Mergers and Acquisitions (CenterPoint Energy) (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The Merger is being accounted for in accordance with ASC 805, Business Combinations, with CenterPoint Energy as the accounting acquirer of Vectren. Identifiable assets acquired and liabilities assumed have been recorded at their estimated fair values on the Merger Date.

Vectren’s regulated operations, comprised of electric generation and electric and natural gas energy delivery services, are subject to the rate-setting authority of the FERC, the IURC and the PUCO, and are accounted for pursuant to U.S. generally accepted accounting principles for regulated operations. The rate-setting and cost-recovery provisions currently in place for Vectren’s regulated operations provide revenues derived from costs including a return on investment of assets and liabilities included in rate base. Thus, the fair values of Vectren’s tangible and intangible assets and liabilities subject to these rate-setting provisions approximate their carrying values. Accordingly, neither the assets and liabilities acquired, nor the unaudited pro forma financial information, reflect any adjustments related to these amounts. The fair value of regulatory assets not earning a return have been determined using the income approach and are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs.

The fair value of Vectren’s assets acquired and liabilities assumed that are not subject to the rate-setting provisions, including identifiable intangibles, have been determined using the income approach and the market approach. The valuation of Vectren’s long-term debt is primarily considered a Level 2 fair value measurement. All other valuations are considered Level 3 fair value measurements due to the use of significant judgmental and unobservable inputs, including projected timing and amount of future cash flows and discount rates reflecting risk inherent in the future market prices.

The following table presents the preliminary purchase price allocation as of June 30, 2019 (in millions):



Cash and cash equivalents	$	16
Other current assets	598
Property, plant and equipment, net	5,146
Identifiable intangibles	322
Regulatory assets	338
Other assets	151
Total assets acquired	6,571
Current liabilities	690
Regulatory liabilities	944
Other liabilities	860
Long-term debt	2,401
Total liabilities assumed	4,895
Net assets acquired	1,676
Goodwill	4,306
Total purchase price consideration	$	5,982

Schedule of Finite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

The estimated fair value of the identifiable intangible assets and related useful lives as included in the preliminary purchase price allocation include:



	Weighted Average Useful Lives	Estimated Fair Value
	(in years)	(in millions)
Operation and maintenance agreements	24	$	12
Customer relationships	18	220
Construction backlog	1	28
Trade names	10	62
Total		$	322

Business Combination, Separately Recognized Transactions [Table Text Block]

The results of operations for Vectren included in CenterPoint Energy’s Interim Condensed Financial Statements from the Merger Date are as follows:



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
	(in millions)
Operating revenues	$	688	$	1,161
Net income	38		19

Business Acquisition, Pro Forma Information [Table Text Block]

The following unaudited pro forma financial information reflects the consolidated results of operations of CenterPoint Energy, assuming the Merger had taken place on January 1, 2018. The unaudited pro forma financial information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved had the Merger taken place on the dates indicated or of the future consolidated results of operations of the combined company.



	Three Months Ended June 30,						Six Months Ended June 30,
	2019		2018				2019			2018
	(in millions)
Operating revenues	$	2,798	$	2,830			$	6,575		$	6,644
Net income (loss)	199		(24		)	(1)	371		(2)	83		(3)


(1)	Pro forma net income was adjusted to exclude $10 million and $27 million, respectively, of Vectren and CenterPoint Energy Merger-related transaction costs incurred in 2018 and reflected in the historical income statements.


(2)	Pro forma net income was adjusted to exclude $37 million of Vectren Merger-related transaction costs incurred in 2019.


(3)	Pro forma net income was adjusted to include $46 million and $1 million, respectively, of Vectren and CenterPoint Energy Merger-related transaction costs incurred from July 1, 2018 to June 30, 2019.