Goodwill and Other Intangibles (CenterPoint Energy and CERC)

9 Months Ended

Sep. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles (CenterPoint Energy and CERC) [Text Block]

Goodwill and Other Intangibles (CenterPoint Energy and CERC)

CenterPoint Energy’s goodwill by reportable segment as of December 31, 2018 and changes in the carrying amount of goodwill as of September 30, 2019 is as follows:

	December 31, 2018		Additions (1)		September 30, 2019
	(in millions)
Indiana Electric Integrated	$	—	$	1,008	$	1,008
Natural Gas Distribution	746		2,529		3,275
Energy Services (2)	110		—		110
Infrastructure Services	—		355		355
Corporate and Other	11		420		431
Total	$	867	$	4,312	$	5,179

(1) The allocation of goodwill to reportable segments subsequent to the Merger is preliminary and subject to change. See Note 3.

(2) Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.

CERC’s goodwill by reportable segment as of September 30, 2019 and December 31, 2018 is as follows:

	September 30, 2019		December 31, 2018
	(in millions)
Natural Gas Distribution	$	746	$	746
Energy Services (1)	110		110
Corporate and Other	11		11
Total	$	867	$	867

(1) Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.

CenterPoint Energy and CERC perform 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 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. See Note 2.

CenterPoint Energy and CERC performed the annual goodwill impairment test in the third quarter of 2019 and determined that no goodwill impairment charge was required for any reporting unit. 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 reportable segment.

The tables below present information on CenterPoint Energy’s other intangible assets recorded in Intangible assets, net 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.

	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
	(in millions)
Customer relationships (1)	$	306	$	(40	)	$	266	$	86	$	(27	)	$	59
Covenants not to compete	4		(3		)	1		4		(3		)	1
Trade names (1)	62		(4		)	58		—		—			—
Construction backlog (1) (2)	28		(18		)	10		—		—			—
Operation and maintenance agreements (1) (2)	12		(1		)	11		—		—			—
Other (1)	24		(14		)	10		16		(11		)	5
Total	$	436	$	(80	)	$	356	$	106	$	(41	)	$	65

(1) The fair value of intangible assets acquired through acquisitions is preliminary and subject to change. See Note 3.

(2) 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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization (1)	$	7	$	2	$	20	$	7
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas (2)	7		—		19		—

(1) Includes $5 million and $13 million for the three and nine months ended September 30, 2019, respectively, of amortization expense related to intangibles acquired in the Merger. The fair value of intangible assets, and related amortization

assumptions, acquired through acquisitions during the nine months ended September 30, 2019, is preliminary and subject to change. See Note 3.

(2) The fair value of intangible assets, and related amortization assumptions, acquired through acquisitions during the nine months ended September 30, 2019, is preliminary and subject to change. See Note 3.

The tables below present information on CERC’s other intangible assets recorded in Other non-current assets on CERC’s Condensed Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CERC’s Condensed Statements of Consolidated Income.

	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
	(in millions)
Customer relationships	$	86	$	(31	)	$	55	$	86	$	(27	)	$	59
Covenants not to compete	4		(3		)	1		4		(3		)	1
Other	16		(14		)	2		16		(11		)	5
Total	$	106	$	(48	)	$	58	$	106	$	(41	)	$	65

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization	$	2	$	2	$	7	$	7

CenterPoint Energy and CERC estimate that amortization expense of intangible assets with finite lives for the next five years will be as follows:

	Amortization Expense
	CenterPoint Energy		CERC
	(in millions)
Remaining three months of 2019	$	15	$	4
2020	32		6
2021	31		6
2022	32		6
2023	31		5
2024	29		5