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of the Indiana Electric Integrated reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Electric Generation, Transmission and Distribution Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
The following table provides summary data of CenterPoint Energy’s Indiana Electric Integrated reportable segment:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 (1) |
| | | |
| Utility Revenues | | $ | 129 |
| | $ | 83 |
|
| Expenses: | | | | |
| Utility natural gas, fuel and purchased power | | 35 |
| | 26 |
|
| Operation and maintenance | | 44 |
| | 48 |
|
| Depreciation and amortization | | 25 |
| | 16 |
|
| Taxes other than income taxes | | 4 |
| | 2 |
|
| Goodwill Impairment | | 185 |
| | — |
|
| Total expenses | | 293 |
| | 92 |
|
| Operating Loss | | (164 | ) | | (9 | ) |
| Other Income (Expense): | | | | |
| Interest expense and other finance charges | | (6 | ) | | (3 | ) |
| Other income (expense), net | | 2 |
| | 1 |
|
| Loss from Continuing Operations Before Income Taxes | | (168 | ) | | (11 | ) |
| Income tax expense (benefit) | | 3 |
| | (2 | ) |
| Net Loss | | $ | (171 | ) | | $ | (9 | ) |
| Throughput (in GWh): | | | | |
| Retail | | 1,078 |
| | 704 |
|
| Wholesale | | 63 |
| | 58 |
|
| Total | | 1,141 |
| | 762 |
|
| Number of metered customers at end of period: | | | | |
| Residential | | 129,233 |
| | 128,194 |
|
| Total | | 148,265 |
| | 147,047 |
|
| |
(1) | Represents February 1, 2019 through March 31, 2019 results only due to the Merger. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
CenterPoint Energy’s Indiana Electric Integrated reportable segment reported a net loss of $171 million for the three months ended March 31, 2020, compared to $9 million for the three months ended March 31, 2019.
The net loss increased $162 million as a result of the following key factors:
a $185 million goodwill impairment charge further discussed in Note 10 to the Interim Condensed Financial Statements;
a $9 million increase in depreciation and amortization expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019;
a $5 million increase in state and federal income taxes driven by growth in earnings and the non-deductible goodwill impairment;
a $3 million decrease in customer margin due to unfavorable weather not protected by weather normalization mechanisms; and
a $3 million increase in interest expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019.
These increases were partially offset by the following:
a $34 million increase in electric margin from the inclusion of results for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019;
a $3 million increase in margin associated with the Indiana Electric infrastructure replacement TDSIC program; and
a $4 million decrease in operation and maintenance expense inclusive of a $19 million reduction in Merger-related severance and incentive compensation costs in 2019 and a timing related reduction of plant maintenance expenditures of $2 million, partially offset by a $17 million increase from the inclusion of expense for three months in 2020 versus two months included in 2019 due to the Merger on February 1, 2019.
Natural Gas Distribution (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of CenterPoint Energy’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
The following table provides summary data of CenterPoint Energy’s Natural Gas Distribution reportable segment:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 (1) |
| | | |
| Revenues: | | | | |
| Utility revenues | | $ | 1,306 |
| | $ | 1,399 |
|
| Non-utility revenues | | 12 |
| | 16 |
|
| Total revenues | | 1,318 |
| | 1,415 |
|
| Expenses: | | | | |
| Utility natural gas | | 574 |
| | 771 |
|
| Non-utility cost of revenues, including natural gas | | 6 |
| | 10 |
|
| Operation and maintenance | | 267 |
| | 310 |
|
| Depreciation and amortization | | 111 |
| | 95 |
|
| Taxes other than income taxes | | 67 |
| | 60 |
|
| Total expenses | | 1,025 |
| | 1,246 |
|
| Operating Income | | 293 |
| | 169 |
|
| Other Income (Expense): | | | | |
| Interest expense and other finance charges | | (32 | ) | | (23 | ) |
| Interest income | | 1 |
| | 1 |
|
| Other income (expense), net | | (2 | ) | | (1 | ) |
| Income from Continuing Operations Before Income Taxes | | 260 |
| | 146 |
|
| Income tax expense | | 56 |
| | 26 |
|
| Net Income | | $ | 204 |
| | $ | 120 |
|
| Throughput (in Bcf): | | | | |
| Residential | | 107 |
| | 114 |
|
| Commercial and industrial | | 146 |
| | 136 |
|
| Total Throughput | | 253 |
| | 250 |
|
| Number of customers at end of period: | | | | |
| Residential | | 4,266,685 |
| | 4,219,795 |
|
| Commercial and industrial | | 350,009 |
| | 350,419 |
|
| Total | | 4,616,694 |
| | 4,570,214 |
|
| |
(1) | Includes only February 1, 2019 through March 31, 2019 results of acquired natural gas businesses due to the Merger. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
CenterPoint Energy’s Natural Gas Distribution reportable segment reported net income of $204 million for the three months ended March 31, 2020 compared to $120 million for the three months ended March 31, 2019.
Net income increased by $84 million primarily as a result of the following key factors:
a $65 million increase in margin related to an additional month of earnings in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;
rate increases of $46 million in Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed below;
a $44 million reduction in operation and maintenance expense, primarily due to a $53 million decrease in Merger-related severance costs in 2019, offset by an additional month of operation and maintenance expense in the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;
a $5 million increase in revenues associated with customer growth from the addition of over 46,000 new customers; and
an increase in revenue of $4 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas, Indiana, Ohio and Mississippi.
These increases were partially offset by the following:
a $30 million increase in state and federal income taxes driven by growth in earnings and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;
a $16 million increase in depreciation and amortization and a $12 million increase in other non-income related taxes, primarily due to capital projects placed in service in 2020 and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019;
$10 million of lower revenue attributed to milder weather and lower customer usage; and
a $9 million increase in interest expense due to incremental financing to fund capital projects and an additional month of expense in 2020 related to the Indiana and Ohio jurisdictions acquired in the Merger on February 1, 2019.
Increased operation and maintenance expenses related to energy efficiency programs of $1 million and decreased taxes other than income taxes of $5 million were offset by corresponding increases and decreases in the related revenues.
Natural Gas Distribution (CERC)
For information regarding factors that may affect the future results of operations of CERC’s Natural Gas Distribution reportable segment, please read “Risk Factors — Risk Factors Associated with Our Consolidated Financial Condition,” “— Risk Factors Affecting Natural Gas Distribution and Competitive Energy Services Businesses” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
The following table provides summary data of CERC’s Natural Gas Distribution reportable segment:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | | |
| Revenues: | | | | |
| Utility revenues | | $ | 996 |
| | $ | 1,195 |
|
| Non-utility revenues | | 12 |
| | 16 |
|
| Total revenues | | 1,008 |
| | 1,211 |
|
| Expenses: | | | |
|
|
| Utility natural gas | | 472 |
| | 687 |
|
| Non-utility cost of revenues, including natural gas | | 6 |
| | 10 |
|
| Operation and maintenance | | 204 |
| | 227 |
|
| Depreciation and amortization | | 74 |
| | 73 |
|
| Taxes other than income taxes | | 50 |
| | 49 |
|
| Total expenses | | 806 |
| | 1,046 |
|
| Operating Income | | 202 |
| | 165 |
|
| Other Income (Expense): | | | | |
| Interest expense and other finance charges | | (21 | ) | | (19 | ) |
| Interest income | | 1 |
| | 1 |
|
| Other income (expense), net | | (4 | ) | | (2 | ) |
| Income from Continuing Operations Before Income Taxes | | 178 |
| | 145 |
|
| Income tax expense | | 44 |
| | 26 |
|
| Net Income | | $ | 134 |
| | $ | 119 |
|
| Throughput (in Bcf): | | | | |
| Residential | | 74 |
| | 91 |
|
| Commercial and industrial | | 90 |
| | 98 |
|
| Total Throughput | | 164 |
| | 189 |
|
| Number of customers at end of period: | | | | |
| Residential | | 3,299,011 |
| | 3,261,669 |
|
| Commercial and industrial | | 261,120 |
| | 261,709 |
|
| Total | | 3,560,131 |
| | 3,523,378 |
|
Three months ended March 31, 2020 compared to three months ended March 31, 2019
CERC’s Natural Gas Distribution reportable segment reported net income of $134 million for the three months ended March 31, 2020 compared to $119 million for the three months ended March 31, 2019.
Net income increased $15 million primarily as a result of the following key factors:
rate increases of $28 million in Minnesota, Arkansas and Texas, exclusive of the TCJA impact discussed below;
a $17 million reduction in operation and maintenance expense, inclusive of a $10 million decrease in Merger-related severance costs in 2019, primarily due to lower labor benefits and support services costs;
higher revenue of $5 million related to the impact of the TCJA in Arkansas, which was offset by lower TCJA revenue impacts in Texas and Mississippi; and
a $2 million increase in revenues associated with customer growth from the addition of almost 37,000 new customers.
These increases were partially offset primarily by the following:
an $18 million increase in state and federal income taxes and interest expense, primarily due to increased taxable income;
$8 million of lower revenue attributed to milder weather and lower customer usage as compared to the three months ended March 31, 2019;
a $5 million increase in property and other non-income related taxes, primarily due to increases in local tax rates and property valuations;
a $2 million increase in interest expense, primarily due to increased debt financing to fund an increase in capital projects in 2020; and
a $1 million increase in depreciation and amortization from an increase of incremental capital projects placed in service in 2020.
Decreased operation and maintenance expenses related to energy efficiency programs of $5 million and taxes other than income taxes of $4 million were offset by corresponding decreases in the related revenues.
Midstream Investments (CenterPoint Energy)
For information regarding factors that may affect the future results of operations of the Midstream Investments reportable segment, please read “Risk Factors — Risk Factors Affecting CenterPoint Energy’s Interests in Enable Midstream Partners, LP” and “— Other Risk Factors Affecting Our Businesses or CenterPoint Energy’s Interests in Enable Midstream Partners, LP” in Item 1A of Part I of the Registrants’ combined 2019 Form 10-K and in Item 1A of Part II of this Form 10-Q.
The following table provides the net income (loss) of the Midstream Investments reportable segment:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Non-utility Revenues | | $ | — |
| | $ | — |
|
| Taxes other than income taxes | | (1 | ) | | — |
|
| Total Expenses | | (1 | ) | | — |
|
| Operating Income | | 1 |
| | — |
|
| Other Income (Expense): | | | | |
| Interest expense and other finance charges | | $ | (14 | ) | | $ | (12 | ) |
| Equity in earnings (loss) from Enable, net | | (1,475 | ) | | 62 |
|
| Interest income | | — |
| | $ | 2 |
|
| Income (Loss) from Continuing Operations Before Income Taxes | | (1,488 | ) | | 52 |
|
| Income tax expense (benefit) | | (361 | ) | | 28 |
|
| Net Income (Loss) | | $ | (1,127 | ) | | $ | 24 |
|
CenterPoint Energy’s Midstream Investment reportable segment reported a net loss of $1,127 million for the three months ended March 31, 2020, compared to net income of $24 million for the three months ended March 31, 2019.
Net income decreased $1,151 million primarily as a result of the following key factors:
a $1,541 million impairment charge recorded on CenterPoint Energy’s equity investment in Enable (see Note 9 to the Interim Condensed Financial Statements for further information); and
a $6 million decrease in Equity in Earnings from Enable.
These decreases were partially offset by the following:
a $389 million increase in income tax benefit primarily resulting from the impairment charge discussed above and a lower effective tax rate in 2020; and
a $10 million decrease in the loss on dilution.
On April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. For further information, see “—Liquidity and Capital Resources—Future Sources and Uses of Cash” below.
Corporate and Other (CenterPoint Energy)
The following table shows the net income (loss) of CenterPoint Energy’s Corporate and Other:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 (1) |
| | (in millions) |
| Non-utility Revenues | | $ | 82 |
| | $ | 42 |
|
| Expenses: | | | | |
| Non-utility cost of revenues, including natural gas | | 58 |
| | 37 |
|
| Operation and maintenance | | 5 |
| | 24 |
|
| Depreciation and amortization | | 17 |
| | 14 |
|
| Taxes other than income taxes | | 2 |
| | 2 |
|
| Total | | 82 |
| | 77 |
|
| Operating Loss | | — |
| | (35 | ) |
| Other Income (Expense) | | | | |
| Gain (loss) on marketable securities | | (144 | ) | | 83 |
|
| Gain (loss) on indexed debt securities | | 135 |
| | (86 | ) |
| Interest expense and other finance charges | | (96 | ) | | (84 | ) |
| Interest income | | 48 |
| | 46 |
|
| Other income, net | | 11 |
| | 10 |
|
| Loss from Continuing Operations Before Income Taxes | | (46 | ) | | (66 | ) |
| Income tax benefit | | (50 | ) | | (44 | ) |
| Net Income (Loss) | | $ | 4 |
| | $ | (22 | ) |
| |
(1) | Includes only February 1, 2019 through March 31, 2019 results of the ESG business acquired in the Merger. |
Three months ended March 31, 2020 compared to three months ended March 31, 2019
CenterPoint Energy’s Corporate and Other reported net income of $4 million for the three months ended March 31, 2020 compared to a net loss of $22 million for the three months ended March 31, 2019.
Net income increased $26 million primarily due to the following key factors:
a $221 million increase in gains on the underlying value of indexed debt securities related to the ZENS;
a $19 million decrease in operation and maintenance expenses primarily due to the following:
| |
◦ | lower corporate allocations retained in continuing operations related to the Infrastructure Services Disposal Group of $11 million primarily from Merger-related severance and incentive compensation costs incurred in 2019 that did not recur in 2020; |
| |
◦ | decreased benefits and services costs of $4 million; |
| |
◦ | decreased software maintenance costs of $2 million; and |
| |
◦ | reduced Merger-related integration costs of $2 million incurred in 2019 that did not recur in 2020; |
a $19 million increase in margin primarily related to higher margin of $9 million at ESG from two large federal projects in 2020 and the reduction of Merger-related amortization of intangibles for construction backlog of $6 million in non-utility cost of revenues, including natural gas; and
a $6 million increase in income tax benefit.
These increases in net income were partially offset by the following:
a $227 million increase in losses on marketable securities;
a $12 million increase in interest expense from the inclusion of expense for three months in 2020 versus two months included in 2019 due to additional debt acquired in the Merger on February 1, 2019; and
a $3 million increase in depreciation and amortization from the inclusion of expense for three months in 2020 versus two months included in 2019 for businesses acquired in the Merger on February 1, 2019.
