Short-term Borrowings and Long-term Debt



	December 31, 2018					December 31, 2017
	Long-Term			Current (1)		Long-Term			Current (1)
	(in millions)
CERC (2):
Short-term borrowings:
Inventory financing (3)	$	—		$	—	$	—		$	39
Total short-term borrowings	—			—		—			39
Long-term debt:
Senior notes 3.55% to 6.625% due 2021 to 2047	2,193			—		1,593			—
Commercial paper (4)	210			—		898			—
Unamortized debt issuance costs	(15		)	—		(12		)	—
Unamortized discount and premium, net	(17		)	—		(22		)	—
Total CERC long-term debt	2,371			—		2,457			—
Total CERC debt	2,371			—		2,457			39
Houston Electric:
First mortgage bonds 9.15% due 2021	102			—		102			—
General mortgage bonds 1.85% to 6.95% due 2021 to 2048	3,212			—		2,812			—
Restoration Bond Company:
System restoration bonds 4.243% due 2022	197			59		256			56
Bond Company II:
Transition bonds 5.302% due 2019	—			208		208			194
Bond Company III:
Transition bonds 5.234% due 2020	29			56		85			53
Bond Company IV:
Transition bonds 2.161% to 3.028% due 2020 to 2024	753			135		888			131
Unamortized debt issuance costs	(24		)	—		(22		)	—
Unamortized discount and premium, net	(11		)	—		(10		)	—
Total Houston Electric debt	4,258			458		4,319			434
CenterPoint Energy:
ZENS due 2029 (5)	—			24		—			122
Senior notes 2.50% to 4.25% due 2021 to 2028	2,000			—		500			—
Pollution control bonds 5.125% due 2028 (6)	68			—		68			50
Commercial paper (4)	—			—		855			—
Unamortized debt issuance costs	(13		)	—		(4		)	—
Unamortized discount and premium, net	(2		)	—		—			—
Total CenterPoint Energy long-term debt	8,682			482		8,195			606
Total CenterPoint Energy debt	$	8,682		$	482	$	8,195		$	645


(1)	Includes amounts due or exchangeable within one year of the date noted.


(2)	Issued by CERC Corp.

(3)

CenterPoint Energy’s and CERC’s NGD has AMAs associated with its utility distribution service in Arkansas, Louisiana, Mississippi, Oklahoma and Texas. In March 2018, NGD’s third-party AMAs in Arkansas, Louisiana and Oklahoma expired, and NGD entered into new AMAs with CES effective April 1, 2018 in these states. The AMAs have varying terms, the longest of which expires in 2021. Pursuant to the provisions of the agreements, NGD sells natural gas and agrees to repurchase an equivalent amount of natural gas during the winter heating seasons at the same cost.


(4)	Classified as long-term debt because the termination date of the facility that backstops the commercial paper is more than one year from the date noted.


(5)	CenterPoint Energy’s ZENS obligation is bifurcated into a debt component and an embedded derivative component. For additional information regarding ZENS, see Note 12(b). As ZENS are exchangeable for cash at any time at the option of the holders, these notes are classified as a current portion of long-term debt.


(6)	$68 million and $118 million of these series of debt were secured by general mortgage bonds of Houston Electric as of December 31, 2018 and 2017, respectively.

Long-term Debt

Debt Retirements. During the year ended December 31, 2018, CenterPoint Energy retired the following debt instrument at maturity:

Registrant

Retirement Date

Debt Instrument

Aggregate Principal Amount (1)

Interest Rate

Maturity Date

(in millions)

CenterPoint Energy

November 2018

Pollution control bonds

5.050%

2018


(1)	Secured by general mortgage bonds of Houston Electric.

Debt Issuances. During the year ended December 31, 2018 and in January 2019, the Registrants issued the following debt instruments:



Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
			(in millions)
Houston Electric (1)	February 2018	General mortgage bonds	$	400	3.95%	2048
CERC (1) (2)	March 2018	Unsecured senior notes	300		3.55%	2023
CERC (1) (2)	March 2018	Unsecured senior notes	300		4.00%	2028
CenterPoint Energy (3)	October 2018	Unsecured senior notes	500		3.60%	2021
CenterPoint Energy (3)	October 2018	Unsecured senior notes	500		3.85%	2024
CenterPoint Energy (3)	October 2018	Unsecured senior notes	500		4.25%	2028
Houston Electric (1)	January 2019	General mortgage bonds	700		4.25%	2049


(1)	Proceeds from these debt issuances were used for general limited liability company and corporate purposes, as applicable, including capital expenditures, repayment of portions of outstanding commercial paper and borrowings under CenterPoint Energy’s money pool.


(2)	Issued by CERC Corp.


(3)	Proceeds from these debt issuances were used to fund a portion of the Merger and to pay related fees and expenses.

Securitization Bonds. As of December 31, 2018, CenterPoint Energy and Houston Electric had special purpose subsidiaries consisting of the Bond Companies, which they consolidate. The consolidated special purpose subsidiaries are wholly-owned, bankruptcy remote entities that were formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of transition bonds or system restoration bonds and activities incidental thereto. These Securitization Bonds are payable only through the imposition and collection of “transition” or “system restoration” charges, as defined in the Texas Public Utility Regulatory Act, which are irrevocable, non-bypassable charges to provide recovery of authorized qualified costs. CenterPoint Energy and Houston Electric have no payment obligations in respect of the Securitization Bonds other than to remit the applicable transition or system restoration charges they collect as set forth in servicing agreements among Houston Electric, the Bond Companies and other parties. Each special purpose entity is the sole owner of the right to impose, collect and receive the applicable transition or system restoration charges securing the bonds issued by that entity. Creditors of CenterPoint Energy or Houston Electric have no recourse to any assets or revenues of the Bond Companies (including the transition and system restoration charges), and the holders of Securitization Bonds have no recourse to the assets or revenues of CenterPoint Energy or Houston Electric.

