Investment in Unconsolidated Affiliate and Related Party Transactions

On March 14, 2013, the Company entered into a Master Formation Agreement with the ArcLight group and CenterPoint pursuant to which the Company, the ArcLight Group and CenterPoint, agreed to form Enable to own and operate the midstream businesses of the Company and CenterPoint that was initially structured as a private limited partnership. This transaction closed on May 1, 2013.

Pursuant to the Master Formation Agreement, the Company and the ArcLight group indirectly contributed 100 percent of the equity interests in Enogex LLC to Enable. The Company determined that its contribution of Enogex LLC to Enable met the requirements of being in substance real estate and was recorded at historical cost. Immediately prior to closing, on May 1, 2013, the ArcLight group contributed $107.0 million and OGE Energy contributed $9.1 million to Enogex LLC in order to pay down short-term debt.

The general partner of Enable is equally controlled by CenterPoint and OGE Energy, who each have 50 percent management ownership. Based on the 50/50 management ownership, with neither company having control, effective May 1, 2013, the Company deconsolidated its interest in Enogex Holdings and began accounting for its interest in Enable using the equity method of accounting.

In April 2014, Enable completed an initial public offering of 25,000,000 common units resulting in Enable becoming a publicly traded Master Limited Partnership. At December 31, 2015, the Company owned approximately 111.0 million limited partner units, or 26.3 percent, of which 68.2 million limited partner units were subordinated.

CenterPoint and the Company also own a 40 percent and 60 percent interest, respectively, in any incentive distribution rights to be held by the general partner of Enable following the initial public offering. See Note 1 for more information regarding incentive distributions.

Distributions received from Enable were $139.3 million and $143.7 million during the years ended December 31, 2015 and 2014, respectively.

Related Party Transactions

Operating costs charged and related party transactions between the Company and its affiliate, Enable, since its formation on May 1, 2013 are discussed below. Prior to May 1, 2013, operating costs charged and related party transactions between the Company and Enogex Holdings were eliminated in consolidation. The Company's interest in Enogex Holdings was deconsolidated on May 1, 2013.

On May 1, 2013, the Company and Enable entered into a Services Agreement, Employee Transition Agreement, and other agreements whereby the Company agreed to provide certain support services to Enable such as accounting, legal, risk management and treasury functions for an initial term ending on April 30, 2016. The support services automatically extend year-to-year at the end of the initial term, unless terminated by Enable with at least 90 days’ notice. Enable may terminate the initial support services at any time with 180 days' notice if approved by the board of Enable's general partner. As of December 31, 2015, Enable terminated all support services except IT, payroll and benefits. Under these agreements, the Company charged operating costs to Enable of $12.0 million and $16.8 million for December 31, 2015 and 2014, respectively. The Company charges operating costs to OG&E and Enable based on several factors. Operating costs directly related to OG&E and Enable are assigned as such. Operating costs incurred for the benefit of OG&E and Enable are allocated either as overhead based primarily on labor costs or using the "Distrigas" method. Effective April 1, 2014, Enable’s general partner, the Company and CenterPoint agreed to reduce certain governance related costs billed to Enable for transition services.

Additionally, the Company agreed to provide seconded employees to Enable to support its operations for an initial term ending on December 31, 2014. The Company did not transfer any employees to Enable at the formation of the partnership or any time through December 31, 2014. In October 2014, CenterPoint, the Company and Enable agreed to continue the secondment to Enable for 192 employees that participate in the Company's defined benefit and retirement plans, beyond December 31, 2014. The remaining seconded employees were terminated from the Company on December 31, 2014 and were offered employment by Enable. The Company billed Enable for reimbursement of $32.1 million and $104.8 million in 2015 and 2014, respectively, under the Transitional Seconding Agreement for employment costs incurred on or after May 1, 2013.

The Company had accounts receivable from Enable of $1.7 million and $5.6 million as of December 31, 2015 and 2014, respectively, for amounts billed for transitional services, including the cost of seconded employees.

Enable reimbursed the Company for Mr. Delaney's services as interim President and Chief Executive Officer for the months of June through November, 2015. Enable paid Mr. Delaney directly for his services for the period from December 1, 2015 to December 31, 2015.

OG&E entered into a new contract with Enable to provide transportation services effective May 1, 2014 which eliminated the natural gas storage services. This transportation agreement grants Enable the responsibility of delivering natural gas to OG&E’s generating facilities and performing an imbalance service. With this imbalance service, in accordance with the cash-out provision of the contract, OG&E purchases gas from Enable when Enable’s deliveries exceed OG&E’s pipeline receipts. Enable purchases gas from OG&E when OG&E’s pipeline receipts exceed Enable’s deliveries. The following table summarizes related party transactions between OG&E and Enable during the years ended December 31, 2015, 2014 and the eight months ended December 31, 2013.