Corporate and Other (CERC)
The following table shows the net income (loss) of CERC’s Corporate and Other:
|
| | | | | | | | |
| | | Three Months Ended March 31, |
| | | 2020 | | 2019 |
| | (in millions) |
| Non-utility Revenues | | $ | 3 |
| | $ | 1 |
|
| Expenses | | | | |
| Operation and maintenance | | 5 |
| | 6 |
|
| Total | | 5 |
| | 6 |
|
| Operating Loss | | (2 | ) | | (5 | ) |
| Other Income (Expense): | | | | |
| Interest expense and other finance charges | | (31 | ) | | (31 | ) |
| Interest income | | 21 |
| | 20 |
|
| Other income (expense), net | | — |
| | (1 | ) |
| Loss from Continuing Operations Before Income Taxes | | (12 | ) | | (17 | ) |
| Income tax benefit | | (9 | ) | | (8 | ) |
| Net Loss | | $ | (3 | ) | | $ | (9 | ) |
CERTAIN FACTORS AFFECTING FUTURE EARNINGS
For information on other developments, factors and trends that may have an impact on the Registrants’ future earnings, please read “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Affecting Future Earnings” in Item 7 of Part II and “Risk Factors” in Item 1A of Part I of the Registrants’ combined 20192020 Form 10-K in Item 1A of Part II of this Form 10-Q and “Cautionary Statement Regarding Forward-Looking Information” in this combined Form 10-Q.
LIQUIDITY AND CAPITAL RESOURCES
Historical Cash Flows
The following table summarizes the net cash provided by (used in) operating, investing and financing activities:activities during the three months ended March 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2021 | | 2020 |
| CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| (in millions) |
| Cash provided by (used in): | | | | | | | | | | | |
| Operating activities | $ | (1,681) | | | $ | 47 | | | $ | (1,787) | | | $ | 662 | | | $ | 103 | | | $ | 381 | |
| Investing activities | (604) | | | (982) | | | (131) | | | (654) | | | 192 | | | (177) | |
| Financing activities | 2,285 | | | 940 | | | 1,918 | | | (32) | | | (315) | | | (205) | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2020 | | 2019 |
| | CenterPoint Energy | | Houston Electric | | CERC | | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Cash provided by (used in): | | | | | | | |
| Operating activities | $ | 662 |
| | $ | 103 |
| | $ | 381 |
| | $ | 271 |
| | $ | 66 |
| | $ | 248 |
|
| Investing activities | (654 | ) | | 192 |
| | (177 | ) | | (6,539 | ) | | (1,237 | ) | | (250 | ) |
| Financing activities | (32 | ) | | (315 | ) | | (205 | ) | | 2,345 |
| | 1,078 |
| | (11 | ) |
Operating Activities. The following items contributed to increased (decreased) net cash provided by operating activities for the three months ended March 31, 20202021 compared to the same periodthree months ended March 31, 2020:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston
Electric | | CERC |
| (in millions) |
| Changes in net income after adjusting for non-cash items | $ | 1,616 | | | $ | 28 | | | $ | (29) | |
| Changes in working capital | (57) | | | (25) | | | (51) | |
Increase in regulatory assets (1) | (2,270) | | | (52) | | | (2,075) | |
| Change in equity in earnings of unconsolidated affiliates | (1,583) | | | — | | | — | |
Change in distributions from unconsolidated affiliates (2) | (31) | | | — | | | — | |
| | | | | |
| Higher pension contribution | (6) | | | — | | | — | |
| Other | (12) | | | (7) | | | (13) | |
| $ | (2,343) | | | $ | (56) | | | $ | (2,168) | |
| | | | | |
| | | | | |
| | | | | |
(1)The increase in regulatory assets is primarily due to the incurred natural gas costs associated with the February 2021 Winter Storm Event. See Note 6 to the Interim Condensed Financial Statements for more information on the February 2021 Winter Storm Event.
(2)This change is partially offset by the change in distributions from Enable in excess of 2019:cumulative earnings in investing activities noted in the table below.
|
| | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Changes in net income after adjusting for non-cash items | $ | (1,363 | ) | | $ | (26 | ) | | $ | 62 |
|
| Changes in working capital | 212 |
| | 58 |
| | 67 |
|
| Change in equity in earnings of unconsolidated affiliates | 1,537 |
| | — |
| | — |
|
Change in distributions from unconsolidated affiliates (1) | (4 | ) | | — |
| | — |
|
| Other | 9 |
| | 5 |
| | 4 |
|
| | $ | 391 |
| | $ | 37 |
| | $ | 133 |
|
| |
(1) | This change is partially offset by the change in distributions from Enable in excess of cumulative earnings in investing activities noted in the table below. |
Investing Activities. The following items contributed to (increased) decreased net cash used in investing activities for the three months ended March 31, 20202021 compared to the same period of 2019:three months ended March 31, 2020:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston
Electric | | CERC |
| (in millions) |
| | | | | |
| | | | | |
| Capital expenditures | $ | 70 | | | $ | (28) | | | $ | 43 | |
| Net change in notes receivable from affiliated companies | — | | | (1,146) | | | — | |
| Change in distributions from Enable in excess of cumulative earnings | (7) | | | — | | | — | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Other | (13) | | | — | | | 3 | |
| $ | 50 | | | $ | (1,174) | | | $ | 46 | |
|
| | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Mergers and acquisitions, net of cash acquired | $ | 5,987 |
| | $ | — |
| | $ | — |
|
| Higher capital expenditures | (127 | ) | | (28 | ) | | (30 | ) |
| Net change in notes receivable from affiliated companies | — |
| | 1,460 |
| | 106 |
|
| Change in distributions from Enable in excess of cumulative earnings | 7 |
| | — |
| | — |
|
| Other | 18 |
| | (3 | ) | | (3 | ) |
| | $ | 5,885 |
| | $ | 1,429 |
| | $ | 73 |
|
Financing Activities. The following items contributed to (increased) decreased net cash used in financing activities for the three months ended March 31, 20202021 compared to the same period of 2019:three months ended March 31, 2020:
| | | | | | | | | | | | | | | | | |
| CenterPoint Energy | | Houston
Electric | | CERC |
| (in millions) |
| Net changes in commercial paper outstanding | $ | 866 | | | $ | — | | | $ | 398 | |
| | | | | |
| | | | | |
| Net changes in long-term debt outstanding, excluding commercial paper | 2,470 | | | 1,021 | | | 1,699 | |
| Net changes in long-term revolving credit facilities | (1,050) | | | — | | | — | |
| Net changes in debt issuance costs | (20) | | | (10) | | | (6) | |
| | | | | |
| | | | | |
| Decreased payment of Common Stock dividends | 57 | | | — | | | — | |
| Increased payment of preferred stock dividends | (6) | | | — | | | — | |
| Net change in notes payable from affiliated companies | — | | | (141) | | | — | |
| | | | | |
| Dividend to parent | — | | | 385 | | | 32 | |
| | | | | |
| | | | | |
| | | | | |
| $ | 2,317 | | | $ | 1,255 | | | $ | 2,123 | |
|
| | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Net changes in commercial paper outstanding | $ | (3,520 | ) | | $ | — |
| | $ | (183 | ) |
| Net changes in long-term debt outstanding, excluding commercial paper | 210 |
| | (584 | ) | | — |
|
| Net changes in long-term revolving credit facilities | 915 |
| | — |
| | — |
|
| Net changes in debt issuance costs | 8 |
| | 7 |
| | — |
|
| Increased payment of Common Stock dividends | (1 | ) | | — |
| | — |
|
| Decreased payment of preferred stock dividends | 1 |
| | — |
| | — |
|
| Net change in notes payable from affiliated companies | — |
| | 134 |
| | — |
|
| Contribution from parent | — |
| | (590 | ) | | — |
|
| Dividend to parent | — |
| | (361 | ) | | (12 | ) |
| Other | 10 |
| | 1 |
| | 1 |
|
| | $ | (2,377 | ) | | $ | (1,393 | ) | | $ | (194 | ) |
Future Sources and Uses of Cash
The liquidity and capital requirements of the Registrants are affected primarily by results of operations, capital expenditures, debt service requirements, tax payments, working capital needs and various regulatory actions. Capital expenditures are expected to be used for investment in infrastructure. These capital expenditures are anticipated to maintain reliability and safety, increase resiliency and expand our systems through value-added projects. In addition to dividend payments on CenterPoint Energy’s Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock, and in addition to interest payments on debt, the Registrants’ principal anticipated cash requirements for the remaining nine months of 20202021 include the following:
| | | | | | | | | | | | | | | | | | | | |
| | CenterPoint Energy | | Houston Electric | | CERC |
| | (in millions) |
| Estimated capital expenditures | | $ | 2,778 | | | $ | 1,365 | | | $ | 866 | |
| Scheduled principal payments on Securitization Bonds | | 174 | | | 174 | | | — | |
| Minimum contributions to pension plans and other post-retirement plans | | 70 | | | 1 | | | 3 | |
| Maturing CenterPoint Energy term loans | | 700 | | | — | | | — | |
| Maturing CenterPoint Energy and VUHI senior notes | | 555 | | | — | | | — | |
| Maturing Houston Electric general mortgage bonds | | 300 | | | 300 | | | — | |
February 2021 Winter Storm Event. In February 2021, portions of the United States experienced an extreme and unprecedented winter weather event resulting in corresponding electricity generation shortages, including in Texas, and natural gas shortages and increased wholesale prices of natural gas in the United States. As a result of this weather event, the governors of Texas, Oklahoma and Louisiana declared states of either disaster or emergencies in their respective states. Subsequently, President Biden also approved major disaster declarations for all or parts of Texas, Oklahoma and Louisiana.
As a result of the February 2021 Winter Storm Event, from February 12, 2021 to February 22, 2021, management estimates CenterPoint Energy spent approximately an incremental $2.2 billion more on natural gas supplies (inclusive of an incremental $2.1 billion more spent by CERC on natural gas supplies). These amounts are preliminary estimates as of April 29, 2021 and remain subject to final settlement. While CenterPoint Energy and CERC will seek to recover the increased costs from its customers (although timing of recovery is uncertain), in the interim, CERC has issued additional external debt financing to pay for such natural gas working capital. For further details, see Note 12 to the Interim Condensed Financial Statements. The proceeds from the debt financing, along with existing sources of liquidity, provide CERC with sufficient capital to address the settlement of natural gas purchases, including the associated upstream supply charges, at the end of March 2021. Any additional external debt financing and/or partial or delayed recovery may negatively impact CenterPoint Energy’s or CERC’s credit metrics, and may lead to a downgrade of CenterPoint Energy’s or CERC’s credit rating.
Although CenterPoint Energy’s and CERC’s excess costs from the increase in natural gas prices are subject to available natural gas recovery mechanisms in their jurisdictions (although timing of recovery is uncertain), until such amounts are
|
| | | | | | | | | | | | |
| | | CenterPoint Energy | | Houston Electric | | CERC |
| | | (in millions) |
| Estimated capital expenditures | | $ | 1,682 |
| | $ | 626 |
| | $ | 401 |
|
| Scheduled principal payments on Securitization Bonds | | 168 |
| | 168 |
| | — |
|
| Maturing Vectren term loans | | 600 |
| | — |
| | — |
|
The Registrants expect that anticipated cash needs for the remaining nine months of 20202021 will be met with borrowings under their credit facilities, bank loans, proceeds from the private placement of Series C Preferred Stock and Common Stock, proceeds from the issuance of long-term debt, proceeds from the completed sale of the Infrastructure Services Disposal Group, proceeds from the anticipated sale of the Energy Services Disposal Group,term loans or common stock, anticipated cash flows from operations, with respect to CenterPoint Energy and CERC, proceeds from commercial paper, and, with respect to CenterPoint Energy, distributions from Enable.Enable until the closing of the Enable Merger expected in the second half of 2021, including any proceeds therefrom, distributions from Energy Transfer or proceeds from dispositions of Energy Transfer common units or Energy Transfer Series G Preferred Units after the expected closing of the Enable Merger, and, with respect to CERC, proceeds from any potential asset sales, including the announced sale of our Natural Gas businesses in Arkansas and Oklahoma, which is expected to close by the end of 2021, subject to satisfaction of customary closing conditions. Discretionary financing or refinancing may result in the issuance of equity securities of CenterPoint Energy or debt securities of the Registrants in the capital markets or the arrangement of additional credit facilities or term bank loans. Issuances of equity or debt in the capital markets, funds raised in the commercial paper markets and additional credit facilities may not, however, be available on acceptable terms.
On April 1, 2020, For further information about the Enable Merger and the announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to CenterPoint Energy that fall below CenterPoint Energy’s previously disclosed expected minimum quarterly distribution from Enablesale of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce Enable common unit distributions to CenterPoint Energy by approximately $155 million per year.
Additionally, on April 1, 2020, CenterPoint Energy provided a business update related to certain measures it expects to take in responseour Arkansas and Oklahoma Natural Gas businesses, see Notes 9 and 20, respectively, to the current business environment to strengthen its financial position and to adjust for the reduction in cash flow related to the reduction in Enable quarterly common unit distributions discussed above. These measures are expected to include reducing CenterPoint Energy’s (i) quarterly common stock dividend per share from $0.2900 to $0.1500; (ii) anticipated 2020 capital spending by approximately $300 million, with CenterPoint Energy continuing to target five-year total capital investment of approximately $13 billion as previously disclosed; and (iii) anticipated operation and maintenance expenses for 2020 by a targetInterim Condensed Financial Statements.
of approximately $40 million, excluding certain merger costs, utility costs to achieve savings, severance and amounts with revenue offsets.
To the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, the Registrants may need to consider alternative sources of funding for some of its operations and for working capital, which may increase the cost of capital and result in higher interest expense. At this time, the Registrants expect impacts on their liquidity due to COVID-19 to be temporary. Although CenterPoint Energy customarily satisfies its near-term financing needs with proceeds from commercial paper, CenterPoint Energy has utilized its revolving credit facilities as a source of funding because market disruptions caused by COVID-19 limited its access to the commercial paper markets. These uncertain economic conditions may also result in the inability of the Registrants’ customers and other counterparties to make payments to the Registrants, on a timely basis or at all, which could adversely affect the business, cash flows, liquidity, financial condition and results of operations of the Registrants. Under such circumstances, the Registrants would intend to rely on borrowings from the short-term capital markets as well as continued use of their revolving credit facilities to mitigate such effects until cash flows revert to their pre-COVID-19 levels. The net proceeds of CenterPoint Energy’s sale of the Infrastructure Services Disposal Group were used to repay a portion of outstanding CenterPoint Energy debt, including $200 million of maturing Vectren term loans.
Off-Balance Sheet Arrangements
Other than Houston Electric’s general mortgage bonds issued as collateral for tax-exempt long-term debt of CenterPoint Energy as discussed in Note 12, guarantees as discussed in Note 14(b) and (c) to the Interim Condensed Financial Statements, we have no off-balance sheet arrangements.
Regulatory Matters
COVID-19 Regulatory Matters
Governors, publicFor information about COVID-19 regulatory matters, see Note 6 to the Interim Condensed Financial Statements.
February 2021 Winter Storm Event
The Texas Legislature conducted in late February and March initial hearings on the February 2021 Winter Storm Event. Immediately after the February 2021 Winter Storm Event, five unaffiliated directors of the ERCOT Board resigned. Three ERCOT market segment directors have also resigned and their replacements were appointed. Presently, the Texas legislature is considering legislation that would require unaffiliated directors of ERCOT to be Texas residents. On March 3, 2021, the ERCOT Board terminated the employment agreement with the ERCOT President and CEO with 60 days’ notice. On April 27, 2021, the ERCOT Board announced a new interim President and CEO. Following the February 2021 Winter Storm Event, all three PUCT commissioners have also either resigned or announced their resignation. To date, Governor Abbott has announced two new PUCT commissioners and both have been confirmed by the Texas Senate. Under consideration at the Texas Legislature is legislation requiring the number of appointed PUCT commissioners to be increased from three to five. For the two additional PUCT commissioner appointees, one will be appointed by the Texas Lieutenant Governor and one will be appointed by the Texas Speaker of the House.