Credit Facilities. In April 2018, CenterPoint Energy obtained commitments by lenders to provide a $5 billion Bridge Facility to provide flexibility for the timing of the long-term acquisition financing and fund, in part, amounts payable by CenterPoint Energy in connection with the Merger. In May 2018, CenterPoint Energy entered into an amendment to its revolving credit facility to increase the aggregate commitments from $1.7 billion to $3.3 billion effective the earlier of (i) the termination of all commitments by certain lenders to provide the Bridge Facility and (ii) the payment in full of all obligations (other than contingent obligations) under the Bridge Facility and termination of all commitments to advance additional credit thereunder, and in each case, so long as the Merger Agreement has not been terminated pursuant to the terms thereof without consummation of the Merger. This increase to CenterPoint Energy’s revolving credit facility will automatically expire on the termination date of the revolving credit facility. In addition, the amendment provided for a temporary increase on the maximum ratio of debt for borrowed money to capital from 65% to 75% until the earlier of (i) June 30, 2019 and (ii) the termination of all commitments in respect of the Bridge Facility without any borrowing thereunder. On October 5, 2018, CenterPoint Energy terminated all remaining commitments by lenders to provide the Bridge Facility. As a result, the aggregate commitments under the revolving credit facility automatically increased from $1.7 billion to $3.3 billion and the maximum ratio of debt for borrowed money to capital reverted to 65%.

As of December 31, 2018 and 2017, the Registrants had the following revolving credit facilities and utilization of such facilities:



	December 31, 2018										December 31, 2017
	Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Size of Facility		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy	$	3,300	$	—	$	6	$	—	—		$	1,700	$	—	$	6	$	855	1.88	%
Houston Electric	300		—		4		—		—		300		—		4		—		—
CERC (1)	900		—		1		210		2.93	%	900		—		1		898		1.72	%
Total	$	4,500	$	—	$	11	$	210			$	2,900	$	—	$	11	$	1,753


(1)	Issued by CERC Corp.

In January 2019, CenterPoint Energy issued the following commercial paper in connection with the closing of the Merger:



Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Weighted Average Interest Rate
			(in millions)
CenterPoint Energy (1) (2)	January 2019	Commercial paper	$	1,660	2.88%


(1)	Proceeds from these commercial paper issuances were used to fund a portion of the Merger and to pay related fees and expenses and were contributed to Vectren for its payment of its stub period cash dividend, long-term incentive payments and to fund the repayment of indebtedness of Vectren subsidiaries redeemed at the option of the holder as a result of the closing of the Merger.


(2)	The commercial paper notes were issued at various times in January 2019 with maturities up to and including 90 days as of the time of issuance, and, prior to their use as described in connection with the closing of the Merger, the net proceeds of such issuances were invested in short-term investments.



Execution Date	Registrant	Size of Facility			Draw Rate of LIBOR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio (2)	Debt for Borrowed Money to Capital Ratio as of December 31, 2018 (3)	Termination Date (4)
		(in millions)
March 3, 2016	CenterPoint Energy	$	3,300	(5)	1.250%	65%	44.9%	March 3, 2022
March 3, 2016	Houston Electric	300			1.125%	65%	49.2%	March 3, 2022
March 3, 2016	CERC (6)	900			1.125%	65%	46.8%	March 3, 2022


(1)	Based on credit ratings as of December 31, 2018.

(2)

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.


(3)	As defined in the revolving credit facility agreement, excluding Securitization Bonds.


(4)	Amended on June 16, 2017 to extend the termination date.


(5)	Pursuant to the amendment entered into in May 2018, the aggregate commitments under the CenterPoint Energy revolving credit facility increased to $3.3 billion on October 5, 2018 as a result of the satisfaction of certain conditions described above.


(6)	Issued by CERC Corp.

The Registrants were in compliance with all financial debt covenants as of December 31, 2018.

Maturities. As of December 31, 2018, maturities of long-term debt, capital leases and sinking fund requirements, excluding the ZENS obligation, are as follows:



	CenterPoint Energy (1)		Houston Electric (1)		CERC		Securitization Bonds
	(in millions)
2019	$	458	$	458	$	—	$	458
2020	231		231		—		231
2021	1,706		613		593		211
2022	1,230		519		210		219
2023	656		356		300		156


(1)	These maturities include Securitization Bonds principal repayments on scheduled payment dates.

Liens. As of December 31, 2018, Houston Electric’s assets were subject to liens securing approximately $102 million of first mortgage bonds. Sinking or improvement fund and replacement fund requirements on the first mortgage bonds may be satisfied by certification of property additions. Sinking fund and replacement fund requirements for 2018, 2017 and 2016 have been satisfied by certification of property additions. The replacement fund requirement to be satisfied in 2019 is approximately $283 million, and the sinking fund requirement to be satisfied in 2019 is approximately $1.6 million. CenterPoint Energy expects Houston Electric to meet these 2019 obligations by certification of property additions.

As of December 31, 2018, Houston Electric’s assets were also subject to liens securing approximately $3.3 billion of general mortgage bonds, including approximately $68 million held in trust to secure pollution control bonds for which CenterPoint Energy is obligated. The lien of the general mortgage indenture is junior to that of the mortgage pursuant to which the first mortgage bonds are issued. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. Approximately $4.3 billion of additional first mortgage bonds and general mortgage bonds could be issued on the basis of retired bonds and 70% of property additions as of December 31, 2018. Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions.