Long-term Debt



	December 31, 2017					December 31, 2016
	Long-Term			Current (1)		Long-Term			Current (1)
	(in millions)
Long-term debt:
First mortgage bonds 9.15% due 2021	102			—		102			—
General mortgage bonds 1.85% to 6.95% due 2021 to 2044 (2)	2,812			—		2,512			—
System restoration bonds 3.46% to 4.243% due 2018 to 2022	256			56		312			53
Transition bonds 2.161% to 5.302% due 2019 to 2024	1,181			378		1,560			358
Unamortized debt issuance costs	(22		)	—		(23		)	—
Unamortized discount and premium, net	(10		)	—		(9		)	—
Total long-term debt	$	4,319		$	434	$	4,454		$	411


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


(2)	Debt issued as collateral is excluded from the financial statements because of the contingent nature of the obligation.

Debt Issuances. Houston Electric issued the following general mortgage bonds during 2017:



Issuance Date	Aggregate Principal Amount		Interest Rate	Maturity Date
	(in millions)
January 2017	$	300	3.00%	2027

The proceeds from the issuance of these bonds were used to repay short-term debt and for general limited liability company purposes.

Hedging of Interest Expense for Future Debt Issuances. In January 2017, Houston Electric entered into forward interest rate agreements with multiple counterparties, having an aggregate notional amount of $150 million. These agreements were executed to hedge, in part, volatility in the 10-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments of Houston Electric’s $300 million issuance of fixed rate debt in January 2017. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of realized losses associated with the agreements, which totaled approximately $1 million, is a component of accumulated other comprehensive income in 2017 and will be amortized over the life of the bonds.

As of December 31, 2017, Houston Electric had no pre-issuance interest rate hedges in place.

In January and February 2018, Houston Electric entered into forward interest rate agreements with multiple counterparties, having an aggregate notional amount of $200 million. These agreements were executed to hedge, in part, volatility in the 30-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments on a forecasted issuance of fixed rate debt in 2018. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of unrealized gains and losses associated with the forward interest rate agreements will be recorded as a component of accumulated other comprehensive income and the ineffective portion, if any, will be recorded in income.

Securitization Bonds. As of December 31, 2017, Houston Electric had special purpose subsidiaries consisting of the Bond Companies, which it consolidates. 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. Houston Electric has no payment obligations in respect of the Securitization Bonds other than to remit the applicable transition or system restoration charges it collects. 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.

Revolving Credit Facility. In June 2017, Houston Electric entered into an amendment to its revolving credit facility to extend the termination date thereof from March 3, 2021 to March 3, 2022 and to terminate the swingline loan subfacility thereunder. No changes were made to the aggregate commitments under the revolving credit facility.

As of December 31, 2017 and 2016, Houston Electric had the following revolving credit facility and utilization of such facility:



December 31, 2017						December 31, 2016
Size of Facility		Loans		Letters of Credit		Size of Facility		Loans		Letters of Credit
(in millions)
$	300	$	—	$	4	$	300	$	—	$	4

Execution Date

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, 2017 (3)

Termination Date (4)

(in millions)

March 3, 2016

300

1.125%

65%

48.6%

March 3, 2022


(1)	Based on current credit ratings.

(2)

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 Houston Electric 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 Houston Electric delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of Houston Electric’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 as noted above.

Houston Electric was in compliance with all financial debt covenants as of December 31, 2017.

Maturities. Maturities of long-term debt, capital leases and sinking fund requirements are as follows:



	Houston Electric (1)		Securitization Bonds
	(in millions)
2018	$	434	$	434
2019	458		458
2020	231		231
2021	613		211
2022	519		219


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

Liens. As of December 31, 2017, 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 2017, 2016 and 2015 have been satisfied by certification of property additions. The replacement fund requirement to be satisfied in 2018 is approximately $266 million, and the sinking fund requirement to be satisfied in 2018 is approximately $1.6 million. Houston Electric expects to meet these 2018 obligations by certification of property additions. As of December 31, 2017, Houston Electric’s assets were also subject to liens securing approximately $2.9 billion of general mortgage bonds, which are junior to the liens of the first mortgage bonds.