On February 13, 2021, the Railroad Commission authorized each Texas natural gas distribution utility commissionsto 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 authorities in the states in which we operate have issued a number of different orderscosts related to the COVID-19 pandemic. While many jurisdictions areprocurement and transportation of natural gas supply, subject to mandatory stay-at-home and similar orders, essential businesses and activities are exempted from these orders, including utility operations and maintenance. Accordingly,recovery in future proceedings. In addition, CenterPoint Energy’s crews will continueand 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 provide essential service by responding to calls, completing work orders and undertaking other critical work. To protect our customers and employees, we are implementing COVID-19 safety precautions. Additionally, regulatory authorities have issued orders addressing customer non-payment and disconnection. For example, in Indiana, the IURC issued an order that, among other things, permits utilities to voluntarily suspend or waive late fees and reconnections fees and reconnect customers who have been disconnected due to non-payment, provided that such actions are taken on a non-discriminatory basis and apply to all customers. Commissions in other states have issued similar orders. In our NGD service territories and for Indiana Electric, we have temporarily suspended disconnections for non-payment and will continue to support those customers who may need payment assistance, arrangements or extensions. We will continue to monitor developments in this area and adjust our response as guidelines and circumstances may require.
On March 26, 2020, the PUCT issued two orders related to COVID-19 issues that affect Houston Electric. First, the PUCT issued an order related to Accrual of Regulatory Assets granting authority for utilities to record as a regulatory asset costs resulting from the effects of COVID-19. In the order, the PUCT noted that it will consider whether a utility’s request forseek 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 reasonable and necessaryuncertain.
The table below presents the estimated incremental natural gas costs included in regulatory assets as of March 31, 2021 by state as a future proceeding. Second, the PUCT issued an order related to COVID-19 ERP, as modified, which, in lightresult of the disaster declarations issued by the GovernorFebruary 2021 Winter Storm Event and CenterPoint Energy’s and CERC’s requested recovery status as of Texas, authorized a customer assistance program for certain residential customers of electric service in areas of Texas open to customer choice, which includes Houston Electric’s service territory. The order includes several requirements for transmission and distribution utilities (including Houston Electric):April 29, 2021:
Transmission and distribution utilities must file a tariff rider to collect funds to reimburse costs related to unpaid bills from eligible residential customers unemployed due
| | | | | | | | | | | | | | | | | | | | |
| State | | Recovery Status | | Legislative Activity | | Estimated Incremental Gas Cost
(in millions) |
| Arkansas | | Filed application on April 16, 2021 to recover over a five-year period beginning May 1, 2021. On April 28, 2021, APSC approved CERC to begin recovery effective May 2021 at a customer deposit interest rate of 0.8% over a five year period, subject to a true-up after APSC determines appropriate allocation, length of recovery, and carrying charge. A hearing is scheduled in August 2021. | | A securitization bill has been passed and recovery via the securitization is beyond 2021. | | $ | 343 | |
| Louisiana | | Filed application on April 16, 2021 for North Louisiana to recover over a three-year period beginning May 1, 2021. LPSC approved on April 22, 2021. | | None. | | 75 |
| Minnesota | | Filed application on March 15, 2021 requesting to recover over a two-year period beginning May 1, 2021. | | None. | | 470 |
| Mississippi | | Recovery expected to begin September 2021 through normal gas cost recovery. | | None. | | 3 |
| | | | | | |
| Oklahoma | | Filed application on February 25, 2021 to defer incremental gas costs is pending at the OCC. | | A securitization bill has passed in the Oklahoma legislature. | | 79 |
| Texas | | Cost currently deferred to a regulatory asset pending recovery method. | | A securitization bill is progressing through the Texas legislature. Approval of the bill could occur as early as the second quarter of 2021 which could allow recovery by the first quarter of 2022. | | 1,105 | |
| | | | Total CERC | | $ | 2,075 | |
| Indiana North | | Recovery expected to begin September 2021 through normal gas recovery. | | None. | | 96 |
| Indiana South | | Recovery expected to begin August 2021 through normal gas recovery. | | None. | | 18 |
| | | | Total CenterPoint Energy | | $ | 2,189 | |
For additional information about February 2021 Winter Storm Event regulatory matters, see Note 6 to the impacts of COVID-19. The rider is based on $0.33 per MW hour ($0.00033 per KW hour) to be applied to all customer classes. HoustonInterim Condensed Financial Statements.
Indiana Electric filed its updated tariff implementing the rider on March 31, 2020, which was approved by the PUCT on April 2, 2020.CPCN (CenterPoint Energy)
Transmission and distribution utilities entered into no-interest loan agreements with ERCOT to provide for an initial fund balance for reimbursement. On April 13, 2020, in connection with the PUCT’s COVID-19 ERP, HoustonFebruary 9, 2021, Indiana Electric entered into a no-interest loanBTA with a subsidiary of Capital Dynamics. Under the agreement, Capital Dynamics, with ERCOT for approximately $5 million.
The fund administered by each transmission and distribution utility for the COVID-19 ERP can also receive donations and grants from governmental entities, corporations, and other entities. Any funds received from other sources shallits partner Tenaska, will build a 300 MW solar array in Posey County, Indiana through a special purpose entity Posey Solar. Upon completion of construction, which is projected to be administered and treated in the same manner by the transmission and distribution utilities as the funds in the program from the rider.
Transmission and distribution utilities may petition the PUCT for changes to the COVID-19 ERP, including the level of the rider in the event that the funds collected are not sufficient to cover reimbursements.
REPs will identify eligible customers to the relevant transmission and distribution utilities, and the transmission and distribution utilities will cease charging REPs for associated delivery charges, except securitization related charges. REPs will cease submitting disconnection for non-payment orders to transmission and distribution utilities for eligible customers.
The funds collected through the rider will be used to reimburse the following entities and costs: REPs’ energy charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice (reimbursement amounts are based on an average energy cost of $0.04 per KW hour); transmission and distribution utilities’ delivery charges related to eligible residential customers with an unpaid, past due electric bill subject to a disconnection for non-payment notice; the third-party administrator to cover its reasonable costs of administering the COVID-19 ERP eligibility process; and ERCOT for the loan to the transmission and distribution utilities.
| |
• | REPs will submit one spreadsheet with reimbursement claims to transmission and distribution utilities beginning on April 30, 2020 and all subsequent requests that may be made on the 15th of each month, and transmission and distribution utilities will process reimbursement payments within 14 days.
|
Transmission and distribution utilities will prepare reports and file them at the PUCT every 30 days showing aggregate amounts of reimbursements to the transmission and distribution utilities and REPs.
The COVID-19 ERP will end on July 17, 2020, unless otherwise extended by the PUCT. Final claims for reimbursement must be submitted to transmission and distribution utilities not later than 90 days after the end of 2023, and subject to approval by the COVID-19 ERP. The transmissionIURC, Indiana Electric will acquire Posey Solar and distribution utilities riders will remain in place and reimbursements will continue after the end of the COVID-19 ERP has ended to complete any remaining COVID-19 ERP cost recovery and disburse all reimbursement amounts or remaining balances.
In the other states in which we operate, public utility commissions have authorized utilities to employ deferred accounting authorityits solar array assets for certain COVID-19 related costs and savings. For example, the MPSC is allowing CenterPoint Energy and CERC to defer the following:
all necessary and reasonable incremental costs or expenses to plan, prepare, stage, or react to protect and keep safe its employees and customers, and to reliably operate its utility system beginninga fixed purchase price. On February 23, 2021, Indiana Electric filed a CPCN with the date ofIURC seeking approval to purchase the Governor of Mississippi’s declared state of emergency; and
any costs, including any incremental bad debt expenses and all associated credit and collection costs, related to connections, reconnections, or disconnections for all customers classes. This deferral authorization includes, butproject. Indiana Electric is not limited to, customer-paid fees.
Further, the MPSC is also allowing CenterPoint Energy and CERC to offset these deferrals with any financial relief received from other sources at the federal or state level. Orders have also been received from the Railroad Commission, the LPSC and the APSC authorizing CenterPoint Energy and CERC to defer some or all COVID-19 related costs for future recovery.
Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)
On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area to change its rates, seeking approval for revenue increasesa 100 MW solar PPA in Warrick County, Indiana. The request accounts for increased cost of approximately $194 million, among other requests. On January 23, 2020, Houstondebt related to this PPA, which provides equivalent equity return to offset imputed debt during the 25 year life of the PPA. A hearing is scheduled to begin in June 2021 and a decision on the CPCN is expected by the fourth quarter of 2021.
Indiana Electric filed a StipulationSecuritization of Planned Generation Retirements (CenterPoint Energy)
The State of Indiana has enacted legislation, Senate Bill 386, that would enable CenterPoint Energy to request approval from the IURC to securitize the remaining book value and Settlement Agreementremoval costs associated with the PUCT that provides for the following, among other things:
an overall revenue requirement increase of approximately $13 million;
an ROE of 9.4%;
a capital structure of 57.5% debt/42.5% equity;
a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and
recovery of all retail transmission related costs through the TCRF.
Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are requiredgenerating facilities to be written off; however, approximately $12 millionretired in rate case expenses were written off in 2019. A base rate application must be filed for Houston Electric no later than four years fromthe
next twenty-four months. The Governor of Indiana signed the date of the PUCT’s final orderlegislation on April 19, 2021. CenterPoint Energy intends to seek securitization in the proceeding. Additionally, Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceedingfuture associated with the PUCT be instituted regarding EDIT on Houston Electric’s securitized assets. Furthermore, under the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy but left the determination of whether to impose a dividend restriction up to the PUCT. The PUCT approved the Stipulation and Settlement Agreement at its February 14, 2020 open meeting and issued a final order on March 9, 2020. The PUCT declined to impose a dividend restriction in the final order. The rates were implemented on April 23, 2020.planned coal generation retirements.
CenterPoint Energy and Houston Electric record pre-tax expense for (i) probable disallowances of capital investments and (ii) customer refund obligations and costs deferred in regulatory assets when recovery of such amounts is no longer considered probable.
Bailey to Jones CreekSpace City Solar Transmission Interconnection Project (CenterPoint Energy and Houston Electric)
In April 2017,On December 17, 2020, Houston Electric submittedfiled a proposal to ERCOT requesting its endorsement of the Freeport Area Master Plan, which included the Bailey to Jones Creek Project. On November 21, 2019, the PUCT issued its final approval of Houston Electric’s certificate of convenience and necessity application basedwith the PUCT for approval to build a 345 kV transmission line in Wharton County, Texas connecting the Hillje substation on an unopposed settlement agreement under which Houston Electric would constructElectric’s transmission system to the project at anplanned 610 MW Space City Solar Generation facility being developed by third-party developer EDF Renewables. Depending on the route ultimately approved by the PUCT, the estimated capital cost of the transmission line project ranges from approximately $483$23 million to $71 million. In April 2020, a federal court vacated the Army Corps of Engineers Nationwide Permit 12, which Houston Electric intended to use for the project. Houston Electric is monitoring those proceedings and has filed its individual permit application with the Army Corps in accordance with the federal court decision. Significant delays in the processing of that application could lead to delays in completing construction. The actual capital costs of the project will depend on actual land acquisition costs, construction costs, minor changesand other factors in addition to route selection. In January 2021, Houston Electric executed a Standard Generation Interconnection Agreement for the routingSpace City Solar Generation facility with EDF Renewables, which also provided security for the transmission line project in the form of a $23 million letter of credit, the amount of which is subject to change depending on the route approved. A hearing at the PUCT is scheduled for June 2021. The PUCT is required to issue its final decision on the transmission line project no later than December 2021. Subject to PUCT approval, Houston Electric expects to complete construction and energization of the transmission line to mitigate environmental and other land use impacts, structure design to address soil and coastal wind conditions, the permitting issues described above, and other factors. Houston Electric has commenced pre-construction activities on the project, and anticipates beginning construction in early 2021 and completing construction and energizing the line before the peak electric season in Aprilby June 2022.
Indiana Electric Generation ProjectMinnesota Base Rate Case (CenterPoint Energy)Energy and CERC)
Indiana Electric must make substantial investments in its generation resources in the near term to comply with environmental regulations. On February 20, 2018, Indiana ElectricOctober 28, 2019, CERC filed a petitiongeneral rate case with the MPUC seeking authorization fromapproval for a revenue increase of approximately $62 million with a projected test year ended December 31, 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 7.41% on a total rate base of approximately $1,307 million. CERC implemented interim rates reflecting $53 million for gas used on and after January 1, 2020. In September 2020, a settlement that addressed all issues except the IURC to constructInclusive Financing/Tariffed On Bill Financing (TOB) proposal by the City of Minneapolis was signed by a new 700-850 MW natural gas combined cycle generating facility to replacemajority of all parties and was filed with the baseload capacityOffice of its existing generation fleet atAdministrative Hearings. A stipulation between the City of Minneapolis and CERC addressing the TOB proposal was filed on September 2, 2020. The settlement reflects a $38.5 million increase and was based on an approximateoverall after-tax rate of return of 6.86% and does not specify individual cost of $900 million, which includescapital components. On March 1, 2021, the cost ofMPUC issued a new natural gas pipeline to serve the plant.
As a part of this same proceeding, Indiana Electric also sought recovery under Indiana Senate Bill 251 of costs to be incurred for environmental investments to be made at its F.B. Culley generating plant to comply with ELG and CCR rules. The F.B. Culley investments, estimated to be approximately $95 million, began in 2019 and will allow the F.B. Culley Unit 3 generating facility to comply with environmental requirements and continue to provide generating capacity to Indiana Electric’s customers. Under Indiana Senate Bill 251, Indiana Electric sought authority to recover 80% of the approved costs, including a return, using a tracking mechanism, with the remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding.
On April 24, 2019, the IURC issued anwritten final order approving the environmental investments proposed for$38.5 million increase and rejected the F.B. Culley generating facility, along with recovery of prior pollution control investments made in 2014.TOB stipulation. The order deniedalso required CERC and the proposed gas combined cycle generating facility. Indiana Electric is conductingCity of Minneapolis to submit a new IRP, expectedfuture filing to be completedallow for further development of a potential TOB pilot program and additional or expanded low-income conservation improvement programs. A compliance filing was submitted on March 12, 2021 proposing a final rate implementation on June 1st and the interim refund occurring in mid-2020, to identify an appropriate investment of capital in its generation fleet to satisfy the needs of its customers and comply with environmental regulations.June 2021, contingent on final MPUC approval.
