Unconsolidated Affiliate

CERC 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 and subordinated units using the equity method of accounting.

CERC’s maximum exposure to loss related to Enable, a VIE in which CERC is not the primary beneficiary, is limited to its equity investment as presented in the Condensed Consolidated Balance Sheets as of June 30, 2017 and outstanding current accounts receivable from Enable.

Transactions with Enable:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in millions)
Reimbursement of transition services (1)	$	1	$	2	$	3	$	5
Natural gas expenses, including transportation and storage costs	24		24		57		57
Interest income related to notes receivable from Enable	—		—		—		1


(1)	Represents amounts billed under the Transition Agreements for certain support services provided to Enable. Actual transition services costs are recorded net of reimbursement.



	June 30, 2017		December 31, 2016
	(in millions)
Accounts receivable for amounts billed for transition services	$	1	$	1
Accounts payable for natural gas purchases from Enable	8		10

Limited Partner Interest in Enable:



	June 30, 2017
CERC	54.1	%
OGE	25.7	%

In November 2016, Enable completed a public offering of 11,500,000 common units of which 1,424,281 were sold by ArcLight Capital Partners, LLC. The common units issued and sold by Enable resulted in dilution of both CERC’s and OGE’s limited partner interest in Enable.

Enable Common and Subordinated Units Held:



	June 30, 2017
	Common	Subordinated
CERC	94,151,707	139,704,916
OGE	42,832,291	68,150,514

Generally, sales of more than 5% of the aggregate of the common units and subordinated units CERC owns in Enable or sales by OGE of more than 5% of the aggregate of the common units and subordinated units it owns in Enable are subject to mutual rights of first offer and first refusal.

Enable is controlled jointly by CERC Corp. and OGE, and each own 50% of the management rights in the general partner of Enable. Sale of CERC’s or OGE’s ownership interests in Enable’s general partner to a third party is subject to mutual rights of first offer and first refusal, and CERC is not permitted to dispose of less than all of its interest in Enable’s general partner.

Summarized unaudited consolidated income information for Enable is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in millions)
Operating revenues	$	626	$	529	$	1,292	$	1,038
Cost of sales, excluding depreciation and amortization	279		254		587		449
Operating income	122		57		262		160
Net income attributable to Enable	86		35		197		121

Reconciliation of Equity in Earnings, net:
CERC’s interest	$	47	$	19	$	107	$	67
Basis difference amortization (1)	12		12		24		24
CERC’s equity in earnings, net	$	59	$	31	$	131	$	91


(1)	Equity in earnings of unconsolidated affiliates includes CERC’s share of Enable’s earnings adjusted for the amortization of the basis difference of CERC’s original investment in Enable and its underlying equity in Enable’s net assets. The basis difference is amortized over approximately 33 years, the average life of the assets to which the basis difference is attributed.

Summarized unaudited consolidated balance sheet information for Enable is as follows:



	June 30, 2017			December 31, 2016
	(in millions)
Current assets	$	351		$	396
Non-current assets	10,780			10,816
Current liabilities	298			362
Non-current liabilities	3,111			3,056
Non-controlling interest	12			12
Preferred equity	362			362
Enable partners’ equity	7,348			7,420

Reconciliation of Equity Method Investment in Enable:
CERC’s ownership interest in Enable partners’ capital	$	4,025		$	4,067
CERC’s basis difference	(1,538		)	(1,562		)
CERC’s equity method investment in Enable	$	2,487		$	2,505

Distributions Received from Unconsolidated Affiliate:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
	(in millions)
Investment in Enable’s common and subordinated units	$	75	$	75	$	149	$	149

As of June 30, 2017, CERC Corp. and OGE also own 40% and 60%, respectively, of the incentive distribution rights held by the general partner of Enable. Enable is expected to pay a minimum quarterly distribution of $0.2875 per unit on its outstanding units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to its general partner and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per unit in any quarter, the general partner will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances the general partner of Enable 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.