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.

In April 2014, Enable completed an initial public offering of 25.0 million common units resulting in Enable becoming a publicly traded Master Limited Partnership. At September 30, 2016, the Company owned 111.0 million common units, or 26.3 percent of which 68.2 million units were subordinated.

The Company and CenterPoint also own a 60 percent and 40 percent interest, respectively, in the incentive distribution rights held by the general partner of Enable.

Distributions received from Enable were $35.3 million and $35.1 million during the three months ended September 30, 2016 and 2015, respectively, and $105.9 million and $104.0 million for the nine months ended September 30, 2016 and 2015, respectively. On November 1, 2016, Enable announced a quarterly dividend distribution of $0.31800 per unit on its outstanding common and subordinated units, representing the same dividend distribution as the previous quarter.

CenterPoint had previously announced that it was evaluating strategic alternatives for its investment in Enable. On July 18, 2016, CenterPoint and its wholly owned subsidiary, CenterPoint Energy Resources Corp., provided notice to the Company of CenterPoint’s solicitation of offers from unrelated third parties to acquire all or any portion of the common units and subordinated units of Enable owned by CenterPoint Energy Resources Corp. and all of the membership interests of the general partner of Enable owned by CenterPoint Energy Resources Corp. This notice also constituted a notice pursuant to the right of first offer held by the Company under the Partnership Agreement and the Third Amended and Restated Limited Liability Company Agreement of the general partner. Under the terms of the right of first offer, the Company had 30 days from receipt of the notice from CenterPoint to make an offer to buy all of CenterPoint’s membership interests in the general partner and all or any portion of CenterPoint Energy Resources Corp. common units and subordinated units. The Company submitted to CenterPoint a proposal to acquire, in conjunction with a third party, all of CenterPoint's membership interests in Enable GP and all of the common units and subordinated units of Enable owned by CenterPoint. The Company did not receive a reply from CenterPoint within the required timeframe.

Related Party Transactions

Operating costs charged and related party transactions between the Company and its affiliate, Enable, are discussed below.

On May 1, 2013, the Company and Enable entered into a Services Agreement, an 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. As of December 31, 2015, Enable terminated all support services except certain information technology, payroll and benefits administration. The remaining services automatically extended for another year on May 1, 2016. Under these agreements, the Company charged operating costs to Enable of $1.0 million and $2.6 million for the three months ended September 30, 2016 and 2015, respectively, and $3.6 million and $7.9 million for the nine months ended September 30, 2016 and 2015, respectively. The Company charges operating costs to OG&E and Enable based on several factors. Operating costs directly related to OG&E and/or Enable are assigned as such. Operating costs incurred for the benefit of OG&E are allocated either as overhead based primarily on labor costs or using the "Distrigas" method.

Additionally, the Company agreed to provide seconded employees to Enable to support its operations for an initial term ending on December 31, 2014. In October 2014, the Company, CenterPoint and Enable agreed to continue the secondment to Enable of 192 employees that participate in the Company's defined benefit and retirement plans beyond December 31, 2014. The Company billed Enable for reimbursement of $6.6 million and $7.0 million during the three months ended September 30, 2016 and 2015, respectively, and $20.7 million and $25.1 million during the nine months ended September 30, 2016 and 2015, respectively, under the Transitional Seconding Agreement for employment costs.

The Company had accounts receivable from Enable for amounts billed for transitional services, including the cost of seconded employees, of $3.7 million and $3.4 million as of September 30, 2016 and December 31, 2015, respectively.

Related Party Transactions with Enable

OG&E entered into a contract with Enable to provide gas transportation services effective May 1, 2014. 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 three and nine months ended September 30, 2016 and 2015.



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(In millions)	2016		2015		2016		2015
Operating Revenues:
Electricity to power electric compression assets	$	3.7	$	4.4	$	9.0	$	11.1
Cost of Sales:
Natural gas transportation services	$	8.8	$	8.8	$	26.3	$	26.3
Natural gas purchases/(sales)	4.4		2.5		11.3		7.1

Summarized Financial Information of Enable

Summarized unaudited financial information for 100 percent of Enable is presented below at September 30, 2016 and December 31, 2015 and for the three and nine months ended September 30, 2016 and 2015.



	September 30,		December 31,
Balance Sheet	2016		2015
(In millions)
Current assets	$	408	$	381
Non-current assets	10,833		10,845
Current liabilities	338		615
Non-current liabilities	3,174		3,080



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
Income Statement	2016		2015			2016		2015
(In millions)
Operating revenues	$	620	$	646		$	1,658	$	1,852
Cost of natural gas and natural gas liquids	268		287			717		856
Operating income	139		(975		)	299		(778		)
Net income	110		(985		)	231		(817		)

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 equity of $2.2 billion. Due to the contribution of Enogex LLC to Enable, meeting the requirements of being in substance real estate and thus 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 $34.5 million and $79.5 million for the three and nine months ended September 30, 2016, respectively, and a loss in equity in earnings of $71.9 million and $12.0 million for the three and nine months ended September 30, 2015, respectively. Equity in earnings of unconsolidated affiliates includes the Company's share of Enable's earnings adjusted for the amortization of the basis difference of the Company's original investment in Enogex and its underlying equity in the net assets of Enable. The basis difference is the result of the initial contribution of Enogex 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 below.

2015 Goodwill Impairment. Enable tested its goodwill for impairment annually on October 1, or more frequently if events or changes in circumstances indicated that the carrying value of goodwill may not be recoverable. Goodwill was 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 test, 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, and wrote off all of its goodwill in the third quarter of 2015.

The following table reconciles the Company's equity in earnings (loss) of its unconsolidated affiliates for the three and nine months ended September 30, 2016 and 2015.



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Reconciliation of Equity in Earnings (Loss) of Unconsolidated Affiliates	2016			2015			2016			2015
(In millions)
Enable net income (loss)	$	110.1		$	(985.1	)	$	230.8		$	(817.3	)
Distributions senior to limited partners	(9.1		)	—			(9.1		)	—
Differences due to timing of OGE Energy and Enable accounting close and permanent items	3.0			4.2			(3.6		)	9.9
Enable net income (loss) used to calculate OGE Energy's equity in earnings	$	104.0		$	(980.9	)	$	218.1		$	(807.4	)
OGE Energy’s percent ownership	26.3		%	26.3		%	26.3		%	26.3		%
OGE Energy’s portion of Enable net income (loss)	$	27.3		$	(257.2	)	$	57.5		$	(212.0	)
Impairments recognized by Enable associated with OGE Energy’s basis differences	—			177.7			0.6			177.7
OGE Energy's share of Enable net income (loss)	$	27.3		$	(79.5	)	$	58.1		$	(34.3	)
Amortization of basis difference	2.9			3.5			8.8			10.6
Elimination of Enable fair value step up	4.3			4.1			12.6			11.7
Equity in earnings (loss) of unconsolidated affiliates	$	34.5		$	(71.9	)	$	79.5		$	(12.0	)