Indiana Electric A.B. Brown Ash Pond RemediationSouth Base Rate Case (CenterPoint Energy)
On August 14, 2019,October 30, 2020, and as subsequently amended, Indiana ElectricSouth filed a petitionits base rate case with the IURC seeking approval for a revenue increase of approximately $29 million. This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana South’s capital expenditure program, approved in 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 5.99% on total rate base of approximately $469 million. Indiana South has utilized a projected test year, reflecting its 2021 budget as a federally mandated project,the basis for the recoveryrevenue increase requested, and proposes to implement rates in two phases. The first phase of costs associated with the clean closurerate implementation will occur as of the A.B. Brown ash pond pursuant todate of an order in this proceeding, expected in September 2021, and the second phase of rate implementation will occur at the completion of the test year, as of December 31, 2021. On April 16, 2021, Indiana Senate Bill 251. This project, expected to last approximately 14 years, would resultSouth announced that an agreement in principle has been reached with certain parties. On April 23, 2021, a Stipulation and Settlement Agreement was filed resolving all issues in the full excavation and recycling of the ponded ash through agreements with a beneficial reuse entity, totaling approximately $160 million. Under Indiana Senate Bill 251, Indiana Electric seeks authority to recover via a tracking mechanism 80% of the approved costs, with a return on eligible capital investments needed to allow for the extraction of the ponded ash, with the remaining 20% of the costs deferred for recovery in Indiana Electric’s next base rate proceeding. On December 19, 2019 and subsequently on January 10, 2020, Indiana Electric filed a settlement agreement with the intervening parties whereby the costs would be recovered as requested, with an additional commitment by Indiana Electric to offset the federally mandated costs by at least $25 million, representing a combination of total cash proceeds received from the
ash reuser and total insurance proceeds to be received from Indiana Electric’s insurers under confidential settlement agreements of litigation filed against the insurers.case. The settlement agreement with the intervening partiesrecommended a revenue increase of $20.5 million based on a 9.7% ROE and an overall after-tax rate of return of 5.78% on total rate base of approximately $469 million. A settlement hearing is pending before the IURC, with anscheduled for June 24, 2021. A final order is expected in the firstsecond half of 2020. If approved,2021. Under Indiana Electric would expect recoverystatutory requirements, the IURC has 300 days from the date of the filing of Indiana South’s case-in-chief to issue an order.
Indiana North Base Rate Case (CenterPoint Energy)
On December 18, 2020, Indiana North filed its base rate case with the IURC seeking approval for a revenue increase of approximately $21 million. This rate case filing is required under Indiana TDSIC statutory requirements before the completion of Indiana North’s capital expenditure program, approved costsin 2014 for investments starting in 2014 through 2020. The revenue increase is based upon a requested ROE of 10.15% and an overall after-tax rate of return of 6.32% on total rate base of approximately $1,611 million. Indiana North has utilized a projected test year, reflecting its 2021 budget as the basis for the revenue increase requested, and proposes to commenceimplement rates in two phases. The first phase of rate implementation will occur as of the date of an order in this proceeding, expected in October 2021, and the second phase of rate implementation will occur at the completion of the test year, as of December 31, 2021. Hearings at the IURC are currently scheduled to occur in May and
June 2021. Under Indiana statutory requirements, the IURC has a minimum of 300 days and maximum of 360 days from the date of the filing of Indiana North’s case-in-chief to issue an order.
Rate Change Applications
The Registrants are routinely involved in rate change applications before state regulatory authorities. Those applications include general rate cases, where the entire cost of service of the utility is assessed and reset. In addition, Houston Electric is periodically involved in proceedings to adjust its capital tracking mechanisms (TCOS and DCRF) and annually files to adjust its EECRF. CERC is periodically involved in proceedings to adjust its capital tracking mechanisms in Texas (GRIP), its cost of service adjustments in Arkansas, Louisiana, Mississippi and Oklahoma (FRP, RSP, RRA and PBRC, respectively), its decoupling mechanism in Minnesota, and its energy efficiency cost trackers in Arkansas, Minnesota, Mississippi and Oklahoma (EECR, CIP, EECR and EECR, respectively). CenterPoint Energy is periodically involved in proceedings to adjust its capital tracking mechanisms in Indiana (CSIA for gas and TDSIC for electric) and Ohio (DRR), its decoupling mechanism in Indiana (SRC for gas), and its energy efficiency cost trackers in Indiana (EEFC for gas and DSMA for electric) and Ohio (EEFR).
The table below reflects significant applications pending or completed since the Registrants’ combined 20192020 Form 10-K was filed with the SEC.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Mechanism | | Annual Increase (Decrease) (1) (in millions) | Filing
Date | | Effective Date | | Approval Date | | Additional Information | | | | | | | | | | | | | Mechanism | | Annual Increase (Decrease) (1)
(in millions)
| | Filing
Date
| | Effective Date | | Approval Date | | Additional Information | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CenterPoint Energy and Houston Electric (PUCT) | Rate CaseTCOS | | $139 | | April
2019
March 2021 | | April 2020
2021 | | March 2020April 2021 | | See discussion above under Houston Electric Base Rate Case.
| TCOS (1)
| | 17 | | March 2020 | | TBD | | TBD | | Requested an increase of $204 million to rate base. | CenterPoint Energy and CERC - Beaumont/East Texas (Railroad Commission) | Rate Case (1) | | 7 | | November
2019
| | TBD | | TBD | | Unanimous settlement agreement filed with the Railroad Commission in March 2020 that recommends a $4 million annual increase in current revenues, a refund for an Unprotected EDIT Rider amortized over three years of which $2.2 million is refunded in the first year and establishes a 9.65% ROE and a 56.95% equity ratio for future GRIP filings for the Beaumont/East Texas jurisdiction. The settlement calls for new rates to be effective with October 2020 usage and would be reflected starting with November 2020 bills. | CenterPoint Energy and CERC - South Texas, Houston and Texas Coast (Railroad Commission) | GRIP (1) | | 18 | | March
2020
| | TBD | | TBD | | Based on net change in invested capital of $144$80 million. | | CenterPoint Energy and CERC - Arkansas (APSC) | FRP (1) | | (8) | | April
2020
| | TBD13 | | TBDApril
2021 | | TBD | | TBD | | Based on ROE of 9.5%9.50% with 50 basis point (+/-) earnings band. Revenue reductionincrease of $8.1$13 million based on prior test year true-up earned return on equity of 11.75%11.43% combined with projected test year earned return on equity of 8.40%3.59%. The initial term of Rider FRP will terminate on September 10, 2021; a request to extend the Rider FRP term for an additional five years was filed on May 5, 2021. | | CenterPoint Energy and CERC - Beaumont/East Texas, South Texas, Houston and Texas Coast (Railroad Commission) | GRIP (1) | | 28 | | March 2021 | | TBD | | TBD | | Based on net change in invested capital of $197 million. | | CenterPoint Energy and CERC - Minnesota (MPUC) | | Decoupling | | N/A | | September 2020 | | September 2020 | | March 2021 | | Represents under-recovery of approximately $2 million recorded for and during the period July 1, 2019 through June 30, 2020, including approximately $1 million related to the period July 1, 2018 through June 30, 2019. | Rate Case (1) | | 39 | | October 2019 | | June
2021 | | TBD | | See discussion above under Minnesota Base Rate Case. | CIP Financial Incentive(1) | | 910 | | May 2020
2021 | | TBD | | TBD | | CIP Financial Incentive based on 20192020 activity. | | | | | | | | | | | | | | | | | | | | | | | | | | CenterPoint Energy and CERC - Mississippi (MPSC) | Rate Case RRA(1)
| | 624 | | October 2019April
2021 | | TBD | | TBD | | Reflects a proposed 10.15%Based on ROE on a 51.39% equity ratio. Interim rates reflecting an annualof 9.81% with 100 basis point (+/-) earnings band. Revenue increase of $53approximately $4 million were implementedbased on January 1, 2020.2020 test year adjusted earned ROE of 6.97%. | | CenterPoint Energy and CERC - Oklahoma (OCC) | PBRC(1) | | (2)(1) | | March 2020
2021 | | TBD | | TBD | | Based on ROE of 10% with 50 basis point (+/-) earnings band. Revenue credit of approximately $2$1 million based on 20192020 test year adjusted earned ROE of 15.37%12.42%. |
| | | | | | | | | | | | Mechanism | | Annual Increase (Decrease) (1)
(in millions)
| | Filing
Date
| | Effective Date | | Approval Date | | Additional Information | CenterPoint Energy and CERC - Mississippi (MPSC) | RRA (1)
| | 2 | | May
2020
| | TBD | | TBD | | Based on ROE of 9.292% with 100 basis point (+/-) earnings band. Revenue increase of $2 million based on 2019 test year adjusted earned ROE of 7.45%. | | CenterPoint Energy - Indiana South - Gas (IURC) | Rate Case (1) | | 29 | | October 2020 | | September 2021 | | TBD | | See discussion above under Indiana South Base Rate Case. | CSIA(1) | | 1(1) | | April 2020
2021 | | July 2020
2021 | | TBD | | Requested an increase of $13$11 million to rate base, which reflects a $(1 million) annual decrease in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of less than $1 million annually. | | CenterPoint Energy - Indiana North - Gas (IURC) | Rate Case (1) | | 21 | | December 2020 | | October 2021 | | TBD | | See discussion above under Indiana North Base Rate Case. | CSIA (1) | | 5 | | April
2021 | | July
2021 | | TBD | | Requested an increase of $37 million to rate base, which reflects a $5 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $1$6 million annually. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | CenterPoint Energy - Indiana North - Gas (IURC)Mechanism | | CSIAAnnual Increase (Decrease) (1)
| | 4 | | April 2020 | | July
2020(in millions)
| | TBDFiling
Date | | Requested an increase of $35 million to rate base, which reflects a $4 million annual increase in current revenues. 80% of revenue requirement is included in requested rate increase and 20% is deferred until the next rate case. The mechanism also includes refunds associated with the TCJA, resulting in no change to the previous credit provided, and a change in the total (over)/under-recovery variance of $14 million annually.Effective Date | | Approval Date | | Additional Information | | | | | | | | | | | | | | | CenterPoint Energy - Ohio (PUCO) | TSCR DRR(1)
| | N/A9 | | January
2019
April
2021 | | TBDSeptember 2021 | | TBD | | Application to flow back to customers certain benefits from the TCJA. Initial impact reflects credits for 2018 of $(10) million and 2019 of $(9) million, and 2020 of $(6) million, with mechanism to begin subsequent to new approval by PUCO. The order is expected in 2020. | DRR | | 10 | | May
2020
| | September
2020
| | TBD | | Requested an increase of $67$71 million to rate base for investments made in 2019,2020, which reflects a $10$9 million annual increase in current revenues. A change in (over)/under-recovery variance of $2$5 million annually is also included in rates. | | CenterPoint Energy - Indiana Electric (IURC) | TDSIC(1) | | 43 | | February 2020
2021 | | May 2020
2021 | | TBD | | Requested an increase of $34$28 million to rate base, which reflects a $4$3 million annual increase in current revenues. 80% of the revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also includes a change in (over)/under-recovery variance of less than $1 million. | CECA (1) | | 8 | | February 2021 | | June
2021 | | TBD | | Reflects an $8 million annual increase in current revenues through a non-traditional rate making approach related to a 50 MW universal solar array placed in service in January 2021. | ECA(1) | | 2 | | May 2021 | | August 2021 | | TBD | | Requested an increase of $39 million to rate base, which reflects a $2 million annual increase in current revenues. 80% of the revenue requirement is included in requested rate increase and 20% is deferred until next rate case. The mechanism also included a change in (over)/under-recovery variance of less than $1 million annually. |
| | (1) | (1)Represents proposed increases (decreases) when effective date and/or approval date is not yet determined. Approved rates could differ materially from proposed rates. |
Tax Reform
TCJA-related 2018 tax expense refunds are currently included in the Registrants’ existing rates and are therefore reducing the Registrants’ current annual revenue. The TCJA-related 2018 tax expense refunds for Houston Electric were completed in September 2019. However, in Houston Electric’s rate case filed in April 2019, and subsequently adjusted in errata filings in May and June 2019, pursuant to the Stipulation and Settlement Agreement, Houston Electric will return unprotected EDIT net regulatory liability balance to customers, through a separate rider and its wholesale transmission tariff over approximately three years. The balance of unprotected EDIT was $105 million as of December 31, 2018. In addition, Houston Electric’s TCJA-related protected EDIT balance as of December 31, 2018 is $563 million and must be returned to customers over ARAM.
CenterPoint Energy’s electric and natural gas utilities in Indiana and Ohio, which were acquired during the Merger, currently recover corporate income tax expense in approved rates charged to customers. The IURC and the PUCO both issued orders which initiated proceedings to investigate the impact of the TCJA on utility companies and customers within Indiana and Ohio, respectively. In addition, the IURC and PUCO have ordered each utility to establish regulatory liabilities to record all estimated impacts of tax reform starting January 1, 2018 until the date when rates are adjusted to capture these impacts. In Indiana, in response to Vectren’s pre-Merger filing for proposed changes to its rates and charges to consider the impact of the lower federal income tax rates, the IURC approved an initial reduction to current rates and charges, effective June 1, 2018, to capture the immediate impact of the lower corporate federal income tax rate. The refund of EDIT and regulatory liabilities commenced in November 2018 for Indiana electric customers and in January 2019 for Indiana natural gas customers. In Ohio, the initial rate reduction to current rates and charges became effective upon conclusion of its pending base rate case on August 28, 2019. In January 2019, an application was filed with PUCO in compliance with its October 2018 order requiring utilities to file for a request to adjust rates to reflect the impact of the TCJA, requesting authority to implement a rider to flow back to customers the tax benefits realized under the TCJA, including the refund of EDIT and regulatory liabilities. CenterPoint Energy expects this proceeding to be approved in 2020.
ELG (CenterPoint Energy)
Under the Clean Water Act, the EPA sets technology-based guidelines for water discharges from new and existing electric generation facilities. In September 2015, the EPA finalized revisions to the existing steam electric ELG setting stringent technology-based water discharge limits for the electric power industry. The EPA focused this rulemaking on wastewater generated primarily by pollution control equipment necessitated by the comprehensive air regulations, specifically setting strict water discharge limits for arsenic, mercury and selenium for scrubber waste waters. The ELG will be implemented when existing water discharge permits for the plants are renewed. In the case of Indiana Electric’s water discharge permits, in 2017 the IDEM issued final renewals for the F.B. Culley and A.B. Brown power plants. IDEM agreed that units identified for retirement by December 2023 would not be required to install new treatment technology to meet ELG, and approved a 2020 compliance date for dry bottom ash and a 2023 compliance date for flue gas desulfurization wastewater treatment standards for the remaining coal-fired unit at F.B. Culley.
