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Goodwill and Other Intangibles (CenterPoint Energy and CERC)
 9 Months Ended
Sep. 30, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangibles (CenterPoint Energy and CERC) [Text Block] Goodwill and Other Intangibles (CenterPoint Energy and CERC)
Goodwill and intangible assets related to the Infrastructure Services and Energy Services Disposal Groups are classified as held for sale on CenterPoint Energy’s and CERC’s respective recast Condensed Consolidated Balance Sheets as of December 31, 2019, as applicable, and are excluded from the tabular disclosures below. See Note 3 for further information.
CenterPoint Energy’s goodwill by reportable segment as of September 30, 2020 and December 31, 2019 is as follows:
December 31, 2019ImpairmentSeptember 30, 2020
(in millions)
Indiana Electric Integrated (1)
$1,121 $185 $936 
Natural Gas Distribution3,312 — 3,312 
Corporate and Other 449 — 449 
Total$4,882 $185 $4,697 
(1) CenterPoint Energy recognized a non-cash goodwill impairment charge as a result of the March 31, 2020 goodwill impairment test.

CERC’s goodwill by reportable segment as of September 30, 2020 and December 31, 2019 is as follows:
(in millions)
Natural Gas Distribution$746 
Corporate and Other11 
Total$757 

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 reporting units approximate the reportable segments, with the exception of ESG, which is a separate reporting unit but included in Corporate and Other at CenterPoint Energy. 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 recorded as an impairment charge, not to exceed the carrying amount of goodwill.

In connection with their preparation of the financial statements for the three months ended March 31, 2020, CenterPoint Energy and CERC identified triggering events to perform interim goodwill impairment tests for each of their reporting units
due to the macroeconomic conditions related in part to the COVID-19 pandemic and the resulting decrease in CenterPoint Energy’s enterprise market capitalization below book value from the decline in CenterPoint Energy’s Common Stock price.

CenterPoint Energy’s interim impairment test in the three months ended March 31, 2020 resulted in a non-cash goodwill impairment charge in the amount of $185 million for the Indiana Electric Integrated reportable segment. The Indiana Electric Integrated reporting unit fair value analysis resulted in an implied fair value of goodwill of $936 million for this reporting unit as of March 31, 2020, and as a result, the non-cash impairment charge was recorded in the nine months ended September 30, 2020.

CenterPoint Energy estimated the value of the Indiana Electric Integrated reporting unit using primarily an income approach. Under the income approach, the fair value of the reporting unit is determined by using the present value of future expected cash flows, which include management’s projections of the amount and timing of future capital expenditures and the cash inflows from the related regulatory recovery. These estimated future cash flows are then discounted using a rate that approximates the weighted average cost of capital of a market participant. The selection of the discount rate requires significant judgment.

With the exception of Indiana Electric Integrated discussed above, the fair value of each of CenterPoint Energy’s and CERC’s reporting units exceeded their carrying value, resulting in no goodwill impairment from the March 31, 2020 interim impairment test. See Note 3 for goodwill impairments included within discontinued operations.

CenterPoint Energy and CERC performed their annual goodwill impairment tests in the third quarter of 2020 and determined that no goodwill impairment charge was required for any reporting unit as a result of those tests.
The tables below present information on CenterPoint Energy’s other intangible assets recorded in Other non-current assets 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, 2020December 31, 2019
Gross Carrying AmountAccumulated AmortizationNet BalanceGross Carrying AmountAccumulated AmortizationNet Balance
(in millions)
Customer relationships$33 $(7)$26 $33 $(4)$29 
Trade names16 (3)13 16 (1)15 
Construction backlog (1)
5 (4)1 5 (4)1 
Operation and maintenance agreements (1)
12 (1)11 12 — 12 
Other2 (1)1 2 (1)1 
Total$68 $(16)$52 $68 $(10)$58 

(1)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,
2020201920202019
(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization (1)
$2 $1 $5 $2 
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas (1)
— 1 1 4 
(1)Assets held for sale are not amortized. The table reflects amortization on continuing operations. For further information on discontinued operations, see Note 3.
CenterPoint Energy estimates that amortization expense of intangible assets with finite lives for the next five years will be as follows:
Amortization
 Expense (1)
CenterPoint Energy
(in millions)
Remaining three months of 2020$2 
20216 
20226 
20236 
20245 
20255 

(1)Assets held for sale are not amortized. The table reflects amortization on continuing operations. For further information on discontinued operations, see Note 3.