Unconsolidated Affiliate (CenterPoint Energy and CERC) (Tables)

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments [Table Text Block]

CenterPoint Energy 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 units using the equity method of accounting. Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of March 31, 2020, CenterPoint Energy’s maximum exposure to loss related to Enable is limited to its investment in unconsolidated affiliate, its investment in Enable Series A Preferred Units and outstanding current accounts receivable from Enable.

Investment in Unconsolidated Affiliates (CenterPoint Energy):

	March 31, 2020		December 31, 2019
	(in millions)
Enable	$	848	$	2,406
Other	2		2
Total	$	850	$	2,408

CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in the value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss, based on the excess of the carrying value over the estimated fair value of the investment, is recognized in earnings when an impairment is deemed to be other than temporary. Considerable judgment is used in determining if an impairment loss is other than temporary and the amount of any impairment. Based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply of crude oil and natural gas and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry, CenterPoint Energy determined, in connection with its preparation of the financial statements, that an other than temporary decrease in the value of its investment in Enable had occurred. CenterPoint Energy wrote down the value of its investment in Enable to its estimated fair value of $848 million and recognized an impairment charge of $1,541 million during the three months ended March 31, 2020. Both the income approach and market approach were utilized to estimate the fair value of CenterPoint Energy’s equity investment in Enable, which includes common units, general partner interest and incentive distribution rights held by CenterPoint Energy through CNP Midstream. The determination of fair value considered a number of relevant factors including Enable’s common unit price and forecasted distributions, recent comparable transactions and the limited float of Enable’s publicly traded common units. See Note 8 for further discussion of the determination of fair value of CenterPoint Energy’s investment in Enable.

Equity in Earnings of Unconsolidated Affiliates, net (CenterPoint Energy):

		Three Months Ended March 31,
		2020			2019
	(in millions)
Enable		$	(1,475	)	$	62
Other		—			—
Total		$	(1,475	)	$	62

CenterPoint Energy recognized a loss of $1,475 million from its investment in Enable for the three months ended March 31, 2020. This loss included an impairment charge on its investment in Enable of $1,541 million.

Limited Partner Interest and Units Held in Enable (CenterPoint Energy):

	March 31, 2020
	Limited Partner Interest (1)		Common Units (2)	Enable Series A Preferred Units (3)
CenterPoint Energy	53.7	%	233,856,623	14,520,000
OGE	25.5	%	110,982,805	—
Public unitholders	20.8	%	90,604,066	—
Total units outstanding	100.0	%	435,443,494	14,520,000

(1) Excludes the Enable Series A Preferred Units owned by CenterPoint Energy.

(2) Held indirectly through CNP Midstream by CenterPoint Energy.

(3) The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Condensed Consolidated Balance Sheets, was $363 million as of March 31, 2020 and $363 million as of December 31, 2019. No impairment charges or adjustment due to observable price changes were required or recorded during the current or prior reporting periods.

Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal set forth in Enable’s Agreement of Limited Partnership.

Interests Held in Enable GP (CenterPoint Energy):

	March 31, 2020
	Management Rights (1)		Incentive Distribution Rights (2)
CenterPoint Energy (3)	50	%	40	%
OGE	50	%	60	%

(1) Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.

(2) Enable previously expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to Enable GP and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP 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.

(3) Held indirectly through CNP Midstream.

Distributions Received from Enable (CenterPoint Energy):

CenterPoint Energy

	Three Months Ended March 31,
	2020				2019
	Per Unit		Cash Distribution		Per Unit		Cash Distribution
Enable common units (1)	$	0.3305	$	77	$	0.3180	$	74
Enable Series A Preferred Units	0.6250		9		0.6250		9
Total CenterPoint Energy			$	86			$	83

(1) On April 1, 2020, Enable announced a 50% reduction in its quarterly distribution per common unit from $0.3305 to $0.16525.

Transactions with Enable (CenterPoint Energy and CERC):

The transactions with Enable in the following tables exclude transactions with the Energy Services Disposal Group, which are now reflected as discontinued operations and liabilities held for sale.

		Three Months Ended March 31,
		2020		2019
	(in millions)
CenterPoint Energy
Natural gas expenses, includes transportation and storage costs		$	27	$	27
CERC
Natural gas expenses, includes transportation and storage costs		27		27

	March 31, 2020		December 31, 2019
	(in millions)
CenterPoint Energy
Accounts payable for natural gas purchases from Enable	$	9	$	9
CERC
Accounts payable for natural gas purchases from Enable	9		9

Summarized unaudited consolidated income information for Enable is as follows:

		Three Months Ended March 31,
		2020			2019
	(in millions)
Operating revenues		$	648		$	795
Cost of sales, excluding depreciation and amortization		226			378
Depreciation and amortization		104			105
Goodwill and long-lived assets impairments		28			—
Operating income		146			165
Net income attributable to Enable common units		103			113
Reconciliation of Equity in Earnings (Losses), net:
CenterPoint Energy’s interest		$	55		$	61
Basis difference amortization (1)		12			12
Loss on dilution, net of proportional basis difference recognition		(1		)	(11		)
Impairment of CenterPoint Energy’s equity method investment in Enable		(1,541		)	—
CenterPoint Energy’s equity in earnings, net		$	(1,475	)	$	62

(1) Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in net assets of Enable. The basis difference is being amortized through the year 2048.

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

	March 31, 2020			December 31, 2019
	(in millions)
Current assets	$	333		$	389
Non-current assets	11,784			11,877
Current liabilities	391			780
Non-current liabilities	4,374			4,077
Non-controlling interest	27			37
Preferred equity	362			362
Accumulated other comprehensive loss	(9		)	(3		)
Enable partners’ equity	6,972			7,013
Reconciliation of Investment in Enable:
CenterPoint Energy’s ownership interest in Enable partners’ equity	$	3,739		$	3,767
CenterPoint Energy’s basis difference (1)	(2,891		)	(1,361		)
CenterPoint Energy’s equity method investment in Enable	$	848		$	2,406

(1)

Includes the impairment of CenterPoint Energy’s equity method investment in Enable of $1,541 million recorded during the three months ended March 31, 2020. The basis difference is being amortized through the year 2048.