On April 13, 2017, as part of the U.S. President’s Administration’s regulatory reform initiative, which is focused on the number and nature of regulations, the EPA granted petitions to reconsider the ELG rule, and indicated it would stay the current implementation deadlines in the rule during the pendency of the reconsideration. On September 13, 2017, the EPA finalized a rule postponing certain interim compliance dates by two years, but did not postpone the final compliance deadline of December 31, 2023. In April 2018, the EPA published an effluent guidelines program plan that anticipated a December 2019 rule revising the effluent limitations and pre-treatment standards for existing sources in the 2015 rule. On April 12, 2019, the U.S. Court of Appeals for the Fifth Circuit vacated and remanded portions of the ELG rule that selected impoundment as the best available technology for legacy wastewater and leachate. It is not clear what revisions to the ELG rule the EPA will implement, or what effect those revisions may have. As Indiana Electric does not currently have short-term ELG implementation deadlines in its recently renewed wastewater discharge permits, it does not anticipate immediate impactsyet determined. Approved rates could differ materially from the EPA’s two-year extension of preliminary implementation deadlines due to the longer compliance time frames granted by IDEM and will continue to work with IDEM to evaluate further implementation plans. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR and ELG rules. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.rates.
CPP and ACE Rule (CenterPoint Energy)
On August 3, 2015, the EPA released its CPP Rule, which required a 32% reduction in carbon emissions from 2005 levels. The final rule was published in the Federal Register on October 23, 2015, and that action was immediately followed by litigation ultimately resulting in the U.S. Supreme Court staying implementation of the rule. On August 31, 2018, the EPA published its proposed CPP replacement rule, the ACE Rule, which was finalized on July 8, 2019 and requires states to implement a program of energy efficiency improvement targets for individual coal-fired electric generating units. States have three years to develop state plans to implementOn January 19, 2021, the ACE rule, and CenterPoint Energy does not expect a state ACE rule to be finalized and approvedRule was struck down by the EPA until 2024.U.S. District Court of Appeals for the D.C. Circuit. CenterPoint Energy is currently unable to predict whether the effectBiden Administration will continue its defense of the CPP or ACE Rule, or what a state plannew replacement rule would look like. The Biden administration recommitted the United States to implementthe Paris Agreement, which can be expected to drive a renewed regulatory push to require further GHG emission reductions from the energy sector. Shortly after taking office in January 2021, President Biden issued a series of executive orders designed to address climate change. President Biden has also signed an executive order requiring agencies to review environmental actions taken by the Trump administration, which would have included the ACE rule but does not anticipate that suchRule, and the Biden administration has issued a plan would havememorandum to departments and agencies to refrain from proposing or issuing rules until a material effect.
Impactdepartmental or agency head appointed or designated by the Biden administration has reviewed and approved the rule. Reentry into the Paris Agreement and President Biden’s executive orders may result in the development of Legislative Actions & Other Initiatives (CenterPoint Energy)
At this time, compliance costsadditional regulations or changes to existing regulations, and other effects associated with reductions inon April 22, 2021, President Biden announced a new goal of 50% reduction of economy-wide GHG emissions or obtaining renewable energy sources remain uncertain. While the requirements ofby 2035. On March 1, 2020, CenterPoint Energy announced corporate carbon emission goals, which are expected to be used to guide Indiana Electric’s transition to a state ACE rule remain uncertain,low carbon fleet and position Indiana Electric will continue to monitorcomply with anticipated future regulatory activity regardingrequirements from the Biden administration to further reduce GHG emission standards that may affectemissions from its electric generating units.fleet.
MRT Rate Case (CenterPoint Energy)
In June 2018, MRT filed a general Natural Gas Act rate case, and in October 2019, MRT filed a second rate case. MRT began collecting the rates proposed in the 2018 rate case, subject to refund, on January 1, 2019. On November 5, 2019, as supplemented on December 13, 2019, MRT filed uncontested proposed settlements for the 2018 and 2019 rate cases. The FERC approved both settlements on March 26, 2020, and that order became final on April 25, 2020.
Other Matters
Credit Facilities
The Registrants may draw on their respective revolving credit facilities from time to time to provide funds used for general corporate and limited liability company purposes, including to backstop CenterPoint Energy’s and CERC’s commercial paper programs. The facilities may also be utilized to obtain letters of credit. For further details related to the Registrants’ revolving credit facilities, please see Note 12 to the Interim Condensed Financial Statements.
Based on the consolidated debt to capitalization covenant in the Registrants’ revolving credit facilities, the Registrants would have been permitted to utilize the full capacity of such revolving credit facilities, which aggregated approximately $5.1$4 billion as of March 31, 2020.2021. As of May 1, 2020,April 29, 2021, the Registrants had the following revolving credit facilities and utilization of such facilities: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amount Utilized as of April 29, 2021 | | | | | | Registrant | | Size of Facility | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | Termination Date | | | (in millions) | | | | | | CenterPoint Energy | | $ | 2,400 | | | $ | — | | | $ | 11 | | | $ | 846 | | | 0.21% | | February 4, 2024 | CenterPoint Energy (1) | | 400 | | | — | | | — | | | 192 | | | 0.18% | | February 4, 2024 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Houston Electric | | 300 | | | — | | | — | | | — | | | —% | | February 4, 2024 | | CERC | | 900 | | | — | | | — | | | 545 | | | 0.19% | | February 4, 2024 | | Total | | $ | 4,000 | | | $ | — | | | $ | 11 | | | $ | 1,583 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Amount Utilized as of May 1, 2020 | | | | | | Registrant | | Size of Facility | | Loans | | Letters of Credit | | Commercial Paper | | Weighted Average Interest Rate | | Termination Date | | | | (in millions) | | | | | | CenterPoint Energy | | $ | 3,300 |
| | $ | — |
| | $ | 8 |
| | $ | 1,675 |
| | 1.68% | | March 3, 2022 | CenterPoint Energy (1) | | 400 |
| | — |
| | — |
| | 147 |
| | 0.68% | | July 14, 2022 | CenterPoint Energy (2) | | 200 |
| | — |
| | — |
| | — |
| | —% | | July 14, 2022 | | Houston Electric | | 300 |
| | — |
| | — |
| | — |
| | —% | | March 3, 2022 | | CERC | | 900 |
| | — |
| | 1 |
| | 125 |
| | 0.63% | | March 3, 2022 | | Total | | $ | 5,100 |
| | $ | — |
| | $ | 9 |
| | $ | 1,947 |
| | | | |
(1)The credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.
| | (1) | The credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO. |
| | (2) | The credit facility was issued by VCC and is guaranteed by Vectren. |
Borrowings under each of the revolving credit facilities are subject to customary terms and conditions. However, there is no requirement that the borrower makes representations prior to borrowing as to the absence of material adverse changes or litigation that could be expected to have a material adverse effect. Borrowings under each of the revolving credit facilities are subject to acceleration upon the occurrence of events of default that we consider customary. The revolving credit facilities also provide for customary fees, including commitment fees, administrative agent fees, fees in respect of letters of credit and other fees. In each of the revolving credit facilities, the spread to LIBOR and the commitment fees fluctuate based on the borrower’s credit rating. Each of the Registrant’s credit facilities provide for a mechanism to replace LIBOR with possible alternative benchmarks upon certain benchmark replacement events. The borrowers are currently in compliance with the various business and financial covenants in the fivefour revolving credit facilities.
Long-term Debt
For detailed information about the Registrants’ debt transactions in 2020,2021, see NotesNote 12 and 20 to the Interim Condensed Financial Statements.
Securities Registered with the SEC
On January 31, 2017,May 29, 2020, the Registrants filed a joint shelf registration statement with the SEC as amended on September 24, 2018, registering indeterminate principal amounts of Houston Electric’s general mortgage bonds, CERC Corp.’s senior debt securities and CenterPoint Energy’s senior debt securities and junior subordinated debt securities and an indeterminate number of shares of Common Stock, shares of preferred stock, depositary shares, as well as stock purchase contracts and equity units. The joint shelf registration statement expiredwill expire on January 31, 2020.May 29, 2023. For information related to the Registrants’ debt issuances in 2021, see Note 12 to the Interim Condensed Financial Statements.
Temporary Investments
As of May 1, 2020,April 29, 2021, the Registrants had no temporary investments.
Money Pool
The Registrants participate in a money pool through which they and certain of their subsidiaries 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 net funding requirements of the CERC money pool are expected to be met with borrowings under CERC’s revolving credit facility or the sale of CERC’s commercial paper. The money pool may not provide sufficient funds to meet the Registrants’ cash needs.
The table below summarizes CenterPoint Energy money pool activity by Registrant as of May 1, 2020:April 29, 2021: | | | | | | | | | | | | | | | | | | | Weighted Average Interest Rate | | Houston Electric | | CERC | | | | | (in millions) | | Money pool investments (borrowings) | 0.20% | | $ | 569 | | | $ | — | |
| | | | | | | | | | | | | Weighted Average Interest Rate | | Houston Electric | | CERC | | | | | (in millions) | | Money pool investments (borrowings) | 1.70% | | $ | (193 | ) | | $ | — |
|
Impact on Liquidity of a Downgrade in Credit Ratings
The interest on borrowings under the credit facilities is based on each respective borrower’s credit ratings. As of May 1, 2020,April 29, 2021, Moody’s, S&P and Fitch had assigned the following credit ratings to the borrowers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Moody’s | | S&P | | Fitch | | Registrant | | Borrower/Instrument | | Rating | | Outlook (1) | | Rating | | Outlook (2) | | Rating | | Outlook (3) | | CenterPoint Energy | | CenterPoint Energy Senior Unsecured Debt | | Baa2 | | NegativeStable | | BBB | | NegativeStable | | BBB | | NegativeStable | | CenterPoint Energy | | Vectren Corp. Issuer Rating | | n/a | | n/a | | BBB+ | | NegativeStable | | n/a | | n/a | | CenterPoint Energy | | VUHI Senior Unsecured Debt | | A3 | | Stable | | BBB+ | | NegativeStable | | n/a | | n/a | | CenterPoint Energy | | Indiana Gas Senior Unsecured Debt | | n/a | | n/a | | BBB+ | | NegativeStable | | n/a | | n/a | | CenterPoint Energy | | SIGECO Senior Secured Debt | | A1 | | Stable | | A | | NegativeStable | | n/a | | n/a | | Houston Electric | | Houston Electric Senior Secured Debt | | A2 | | Stable | | A | | NegativeStable | | A | | NegativeStable | | CERC | | CERC Corp. Senior Unsecured Debt | | Baa1A3 | | PositiveNegative | | BBB+ | | NegativeStable | | BBB+A- | | Stable |
| | (1) | A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. |
(1)A Moody’s rating outlook is an opinion regarding the likely direction of an issuer’s rating over the medium term. (2)An S&P outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. (3)A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period.
| | (2) | An S&P outlook assesses the potential direction of a long-term credit rating over the intermediate to longer term. |
| | (3) | A Fitch rating outlook indicates the direction a rating is likely to move over a one- to two-year period. |
The Registrants cannot assure that the ratings set forth above will remain in effect for any given period of time or that one or more of these ratings will not be lowered or withdrawn entirely by a rating agency. The Registrants note that these credit ratings are included for informational purposes and are not recommendations to buy, sell or hold the Registrants’ securities and may be revised or withdrawn at any time by the rating agency. Each rating should be evaluated independently of any other rating. Any future reduction or withdrawal of one or more of the Registrants’ credit ratings could have a material adverse impact on the Registrants’ ability to obtain short- and long-term financing, the cost of such financings and the execution of the Registrants’ commercial strategies.
A decline in credit ratings could increase borrowing costs under the Registrants’ revolving credit facilities. If the Registrants’ credit ratings had been downgraded one notch by S&P and Moody’s from the ratings that existed as of March 31, 2020,2021, the impact on the borrowing costs under the fivefour revolving credit facilities would have been immaterial.insignificant. A decline in credit ratings would also increase the interest rate on long-term debt to be issued in the capital markets and could negatively impact the Registrants’ ability to complete capital market transactions and to access the commercial paper market. Additionally, a decline in credit ratings could increase cash collateral requirements and reduce earnings of CenterPoint Energy’s and CERC’s Natural Gas Distribution reportable segments.
The Energy Services Disposal Group provides natural gas sales and services primarily to commercial and industrial customers and electric and natural gas utilities throughout the United States. To economically hedge its exposure to natural gas prices, the Energy Services Disposal Group uses derivatives with provisions standard for the industry, including those pertaining to credit thresholds. Typically, the credit threshold negotiated with each counterparty defines the amount of unsecured credit that such counterparty will extend to the Energy Services Disposal Group. To the extent that the credit exposure that a counterparty has to the Energy Services Disposal Group at a particular time does not exceed that credit threshold, the Energy Services Disposal Group is not obligated to provide collateral. Mark-to-market exposure in excess of the credit threshold is routinely collateralized by the Energy Services Disposal Group. Similarly, mark-to-market exposure offsetting and exceeding the credit threshold may cause the counterparty to provide collateral to the Energy Services Disposal Group. As of March 31, 2020, the amount posted by the Energy Services Disposal Group as collateral aggregated approximately $72 million. Should the credit ratings of CERC Corp. (as the credit support provider for the Energy Services Disposal Group) fall below certain levels, the Energy Services Disposal Group
would be required to provide additional collateral up to the amount of its previously unsecured credit limit. CenterPoint Energy and CERC estimate that as of March 31, 2020, unsecured credit limits extended to the Energy Services Disposal Group by counterparties aggregated $452 million, and none of such amount was utilized.
Pipeline tariffs and contracts typically provide that if the credit ratings of a shipper or the shipper’s guarantor drop below a threshold level, which is generally investment grade ratings from both Moody’s and S&P, cash or other collateral may be demanded from the shipper in an amount equal to the sum of three months’ charges for pipeline services plus the unrecouped cost of any lateral built for such shipper. If the credit ratings of CERC Corp. decline below the applicable threshold levels, CERC might need to provide cash or other collateral of as much as $193$162 million as of March 31, 2020.2021. The amount of collateral will depend on seasonal variations in transportation levels.
ZENS and Securities Related to ZENS (CenterPoint Energy)
If CenterPoint Energy’s creditworthiness were to drop such that ZENS holders thought its liquidity was adversely affected or the market for the ZENS were to become illiquid, some ZENS holders might decide to exchange their ZENS for cash. Funds for the payment of cash upon exchange could be obtained from the sale of the shares of ZENS-Related Securities that CenterPoint Energy owns or from other sources. CenterPoint Energy owns shares of ZENS-Related Securities equal to
approximately 100% of the reference shares used to calculate its obligation to the holders of the ZENS. ZENS exchanges result in a cash outflow because tax deferrals related to the ZENS and shares of ZENS-Related Securities would typically cease when ZENS are exchanged or otherwise retired and shares of ZENS-Related Securities are sold. The ultimate tax liability related to the ZENS and ZENS-Related Securities continues to increase by the amount of the tax benefit realized each year, and there could be a significant cash outflow when the taxes are paid as a result of the retirement or exchange of the ZENS. If all ZENS had been exchanged for cash on March 31, 2020,2021, deferred taxes of approximately $470$490 million would have been payable in 2020.2021. If all the ZENS-Related Securities had been sold on March 31, 2020,2021, capital gains taxes of approximately $119$152 million would have been payable in 20202021 based on 20202021 tax rates in effect. For additional information about ZENS, see Note 11 to the Interim Condensed Financial Statements.
