Equity Securities and Indexed Debt Securities (ZENS) (CenterPoint Energy)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Equity Securities and Indexed Debt Securities (ZENS) (CenterPoint Energy)

(a) Equity Securities

During February and March 2022, CenterPoint Energy executed its previously announced plan to exit the midstream sector by selling the remaining Energy Transfer Common Units and Energy Transfer Series G Preferred Units it held as discussed below. CenterPoint Energy used the proceeds from these sales to redeem outstanding debt and pay incurred expenses associated with the early redemptions. See Note 11 for further information.

CenterPoint Energy’s sales of equity securities during the six months ended June 30, 2022 are as follows:


Equity Security/Date Sold	Units Sold	Proceeds (1)
		(in millions)
Energy Transfer Common Units
February and March 2022	50,999,768	$	515
Energy Transfer Series G Preferred Units
March 2022	192,390	$	187

(1)Proceeds are net of transaction costs.

Gains and losses on equity securities, net of transaction costs, are recorded in Gain (Loss) on Equity Securities in CenterPoint Energy’s Condensed Statements of Consolidated Income.


	Gains (Losses) on Equity Securities
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in millions)
AT&T Common	$	(27)	$	(15)	$	(37)	$	—
Charter Common	(67)		90		(160)		52
WBD Common	33		—		33		—
Energy Transfer Common Units	—		—		95		—
Energy Transfer Series G Preferred Units	—		—		(9)		—
Other	—		—		—		—
Total	$	(61)	$	75	$	(78)	$	52

CenterPoint Energy recorded net unrealized losses of $61 million and $164 million for the three and six months ended June 30, 2022 and net unrealized gains of $75 million and $52 million for the three and six months ended June 30, 2021 respectively, for equity securities held as of June 30, 2022 and 2021.

CenterPoint Energy and its subsidiaries hold shares of certain securities detailed in the table below, which are classified as trading securities. Shares of AT&T Common, Charter Common and WBD Common are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS.


	Shares Held		Carrying Value
	June 30, 2022	December 31, 2021	June 30, 2022		December 31, 2021
			(in millions)
AT&T Common	10,212,945	10,212,945	$	214	$	251
Charter Common	872,503	872,503	409		569
WBD Common	2,470,685	—	33		—
Energy Transfer Common Units	—	50,999,768	—		420
Energy Transfer Series G Preferred Units	—	192,390	—		196
Other			2		3
Total			$	658	$	1,439

(b) ZENS

In September 1999, CenterPoint Energy issued ZENS having an original principal amount of $1.0 billion of which $828 million remained outstanding as of June 30, 2022. Each ZENS is exchangeable at the holder’s option at any time for an amount of cash equal to 95% of the market value of the reference shares attributable to such note. The number and identity of the reference shares attributable to each ZENS are adjusted for certain corporate events.

CenterPoint Energy’s reference shares for each ZENS consisted of the following:


	June 30, 2022	December 31, 2021
	(in shares)
AT&T Common	0.7185	0.7185
Charter Common	0.061382	0.061382
WBD Common	0.173817	—

CenterPoint Energy pays interest on the ZENS at an annual rate of 2% plus the amount of any quarterly cash dividends paid in respect of the reference shares attributable to the ZENS. The principal amount of the ZENS is subject to increases or decreases to the extent that the annual yield from interest and cash dividends on the reference shares attributable to the ZENS is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of June 30, 2022, the ZENS, having an original principal amount of $828 million and a contingent principal amount of

$31 million, were outstanding and were exchangeable, at the option of the holders, for cash equal to 95% of the market value of the reference shares attributable to the ZENS.On May 17, 2021, AT&T announced that it had entered into a definitive agreement with Discovery, Inc. to combine their media assets into a new publicly traded company, Warner Bros. Discovery. The transaction closed on April 8, 2022. Pursuant to the definitive agreement, AT&T shareholders received 0.241917 shares of WBD Common for each share of AT&T Common owned, representing 71% of the new company. Upon the closing of the transaction, reference shares attributable to ZENS now consist of 0.7185 shares of AT&T Common, 0.061382 shares of Charter Common and 0.173817 shares of WBD Common.