	Year Ended December 31,
(In millions)	2015		2014		2013
Operating Revenues:
Electricity to power electric compression assets	$	13.8	$	13.3	$	7.7
Cost of Sales:
Natural gas transportation services	$	35.0	$	34.9	$	23.2
Natural gas storage services	—		4.4		8.6
Natural gas purchases/(sales)	7.6		8.7		14.8

Summarized Financial Information of Enable

Summarized unaudited financial information for 100 percent of Enable is presented below for the years ended December 31, 2015 and 2014 and for the eight months ended December 31, 2013.



Balance Sheet	December 31,
(In millions)	2015		2014
Current assets	$	381	$	438
Non-current assets	10,857		11,399
Current liabilities	615		671
Non-current liabilities	3,092		2,344



Income Statement	Year Ended December 31,
(In millions)	2015			2014		2013
Operating revenues	$	2,418		$	3,367	$	2,123
Cost of natural gas and natural gas liquids	1,097			1,914		1,241
Operating income (loss)	(712		)	586		322
Net income (loss)	(752		)	530		289

The formation of Enable was considered a business combination, and CenterPoint was the acquirer of Enogex Holdings for accounting purposes. Under this method, the fair value of the consideration paid by CenterPoint for Enogex Holdings is allocated to the assets acquired and liabilities assumed on May 1, 2013 based on their fair value. Enogex Holdings' assets, liabilities and equity have accordingly been adjusted to estimated fair value as of May 1, 2013, resulting in an increase to Enable's equity of $2.2 billion. Due to the contribution of Enogex LLC to Enable meeting the requirements of being in substance real estate and the recording the initial investment at historical cost, the effects of the amortization and depreciation expense associated with the fair value adjustments on Enable's results of operations have been eliminated in the Company's recording of its equity in earnings of Enable.

The Company recorded equity in earnings of unconsolidated affiliates of $15.5 million and $172.6 million for the years ended December 31, 2015 and 2014, respectively. Equity in earnings of unconsolidated affiliates includes OGE Energy's share of Enable earnings adjusted for the amortization of the basis difference of OGE Energy's original investment in Enogex LLC and its underlying equity in net assets of Enable. The basis difference is the result of the initial contribution of Enogex LLC to Enable in May 2013, and subsequent issuances of equity by Enable, including the initial public offering in April 2014 and the issuance of common units for the acquisition of CenterPoint's 24.95 percent interest in SESH. The basis difference is being amortized over approximately 30 years, the average life of the assets to which the basis difference is attributed. Equity in earnings of unconsolidated affiliates is also adjusted for the elimination of the Enogex Holdings fair value adjustments, as described above.

The difference between OGE Energy's investment in Enable and its underlying equity in the net assets of Enable was $783.5 million as of December 31, 2015.

The following table reconciles OGE Energy's equity in earnings of its unconsolidated affiliates for the years ended December 31, 2015 and 2014.



	Year Ended December 31,
(In millions)	2015			2014
OGE's share of Enable Net Income (Loss)	$	(16.0	)	$	143.1
Amortization of basis difference	13.5			14.0
Elimination of Enogex Holdings fair value and other adjustments	18.0			15.5
Equity in earnings of unconsolidated affiliates	$	15.5		$	172.6

Enable tests its goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable. Goodwill is assessed for impairment by comparing the fair value of the reporting unit with its book value, including goodwill. Subsequent to the completion of the October 1, 2014 annual goodwill impairment test and previous interim assessment as of December 31, 2014, the crude oil and natural gas industry was impacted by further commodity price declines, which consequently resulted in decreased producer activity in certain regions in which Enable operates. Based on the decline in producer activity and the forecasted impact on future periods, in addition to an increase in the weighted average cost of capital, Enable determined that the impact on its forecasted operating profits and cash flows for its gathering and processing and transportation and storage segments for the next five years would be significantly reduced. As a result, when Enable performed the first step of its annual goodwill impairment analysis as of October 1, 2015, it determined that the carrying value of the gathering and processing and transportation and storage segments exceeded fair value. Enable completed the second step of the goodwill impairment analysis comparing the implied fair value for those reporting units to the carrying amount of that goodwill and determined that goodwill for those units was completely impaired in the amount of $1,086.4 million as of September 30, 2015.

Accordingly, the Company recorded a $108.4 million pre-tax charge in the third quarter of 2015 for its share of the goodwill impairment, as adjusted for the basis differences.