Cross Defaults
Under each of CenterPoint Energy’s (including VUHI’s), Houston Electric’s and CERC’s respective revolving credit facilities, as well as under CenterPoint Energy’s term loan agreement, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $125 million by the borrower or any of their respective significant subsidiaries will cause a default under such borrower’s respective credit facility or term loan agreement. A default by CenterPoint Energy would not trigger a default under its subsidiaries’ debt instruments or revolving credit facilities.
Under each of VUHI’s and VCC’s respective revolving credit facilities and term loan agreements, a payment default on, or a non-payment default that permits acceleration of, any indebtedness for borrowed money and certain other specified types of obligations (including guarantees) exceeding $50 million by the borrower, any of their respective subsidiaries or any of the respective guarantors of a credit facility or term loan agreement will cause a default under such borrower’s respective credit facility or term loan agreement.
Possible Acquisitions, Divestitures and Joint Ventures
From time to time, the Registrants consider the acquisition or the disposition of assets or businesses or possible joint ventures, strategic initiatives or other joint ownership arrangements with respect to assets or businesses. Any determination to take action in this regard will be based on market conditions and opportunities existing at the time, and accordingly, the timing, size or success of any efforts and the associated potential capital commitments are unpredictable. The Registrants may seek to fund all or part of any such efforts with proceeds from debt and/or equity issuances. Debt or equity financing may not, however, be available to the Registrants at that time due to a variety of events, including, among others, maintenance of our credit ratings, industry conditions, general economic conditions, market conditions and market perceptions.
As announced in December 2020, CenterPoint Energy previously disclosed that it may reduceEnergy’s business strategy incorporated the Business Review and Evaluation Committee’s recommendations to increase its ownershipplanned capital expenditures in Enable over time through salesits electric and natural gas businesses to support rate base growth and sell certain of its Natural Gas businesses located in the public equity markets, or otherwise, of the Enable common units it holds, subjectArkansas and Oklahoma as a means to market conditions. CenterPoint Energy has no intention to reduce its ownership of Enable common units and currently plans to hold such Enable common units and to utilize any cash distributions received on such Enable common units toefficiently finance a portion of CenterPoint Energy’ssuch increased capital expenditure program. CenterPoint Energy may consider or alter its plans or proposals in respect of any such plans in the future.
expenditures, among other recommendations. On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.
Additionally, on February 24, 2020,29, 2021, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equityan 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. For further information regarding the announced sale of our Arkansas and Oklahoma Natural Gas businesses, see Note 20 to the Interim Condensed Financial Statements.
Additionally, CenterPoint Energy’s process of evaluating and optimizing the various businesses, assets and ownership interests currently held by it considered, among other things, various plans, proposals and other strategic alternatives with respect to Enable and CenterPoint Energy’s investment in Enable, which may result in the disposition of a portion or all of its ownership interest in Enable. In February 2021, CenterPoint Energy Services Disposal Group. The transactionannounced its support of the Enable Merger, which is expected to close in the second quarterhalf of 2020.
See2021, subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance. CenterPoint Energy may not realize any or all of the anticipated strategic, financial, operational or other benefits from the Enable Merger, if completed, or from any disposition or reduction of its anticipated resulting investment in Energy Transfer. There can be no assurances that any disposal of Energy Transfer common units or Energy Transfer Series G Preferred Units will be completed. Any disposal of such securities may involve significant costs and expenses, including in connection with any public offering, a significant underwriting discount. For information regarding the Enable Merger, see Note 39 to the Interim Condensed Financial Statements for further information.Statements.
Enable Midstream Partners (CenterPoint Energy)
CenterPoint Energy receives quarterly cash distributions from Enable on its common units and Enable Series A Preferred Units. A reduction in the cash distributions CenterPoint Energy receives from Enable could significantly impact CenterPoint Energy’s liquidity. For additional information about cash distributions from Enable, see Notes 9 and 20 to the Interim Condensed Financial Statements.
Hedging of Interest Expense for Future Debt Issuances
From time to time, the Registrants may enter into interest rate agreements to hedge, in part, volatility in the U.S. treasury rates by reducing variability in cash flows related to interest payments. For further information, see Note 7(a) to the Interim Condensed Financial Statements.
Weather Hedge (CenterPoint Energy and CERC)
CenterPoint Energy and CERC have historically entered into partial weather hedges for certain NGDNatural Gas jurisdictions and electric operations’ Texas service territory to mitigate the impact of fluctuations from normal weather. CenterPoint Energy and CERC remain exposed to some weather risk as a result of the partial hedges. For more information about weather hedges, see Note 7(a) to the Interim Condensed Financial Statements.
Collection of Receivables from REPs (CenterPoint Energy and Houston Electric)
Houston Electric’s receivables from the distribution of electricity are collected from REPs that supply the electricity Houston Electric distributes to their customers. Before conducting business, a REP must register with the PUCT and must meet certain financial qualifications. Nevertheless, adverse economic conditions, the February 2021 Winter Storm Event, structural problems in the market served by ERCOT or financial difficulties of one or more REPs could impair the ability of these REPs to pay for Houston Electric’s services or could cause them to delay such payments. Houston Electric depends on these REPs to remit payments on a timely basis, and any delay or default in payment by REPs could adversely affect Houston Electric’s cash flows. In the event of a REP’sREP default, Houston Electric’s tariff provides a number of remedies, including the option for Houston Electric to request that the PUCT suspend or revoke the certification of the REP. Applicable regulatory provisions require that customers be shifted to another REP or a provider of last resort if a REP cannot make timely payments. However, Houston Electric remains at risk for payments related to services provided prior to the shift to the replacement REP or the provider of last resort. If a REP were unable to meet its obligations, it could consider, among various options, restructuring under the bankruptcy laws, in which event such REP might seek to avoid honoring its obligations and claims might be made against Houston Electric involving payments it had received from such REP. If a REP were to file for bankruptcy, Houston Electric may not be successful in recovering accrued receivables owed by such REP that are unpaid as of the date the REP filed for bankruptcy. However, PUCT regulations authorize utilities, such as Houston Electric, to defer bad debts resulting from defaults by REPs for recovery in future rate cases, subject to a review of reasonableness and necessity.
Other Factors that Could Affect Cash Requirements
In addition to the above factors, the Registrants’ liquidity and capital resources could also be negatively affected by:
•further reductions in the cash distributions we receive from Enable;
•cash collateral requirements that could exist in connection with certain contracts, including weather hedging arrangements, and natural gas purchases, natural gas price and natural gas storage activities of CenterPoint Energy’s and CERC’s Natural Gas Distribution reportable segment;
•acceleration of payment dates on certain gas supply contracts, under certain circumstances, as a result of increased natural gas prices, including as a result of the February 2021 Winter Storm Event, and concentration of natural gas suppliers (CenterPoint Energy and CERC);
•increased costs related to the acquisition of natural gas, including as a result of the February 2021 Winter Storm Event (CenterPoint Energy and CERC);
•increases in interest expense in connection with debt refinancings and borrowings under credit facilities or term loans;
various legislativeloans or regulatory actions;
incremental collateral, if any, that may be requiredthe use of alternative sources of financings due to regulationthe effects of derivatives (CenterPoint EnergyCOVID-19 and CERC); the February 2021 Winter Storm Event on capital and other financial markets;
•the ability of REPs, including REP affiliates of NRG and Vistra Energy Corp., formerly known as TCEH Corp., to satisfy their obligations to CenterPoint Energy and Houston Electric, including the negative impact on such ability related to COVID-19;COVID-19 and the February 2021 Winter Storm Event;
•incremental collateral, if any, that may be required due to regulation of derivatives (CenterPoint Energy); •slower customer payments and increased write-offs of receivables due to higher natural gas prices, changing economic conditions, COVID-19 or COVID-19the February 2021 Winter Storm Event (CenterPoint Energy and CERC);
•the satisfaction of any obligations pursuant to guarantees;
the outcome of litigation;
•contributions to pension and postretirement benefit plans;
•restoration costs and revenue losses resulting from future natural disasters such as hurricanes and the timing of recovery of such restoration costs; and
Certain Contractual Limits on Our Ability to Issue Securities and Borrow Money
Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions. Additionally, certain provisions in note purchase agreements relating to debt issued by VUHI have the effect of restricting the amount of additional first mortgage bonds issued by SIGECO.
For information about the total debt to capitalization financial covenants in the Registrants’ and certain of CenterPoint Energy’s subsidiaries’ revolving credit facilities, see Note 12 to the Interim Condensed Financial Statements.
CRITICAL ACCOUNTING POLICIES
Impairment of Long-Lived Assets, Including Identifiable Intangibles, Goodwill, Equity Method Investments, and Investments without a Readily Determinable Fair Value
The Registrants review the carrying value of long-lived assets, including identifiable intangibles, goodwill, equity method investments, and investments without a readily determinable fair value whenever events or changes in circumstances indicate that such carrying values may not be recoverable, and at least annually, goodwill is tested for impairment as required by accounting guidance for goodwill and other intangible assets. Unforeseen events, changes in market conditions, and probable regulatory disallowances, where applicable, could have a material effect on the value of long-lived assets, including intangibles, goodwill, equity method investments, and investments without a readily determinable fair value due to changes in observable or estimated market value, future cash flows, interest rate, and regulatory matters could result in an impairment charge.
In connection with its preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units due to the macroeconomic conditions resulting from the COVID-19 pandemic and the related decline in CenterPoint Energy’s common stock price. CenterPoint Energy recognized goodwill impairment losses, discussed below, during the three months March 31, 2020, and CERC recorded no impairments to goodwill within continuing operations during the three months ended March 31, 2020. The long-lived assets within the reporting units were determined to be recoverable as of March 31, 2020.
Fair value is the amount at which an asset, liability or business could be bought or sold in a current transaction between willing parties and may be estimated using a number of techniques, including quoted market prices or valuations by third parties, present value techniques based on estimates of cash flows, or multiples of earnings or revenue performance measures. The fair value could be different using different estimates and assumptions in these valuation techniques.
Fair value measurements require significant judgment and unobservable inputs, including (i) projected timing and amount of future cash flows, which factor in planned growth initiatives, (ii) the regulatory environment, as applicable, and (iii) discount rates reflecting risk inherent in the current and future market prices. Determining the discount rates requires the estimation of the appropriate company specific risk premiums for those businesses based on evaluation of industry and entity-specific risks, which
includes expectations about future market or economic conditions and reflects the risk demonstrated by market participants through the value of CenterPoint Energy’s common stock price as of the impairment test date. Changes in these assumptions could have a significant impact on results of the impairment tests. CenterPoint Energy and CERC utilized a third-party valuation specialist to determine the key assumptions used in the estimate of fair value for each of their respective reporting units on the date of their annual goodwill impairment test and for CenterPoint Energy the fair value of each of its reporting units are reconciled to its market capitalization based on the price of CenterPoint Energy’s common stock.
Interim goodwill impairment test, excluding assets held for sale
CenterPoint Energy and CERC performed an interim goodwill impairment test as of March 31, 2020. The fair value of each reporting unit was derived using an income approach or a weighted combination of income and market approaches. Based on the results of the test, CenterPoint Energy recorded a goodwill impairment loss of $185 million at its Indiana Electric Integrated reporting unit. CERC recorded no goodwill impairment charge in its continuing operations for the three months ended March 31, 2020.
The fair values of each reporting unit exceeded the carrying value of the reporting unit, with the exception of CenterPoint Energy’s Indiana Electric Integrated reporting unit. As of March 31, 2020, subsequent to the impairment loss recorded by CenterPoint Energy in the three months ended March 31, 2020, Indiana Electric Integrated reporting unit’s fair value approximated its carrying value, and the reporting unit had total goodwill of $936 million. The reporting unit is comprised entirely of businesses acquired in the Merger on February 1, 2019, when the carrying value of the acquired assets and liabilities were adjusted to fair value and as a result presented the greatest risk for impairment. The primary driver for the decline in fair value as of the March 31, 2020 interim goodwill impairment test date is an increase in discounts rates, or the weighted average cost of capital of market participants, on the rate regulated reporting units due in part to the decline in current macroeconomic conditions from July 1, 2019, the previous annual testing date, to March 31, 2020.
An interim goodwill impairment test could be triggered and goodwill impairments recorded in future periods by CenterPoint Energy or CERC’s reporting units due to any of the following: CenterPoint Energy’s market capitalization falling below book value, adverse macroeconomic environment, turnover in key personnel, events affecting a reporting unit such as a contemplated disposal of all or part of a reporting unit, actual earnings results that are materially lower than expected, significant adverse changes in the operating or regulatory environment, or changes in discount rates or other key assumptions that require judgment and are forward looking in nature.
For further information, see Note 10 to the Interim Condensed Financial Statements.
Assets held for sale and discontinued operations, Infrastructure Services Disposal Group
Generally, a long-lived asset to be sold is classified as held for sale in the period in which management, with approval from the Board of Directors, as applicable, commits to a plan to sell, and a sale is expected to be completed within one year. The Registrants record assets and liabilities held for sale, or the disposal group, at the lower of their carrying value or their estimated fair value less cost to sell. If a disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. Goodwill is not allocated to a portion of a reporting unit that does not meet the definition of a business. A disposal group that meets the held for sale criteria and also represents a strategic shift to the Registrant is also reflected as discontinued operations on the Statements of Consolidated Income, and prior periods are recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.
On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the Infrastructure Services Disposal Group. The transaction closed on April 9, 2020.
In February 2020, certain assets and liabilities representing the Infrastructure Services Disposal Group met the held for sale criteria and represented all of the businesses within the reporting unit. In accordance with the Securities Purchase Agreement, VISCO was converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale was considered an asset sale for tax purposes, requiring the net deferred tax liabilities of approximately $125 million as of March 31, 2020 to be excluded from the disposal group and were recognized as a deferred income tax benefit by CenterPoint Energy upon closing.
Upon classifying the Infrastructure Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment of approximately $82 million, plus an additional loss of $14 million for transaction costs.
Because the Infrastructure Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy, it is reflected as discontinued operations on CenterPoint Energy’s Statements of Consolidated Income, and as a result, prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.
Assets held for sale and discontinued operations, Energy Services Disposal Group
On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell the Energy Services Disposal Group. This transaction does not include CEIP and its assets. The transaction is expected to close in the second quarter of 2020.
In February 2020, certain assets and liabilities representing the Energy Services Disposal Group met the criteria to be classified as held for sale and represented substantially all of the businesses within the reporting unit. In accordance with the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes, requiring the net deferred tax assets of approximately $3 million as of March 31, 2020 to be included within the retained component of the reporting unit and will be recognized as a deferred tax expense by CenterPoint Energy upon closing.
Upon classifying the Energy Services Disposal Group as held for sale and in connection with the preparation of the Registrants’ financial statements for the three months ended March 31, 2020, CenterPoint Energy recorded a goodwill impairment loss of approximately $62 million and a loss on assets held for sale of approximately $70 million, plus an additional loss of $6 million for transaction costs. CenterPoint Energy and CERC disclosed it its 2019 Form 10-K that an anticipated loss on held for sale of $80 million was expected in the three months ended March 31, 2020. The primary driver for the increase in the actual impairment recorded by CenterPoint Energy and CERC in the three months ended March 31, 2020 compared to the amounts previously anticipated is a result of an increase in portions of the derivative assets, net of derivative liabilities, excluded from the working capital adjustment within the Equity Purchase Agreement during the three months ended March 31, 2020. Additional impairments or loss on held for sale may be recorded in future periods due to increases to the carrying value of derivative assets or decreases to derivative liabilities in those periods.
Because the Energy Services Disposal Group met the held for sale criteria and also represents a strategic shift to CenterPoint Energy and CERC, it is reflected as discontinued operations on CenterPoint Energy’s and CERC’s Statements of Consolidated Income, and prior periods have been recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.
For further information, see Note 3 to the Interim Condensed Financial Statements.
Equity Method Investments
Equity method investments are evaluated for impairment when factors indicate that a decrease in value of an investment has occurred and the carrying amount of the investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the best estimate of fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of its financial statements for the three months ended March 31, 2020, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest, and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units.
Key assumptions in the market approach include recent market transactions of comparable companies and EBITDA to total enterprise multiples for comparable companies. Due to volatility of the quoted price of Enable’s units, a volume weighted average price was used under the market approach to best approximate fair value at the measurement date. Key assumptions in the income
approach include Enable’s forecasted cash distributions, projected cash flows of incentive distribution rights, forecasted growth rate of Enable’s cash distributions beyond 2020, and the discount rate used to determine the present value of the estimated future cash flows. A weighing of the different approaches was utilized to determine the estimated fair value of our investment in Enable. CenterPoint Energy based its assumptions on projected financial information that it believes is reasonable; however, actual results may differ materially from those projections. It is reasonably possible that the fair value of CenterPoint Energy’s investment in Enable will change in the near term due to the following: actual Enable cash distribution is materially lower than expected, significant adverse changes in Enable’s operating environment, decline in Enable’s common unit price, increase in the discount rate, and changes in other key assumptions which require judgment and/or are forward looking in nature. Further declines in the fair value of Enable could result in additional impairments.
For further information, see Note 9 to the Interim Condensed Financial Statements.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 2 to the Interim Condensed Financial Statements, incorporated herein by reference, for a discussion of new accounting pronouncements that affect the Registrants.
OTHER SIGNIFICANT MATTERS
The significant uncertainties related to the COVID-19 pandemic and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries. While it is unknown how long these conditions will last and what the complete financial effect will be, the plan assets and benefit obligations of our pension and postretirement plans are expected to be negatively impacted when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the subsequent years from the historical amounts. Currently, we do not expect the event to impact the disclosed 2020 plan expenses or minimum required contributions.
| | Item 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Houston Electric and CERC meet the conditions specified in General Instruction H(1)(a) and (b) to Form 10-Q and are therefore permitted to use the reduced disclosure format for wholly-owned subsidiaries of reporting companies. Accordingly, Houston Electric and CERC have omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures About Market Risk) of Part I of the Form 10-Q.
Interest Rate Risk (CenterPoint Energy)
As of March 31, 2020,2021, CenterPoint Energy had outstanding long-term debt, lease obligations and obligations under its ZENS that subject it to the risk of loss associated with movements in market interest rates.
CenterPoint Energy’s floating rate obligations aggregated $4.2$3.4 billion and $3.9$2.4 billion as of March 31, 20202021 and December 31, 2019,2020, respectively. If the floating interest rates were to increase by 10% from March 31, 20202021 rates, CenterPoint Energy’s combined interest expense would increase by approximately $9$1.7 million annually.
As of March 31, 20202021 and December 31, 2019,2020, CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating $11.2$12.5 billion and $11.2$11.1 billion, respectively, in principal amount and having a fair value of $12.0$13.5 billion and $12.2$12.9 billion, respectively. Because these instruments are fixed-rate, they do not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of these instruments would increase by approximately $348$376 million if interest rates were to decline by 10% from levels at March 31, 2020.2021. In general, such an increase in fair value would impact earnings and cash flows only if CenterPoint Energy were to reacquire all or a portion of these instruments in the open market prior to their maturity.
The ZENS obligation is bifurcated into a debt component and a derivative component. The debt component of $18$13 million as of March 31, 20202021 was a fixed-rate obligation and, therefore, did not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates. However, the fair value of the debt component would increase by approximately $2$2 million if interest rates were to decline by 10% from levels at March 31, 2020.2021. Changes in the fair value of the derivative component, a $758$927 million recorded liability at March 31, 2020,2021, are recorded in CenterPoint Energy’s Condensed Statements of Consolidated Income and, therefore, it is exposed to changes in the fair value of the derivative component as a result of changes in the underlying risk-free interest rate. If the risk-free interest rate were to increase by 10% from March 31, 20202021 levels, the fair value of the
derivative component liability would decrease by less than $1approximately $1 million,, which would be recorded as an unrealized gain in CenterPoint Energy’s Condensed Statements of Consolidated Income.
Equity Market Value Risk (CenterPoint Energy)
CenterPoint Energy is exposed to equity market value risk through its ownership of 10.2 million shares of AT&T Common and 0.9 million shares of Charter Common, which CenterPoint Energy holds to facilitate its ability to meet its obligations under the ZENS. See Note 11 to the condensed consolidated financial statementsInterim Condensed Financial Statements for a discussion of CenterPoint Energy’s ZENS obligation. Changes in the fair value of the ZENS-Related Securities held by CenterPoint Energy are expected to substantially offset changes in the fair value of the derivative component of the ZENS. A decrease of 10% from the March 31, 20202021 aggregate market value of these shares would result in a net loss of less than $1$1 million,, which would be recorded as an unrealizeda loss in CenterPoint Energy’s Condensed Statements of Consolidated Income.
Commodity Price Risk From Non-Trading Activities (CenterPoint Energy)
CenterPoint Energy’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms. CenterPoint Energy’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years. This authority has been utilized to secure fixed price natural gas using both physical purchases and financial derivatives. As of March 31, 2020,2021, the recorded fair value of non-trading energy derivative liabilities was $23$7 million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.
Although CenterPoint Energy’s regulated operations are exposed to limited commodity price risk, natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered. Constructive regulatory orders, such as those authorizing lost margin recovery, other innovative rate designs and recovery of unaccounted for natural gas and other natural gas-related expenses, also mitigate the effect natural gas costs may have on CenterPoint Energy’s financial condition. In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy.
CenterPoint Energy uses derivative instruments as economic hedges to offset the commodity price exposure inherent in the Energy Services Disposal Group. The commodity risk created by these instruments, including the offsetting impact on the market value of natural gas inventory, is described below. CenterPoint Energy measures this commodity risk using a sensitivity analysis. For purposes of this analysis, CenterPoint Energy estimates commodity price risk by applying a $0.50 change in the forward NYMEX price to its net open fixed price position (including forward fixed price physical contracts, natural gas inventory and fixed price financial contracts) at the end of each period. As of March 31, 2020, the recorded fair value of CenterPoint Energy’s non-trading energy derivatives was a net asset of $127 million (before collateral), all of which is related to the Energy Services Disposal Group and included in assets and liabilities held for sale. A $0.50 change in the forward NYMEX price would have had a combined impact of $19 million on CenterPoint Energy’s non-trading energy derivatives net asset, included in assets and liabilities held for sale, and the market value of natural gas inventory. For further information, See Note 3 to the Interim Condensed Financial Statements.
Commodity price risk is not limited to changes in forward NYMEX prices. Variation of commodity pricing between the different indices used to mark to market portions of Energy Services Disposal Group’s natural gas inventory, included in assets held for sale, (Gas Daily) and the related fair value hedge (NYMEX) can result in volatility to CenterPoint Energy’s net income. Over time, any gains or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.
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 is expected to close in the second quarter of 2020. For further information, see Note 3 to the Interim Condensed Financial Statements.
| | Item 4. | CONTROLS AND PROCEDURES |
In accordance with Exchange Act Rules 13a-15 and 15d-15, the Registrants carried out separate evaluations, under the supervision and with the participation of each company’s management, including the principal executive officer and principal financial officer, of the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report. Based on those evaluations, the principal executive officer and principal financial officer, in each case, concluded that the disclosure controls and procedures were effective as of March 31, 20202021 to provide assurance that information required to be disclosed in the
reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.
There has been no change in the Registrants’ internal controls over financial reporting that occurred during the three months ended March 31, 20202021 that has materially affected, or is reasonably likely to materially affect, the Registrants’ internal controls over financial reporting.
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
For a description of certain legal and regulatory proceedings, please read Note 14(d) to the Interim Condensed Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Future Sources and Uses of Cash” and “— Regulatory Matters,” each of which is incorporated herein by reference. See also “Business — Regulation” and “— Environmental Matters” in Item 1 and “Legal Proceedings” in Item 3 of the Registrants’ combined 20192020 Form 10-K.
Please see below the new risk factors affecting the Registrants’ businesses and CenterPoint Energy’s investment in Enable, in addition to those discussed in “Risk Factors” in Item 1A of Part I of the combined 2019 Form 10-K, which could materially affect the Registrants’ financial condition or future results. Except for the updates below, there1A.RISK FACTORS
There have been no material changes from the risk factors disclosed in the Registrants’ combined 20192020 Form 10-K.
We face risks related to COVID-19 and other health epidemics and outbreaks, including economic, regulatory, legal, workforce and cyber security risks, which could adversely impact our financial condition, resultsThe recent outbreak of COVID-19 is a rapidly evolving situation that is adversely affecting current global economic activities and conditions. An extended slowdown of economic growth, decreased demand for commodities and/or material changes in governmental or regulatory policy in the United States could result in lower growth and reduced demand for and usage of electricity and natural gas in our service territories as customer facilities continue to close or remain closed. The ability of our customers, contractors and suppliers to meet their obligations to us, including payment obligations, could also be negatively affected under the current economic conditions. Furthermore, to the extent we experience disruptions in our supply chain that limit our ability to obtain materials and equipment necessary for our businesses, whether through delayed order fulfillment, limited production or unavailability due to COVID-19, we may be unable to perform our operations timely or as anticipated, which could result in service or construction delays or increased costs.
In our NGD service territories and for Indiana Electric, we have informed customers that disconnections for non-payment and late fees are temporarily suspended, which could increase our bad debt expense. For Houston Electric, we are following PUCT orders regarding disconnection practices related to those customers impacted by COVID-19. These PUCT orders provide for suspended disconnections for certain residential customers as well as for their REPs and utilities to be compensated through a temporary rider charged by utilities, including Houston Electric, applicable to all customers. Additionally, the PUCT orders allow for certain utility costs related to COVID-19 to be placed in a regulatory asset for utilities to seek recovery in the future. As adverse economic conditions continue, REPs could encounter financial difficulties, including bankruptcies, which could impair their ability to pay for Houston Electric’s services or could cause them to delay such payments. Additionally, our state and local regulatory agencies, in response to a federal mandate or otherwise, could impose restrictions on the rates we charge to provide our services, including the inability to implement approved rates, or delay actions with respect to our rate cases and filings. The COVID-19 outbreak may affect our ability to timely satisfy regulatory requirements such as recordkeeping and/or timely reporting requirements. As the EPA and many state environmental agencies have issued enforcement discretion policies for such issues, it is unclear whether the effect of any possible noncompliance due to COVID-19 will be material.
Furthermore, in the event a substantial portion of our workforce were to be impacted by COVID-19 for an extended period of time, we may face challenges with respect to our services or operations and we may not be able to execute our capital plan as anticipated. There is considerable uncertainty regarding the extent to which COVID-19 will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of COVID-19, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, shortages of employees, facility shutdowns or business closures. We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in certain meetings,
events and conferences) to conform to government restrictions and best practices encouraged by governmental and regulatory authorities. However, the quarantine of personnel or the inability to access our facilities or customer sites could adversely affect our operations. Also, we have a limited number of highly skilled employees for some of our operations. If a large proportion of our employees in those critical positions were to contract COVID-19 at the same time, we would rely upon our business continuity plans in an effort to continue operations at our facilities, but there is no certainty that such measures will be sufficient to mitigate the adverse impact to our operations that could result from shortages of highly skilled employees.
In addition, the significant uncertainties related to the COVID-19 pandemic and actions taken to slow its spread have had, and are expected to continue to have, an adverse impact on the economies and financial markets of many countries. The plan assets and benefit obligations of our pension and postretirement plans are expected to be impacted negatively when these plans are re-measured, generally, at year-end, resulting in a decline in the funded status. During the three months ended March 31, 2020, the pension plan assets declined by approximately $171 million or 10% from December 31, 2019. A decline in the funded status of our pension plans as of December 31, 2020 could result in an increase in plan expenses and minimum required contributions for the subsequent years from the historical amounts.
AItem 6.s many of our employees and third-party service providers work remotely in accordance with government mandates, we face heightened cyber security and privacy risks related to unauthorized system access, aggressive social engineering tactics and adversaries attacking the information technology systems, network infrastructure, technology and facilities used to conduct our businesses. We will continue to monitor developments affecting our employees, customers and operations. At this time, however, we cannot predict the extent or duration of the COVID-19 pandemic or its effects on national, state and local economies, including the impact on our ability to access capital markets, our supply chain and our workforce, nor can we estimate the potential adverse impact from COVID-19 on our financial condition, results of operations, cash flows and liquidity.EXHIBITS
The demand for Enable’s services are impacted by the drilling and production decisions of others and by commodity price volatility, which could adversely affect its financial position, results of operations and its ability to make cash distributions to us. A sustained decline in energy and commodity prices may also contribute to unfavorable economic conditions in certain of our service territories, in particular Houston, Texas.
The COVID-19 pandemic has adversely affected Enable’s businesses by (i) reducing the demand for natural gas, NGLs and crude oil due to reduced global and national economic activity, leading to significantly lower prices for natural gas, NGLs and crude oil; (ii) impairing the supply chain of certain of its customers for which it provides gathering and processing services, both of which could lead to further reduction of the utilization of its systems; and (iii) reducing producer activity across its footprint which is expected to result in reduced utilization of its services. In addition, concerns about global economic growth, as well as uncertainty regarding the timing, pace and extent of an economic recovery in the United States and abroad, have had a significant adverse impact on global financial markets and commodity prices. The price of, and demand for, natural gas, NGLs and crude oil declined significantly in response to the ongoing spread and economic effects of COVID-19, including significant governmental measures being implemented to control the spread of COVID-19, including quarantines, travel restrictions and business shutdowns and efforts made by oil-producing countries to reduce production of crude oil in response to declining global demand. For example, a coalition of 23 nations led by Saudi Arabia and Russia agreed to reduce production of crude oil by 9.7 million barrels per day in May and June; however, NGL and crude oil prices have remained depressed. These events, combined with the continuing COVID-19 pandemic and uncertainty regarding the length of time it will take for the United States and the rest of the world to slow the spread of COVID-19 to the point where applicable authorities are comfortable easing current restrictions on various commercial and economic activities, contributed to a sharp drop in prices for crude oil in the first quarter of 2020 and negative crude oil prices in the second quarter of 2020. On March 31, 2020, Enable’s common unit price closed at $2.57 per common unit. In response to these industry conditions, on April 1, 2020, Enable announced a reduction in its quarterly distributions per common unit from $0.3305 distributed for the fourth quarter 2019 to $0.16525, representing a 50% reduction. This reduction is expected to result in one or more quarterly distributions to us that fall below our previously disclosed expected minimum quarterly distribution from Enable of $0.2875 per common unit. This reduction in Enable’s quarterly distributions per common unit is expected to reduce its common unit distributions to us by approximately $155 million per year. Enable currently cannot predict the duration or magnitude of the effects of COVID-19 on the supply and demand for, and the price of, natural gas, NGLs and crude oil or the exploration, development and production activity of the producers across its areas of operation. Sustained low commodity prices and reductions in exploration or production activities could continue to adversely affect the value of our interests in Enable and Enable’s financial position, results of operations and ability to make cash distributions to us.
Additionally, the significant decline in energy and commodity prices described above, if sustained, could cause, the rate of economic, employment and/or population growth in certain of our service territories to decline. In particular, Houston, Texas has a higher percentage of employment tied to the energy sector relative to other regions of the country. A reduction in the rate of economic, employment and/or population growth could result in lower growth and reduced demand for and usage of electricity and natural gas in such service territories. As such, sustained low energy and commodity prices could have an adverse impact on our financial condition, results of operations, cash flows and liquidity.
Exhibits filed herewith are designated by a cross (+(†); all exhibits not so designated are incorporated by reference to a prior filing as indicated. Agreements included as exhibits are included only to provide information to investors regarding their terms. Agreements listed below may contain representations, warranties and other provisions that were made, among other things, to provide the parties thereto with specified rights and obligations and to allocate risk among them, and no such agreement should be relied upon as constituting or providing any factual disclosures about the Registrants, any other persons, any state of affairs or other matters. Pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K, the Registrants have not filed as exhibits to this Form 10-Q certain long-term debt instruments, including indentures, under which the total amount of securities authorized does not exceed 10% of the total assets of the Registrants and its subsidiaries on a consolidated basis. The Registrants hereby agree to furnish a copy of any such instrument to the SEC upon request. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exhibit
Number | | Description | | Report or Registration
Statement | | SEC File or
Registration
Number | | Exhibit
Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 2.1* | | | | CenterPoint Energy’s Form 8-K dated April 21, 2018 | | 1-31447 | | 2.1 | | x | | | | | | 2.2* | | | | CenterPoint Energy’s Form 8-K dated February 3, 2020 | | 1-31447 | | | | x | | | | | | 2.3* | | | | CenterPoint Energy’s Form 8-K dated February 24, 2020 | | 1-31447 | | | | x | | | | x | | †2.4* | | | | | | | | | | x | | | | x | | 3.1 | | | | CenterPoint Energy’s Form 8-K dated July 24, 2008 | | 1-31447 | | 3.2 | | x | | | | | | 3.2 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.1 | | | | x | | | | 3.3 | |
| | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(1) | | | | | | x | | 3.4 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(2) | | | | | | x | | 3.5 | | | | CERC Form 10-K for the year ended December 31, 1998 | | 1-13265 | | 3(a)(3) | | | | | | x | | 3.6 | | | | CERC Form 10-Q for the quarter ended June 30, 2003 | | 1-13265 | | 3(a)(4) | | | | | | x | | 3.7 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | | x | | | | | | 3.8 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.2 | | | | x | | | | 3.9 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(b) | | | | | | x |
| | | | | | | | | | | | | | | | Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 2.1* | | | | CenterPoint Energy’s Form 8-K dated April 21, 2018 | | 1-31447 | | 2.1 | | x | | | | | | 2.2* | | | | CenterPoint Energy’s Form 8-K dated February 3, 2020 | | 1-31447 | | | | x | | | | | | 2.3* | | | | CenterPoint Energy’s Form 8-K dated February 24, 2020 | | 1-31447 | | | | x | | | | x | | 3.1 | | | | CenterPoint Energy’s Form 8-K dated July 24, 2008 | | 1-31447 | | 3.2 | | x | | | | | | 3.2 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.1 | | | | x | | | | 3.3 | |
| | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(1) | | | | | | x | | 3.4 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(a)(2) | | | | | | x | | 3.5 | | | | CERC Form 10-K for the year ended December 31, 1998 | | 1-13265 | | 3(a)(3) | | | | | | x | | 3.6 | | | | CERC Form 10-Q for the quarter ended June 30, 2003 | | 1-13265 | | 3(a)(4) | | | | | | x | | 3.7 | | | | CenterPoint Energy’s Form 8-K dated February 21, 2017 | | 1-31447 | | 3.1 | | x | | | | | | 3.8 | | | | Houston Electric’s Form 10-Q for the quarter ended June 30, 2011 | | 1-3187 | | 3.2 | | | | x | | | | 3.9 | | | | CERC Form 10-K for the year ended December 31, 1997 | | 1-13265 | | 3(b) | | | | | | x | | 3.10 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | | x | | | | |
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Number | | Description | | Report or Registration
Statement | | SEC File or
Registration
Number | | Exhibit
Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 3.10 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2011 | | 1-31447 | | 3(c) | | x | | | | | | 3.11 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 3.1 | | x | | | | | | 3.12 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 3.1 | | x | | | | | | 3.13 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 3.1 | | x | | | | | | 4.1 | | | | CenterPoint Energy’s Registration Statement on Form S-4 | | 3-69502 | | 4.1 | | x | | | | | | 4.2 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 4.1 | | x | | | | | | 4.3 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.1 | | x | | | | | | 4.4 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.2 | | x | | | | | | 4.5 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.3 | | x | | | | | | 4.6 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.1 | | x | | | | | | 4.7 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.2 | | x | | x | | | | 4.8 | | | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.3 | | x | | | | x |
| | | | | | | | | | | | | | | | Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 3.11 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 3.1 | | x | | | | | | 3.12 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 3.1 | | x | | | | | | 4.1 | | | | CenterPoint Energy’s Registration Statement on Form S-4 | | 3-69502 | | 4.1 | | x | | | | | | 4.2 | | | | CenterPoint Energy’s Form 8-K dated August 22, 2018 | | 1-31447 | | 4.1 | | x | | | | | | 4.3 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.1 | | x | | | | | | 4.4 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.2 | | x | | | | | | 4.5 | | | | CenterPoint Energy’s Form 8-K dated September 25, 2018 | | 1-31447 | | 4.3 | | x | | | | | | 4.6 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.1 | | x | | | | | | 4.7 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.2 | | x | | x | | | | 4.8 | | | | CenterPoint Energy’s Form 8-K dated March 3, 2016 | | 1-31447 | | 4.3 | | x | | | | x | | 4.9 | | | | CenterPoint Energy’s Form 8-K dated June 16, 2017 | | 1-31447 | | 4.1 | | x | | | | | | 4.10 | | | | CenterPoint Energy’s Form 8-K dated May 25, 2018 | | 1-31447 | | 4.1 | | x | | | | | | 4.11 | | | | CenterPoint Energy’s Form 8-K dated June 16, 2017 | | 1-31447 | | 4.2 | | x | | x | | | | 4.12 | | | | CenterPoint Energy’s Form 8-K dated June 16, 2017 | | 1-31447 | | 4.3 | | x | | | | x | | 4.13 | | | | Vectren’s Form 8-K dated July 17, 2017 | | 1-15467 | | 10.1 | | x | | | | | | 4.14 | | | | Vectren’s Form 8-K dated July 17, 2017 | | 1-15467 | | 10.2 | | x | | | | |
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Number | | Description | | Report or Registration
Statement | | SEC File or
Registration
Number | | Exhibit
Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 4.9 | | $400,000,000 Credit Agreement dated as of February 4, 2021 among VUHI, as Borrower, Indiana Gas, SIGECO and VEDO, as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto , Inc., as Borrower, Indiana Gas Company, Inc., Southern Indiana Gas and Electric Company and Vectren Energy Delivery of Ohio, Inc. as guarantors, Bank of America, N.A., as Administrative Agent, the financial institutions as bank parties thereto and the other parties thereto | | CenterPoint Energy’s Form 8-K dated February 4, 2021 | | 1-31447 | | 4.4 | | x | | | | | | 4.10 | | $1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein | | CenterPoint Energy’s Form 8-K dated May 15, 2019 | | 1-31447 | | 4.1 | | x | | | | | | 4.11 | | First Amendment to Term Loan Agreement, dated as of April 26, 2021, by and among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent, and the banks named therein | | CenterPoint Energy’s Form 8-K dated April 26, 2021 | | 1-31447 | | 4.1 | | x | | | | | | 4.12 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.1 | | x | | | | | | 4.13 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.2 | | x | | | | | | 4.14 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.3 | | x | | | | | | 4.15 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.4 | | x | | | | | | 4.16 | | | | CenterPoint Energy’s Form 8-K dated May 6, 2020
| | 1-31447 | | 4.5 | | x | | | | | | 4.17 | | | | CERC’s Form 8-K dated February 5, 1998 | | 1-13265 | | 4.1 | | | | | | x | | †4.18 | | | | | | | | | | | | | | x | | †4.19 | | | | | | | | | | | | | | x |
| | | | | | | | | | | | | | | | Exhibit Number | | Description | | Report or Registration Statement | | SEC File or Registration Number | | Exhibit Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 4.15 | | | | Vectren’s Form 8-K dated July 30, 2018 | | 1-15467 | | 10.1 | | x | | | | | | 4.16 | | | | Vectren’s Form 8-K dated September 18, 2018 | | 1-15467 | | 10.1 | | x | | | | | | 4.17 | | | | CenterPoint Energy’s Form 10-Q for the quarter ended June 30, 2019 | | 1-31447 | | 4.17 | | x | | | | | | 4.18 | | $1,000,000,000 Term Loan Agreement, dated as of May 15, 2019, among CenterPoint Energy, as Borrower, Mizuho Bank, Ltd., as Administrative Agent and Lead Arranger, and the banks named therein | | CenterPoint Energy’s Form 8-K dated May 15, 2019 | | 1-31447 | | 4.1 | | x | | | | | | 10.1 | | | | CenterPoint Energy’s Form 8-K dated December 9, 2019 | | 1-31447 | | 10.1 | | x | | | | | | 10.2 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2019 | | 1-31447 | | 10(n)(2) | | x | | | | | | 10.3 | | | | CenterPoint Energy’s Form 8-K dated March 6, 2020 | | 1-31447 | | 10.1 | | x | | | | | | 10.4 | | | | CenterPoint Energy’s Form 8-K dated March 4, 2020 | | 1-31447 | | 10.1 | | x | | | | | | 10.5 | | | | CenterPoint Energy’s Form 8-K/A dated March 30, 2020 | | 1-31447 | | 10.1 | | x | | | | | | 10.6 | | | | CenterPoint Energy’s Form 8-K/A dated March 30, 2020 | | 1-31447 | | 10.2 | | x | | | | | | +31.1.1 | | | | | | | | | | x | | | | | | +31.1.2 | | | | | | | | | | | | x | | | | +31.1.3 | | | | | | | | | | | | | | x | | +31.2.1 | | | | | | | | | | x | | | | | | +31.2.2 | | | | | | | | | | | | x | | | | +31.2.3 | | | | | | | | | | | | | | x | | +32.1.1 | | | | | | | | | | x | | | | | | +32.1.2 | | | | | | | | | | | | x | | | | +32.1.3 | | | | | | | | | | | | | | x | | +32.2.1 | | | | | | | | | | x | | | | | | +32.2.2 | | | | | | | | | | | | x | | | | +32.2.3 | | | | | | | | | | | | | | x | | +101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | x | | x | | x | | +101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | x | | x | | x |
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Number | | Description | | Report or Registration
Statement | | SEC File or
Registration
Number | | Exhibit
Reference | | CenterPoint Energy | | Houston Electric | | CERC | | 4.20 | | | | Houston Electric’s Form 10-Q for the quarter ended September 30, 2002 | | 1-3187 | | 4(j)(1) | | | | x | | | | 4.21 | | | | Houston Electric’s Form 8-K dated March 8, 2021 | | 1-3187 | | 4.4 | | | | x | | | | †4.22 | | | | | | | | | | | | x | | | | 10.1 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(q)(12) | | x | | | | | | 10.2 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(q)(13) | | x | | | | | | 10.3 | | | | Form 8-K of CenterPoint Energy, Inc. dated May 6, 2020 | | 1-31447 | | 10.1 | | x | | | | | | 10.4 | | | | CenterPoint Energy’s Form 8-K dated February 16, 2021 | | 1-31447 | | 10.1 | | x | | | | | | 10.5 | | | | CenterPoint Energy’s Form 8-K dated February 16, 2021 | | 1-31447 | | 10.2 | | x | | | | | | 10.6 | | | | CenterPoint Energy’s Form 8-K dated April 27, 2017 | | 1-31447 | | 10.1 | | x | | | | | | 10.7 | | | | CenterPoint Energy’s Form 10-K for the year ended December 31, 2020 | | 1-31447 | | 10(t)(2) | | x | | | | | | †31.1.1 | | | | | | | | | | x | | | | | | †31.1.2 | | | | | | | | | | | | x | | | | †31.1.3 | | | | | | | | | | | | | | x | | †31.2.1 | | | | | | | | | | x | | | | | | †31.2.2 | | | | | | | | | | | | x | | | | †31.2.3 | | | | | | | | | | | | | | x | | †32.1.1 | | | | | | | | | | x | | | | | | †32.1.2 | | | | | | | | | | | | x | | | | †32.1.3 | | | | | | | | | | | | | | x | | †32.2.1 | | | | | | | | | | x | | | | | | †32.2.2 | | | | | | | | | | | | x | | | | †32.2.3 | | | | | | | | | | | | | | x |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exhibit
Number
| | Description | | Report or Registration
Statement
| | SEC File or
Registration
Number
| | Exhibit
Reference
| | CenterPoint Energy | | Houston Electric | | CERC | +101.CAL†101.INS | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | | | | | | | | x | | x | | x | | †101.SCH | | Inline XBRL Taxonomy Extension Schema Document | | | | | | | | x | | x | | x | | †101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | | | | | | | x | | x | | x | +†101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | | | | | | | | x | | x | | x | +†101.LAB | | Inline XBRL Taxonomy Extension Labels Linkbase Document | | | | | | | | x | | x | | x | +†101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | | | | | | | x | | x | | x | +†104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | | | | | | x | | x | | x |
| | | | | | | * | Schedules to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedules will be furnished supplementally to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | CENTERPOINT ENERGY, INC. | | CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC | | CENTERPOINT ENERGY RESOURCES CORP. | | | | | | By: | CENTERPOINT ENERGY, INC. | | CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC | | CENTERPOINT ENERGY RESOURCES CORP. | | | | | By: | /s/ Kristie L. Colvin | | Kristie L. Colvin | | Interim ExecutiveSenior Vice President and Chief FinancialAccounting Officer | | and Chief Accounting Officer |
Date: May 7, 20206, 2021
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