Short-term Borrowings and Long-term Debt

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Short-term Borrowings and Long-term Debt

Short-term Borrowings and Long-term Debt Inventory Financing. CenterPoint Energy’s and CERC’s Natural Gas businesses have third-party AMAs associated with their utility distribution service in Indiana, Louisiana, Minnesota, Mississippi and Texas. The AMAs have varying terms, the longest of which expires in 2027. Pursuant to the provisions of the agreements, CenterPoint Energy’s and CERC’s Natural Gas either sells natural gas to the asset manager and agrees to repurchase an equivalent amount of natural gas throughout the year at the same cost, or simply purchases its full natural gas requirements at each delivery point from the asset manager. These transactions are accounted for as an inventory financing. CenterPoint Energy and CERC had $14 million and $7 million outstanding obligations related to the AMAs as of September 30, 2022 and December 31, 2021, respectively, recorded in Short-term borrowings on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. Outstanding obligations related to third-party AMAs associated with utility distribution service in Arkansas and Oklahoma of $36 million as of December 31, 2021 are reflected in current liabilities held for sale on CenterPoint Energy’s and CERC’s Condensed Consolidated Balance Sheets. See Note 3 for further information.

Debt Transactions. During the nine months ended September 30, 2022, in addition to CERC’s debt exchange discussed further below, the following debt instruments were issued or incurred:

Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
	(in millions)
Houston Electric	February 2022	General Mortgage Bonds (1)	$	300	3.00%	2032
Houston Electric	February 2022	General Mortgage Bonds (1)	500		3.60%	2052
Houston Electric	September 2022	General Mortgage Bonds (2)	500		4.45%	2032
Houston Electric	September 2022	General Mortgage Bonds (2)	300		4.85%	2052
		Total Houston Electric	1,600
CERC	June 2022	Senior Notes (3)	500		4.40%	2032
CERC	August 2022	Term Loan (4)	500		SOFR (5) + 0.70%	2023
		Total CERC	1,000
		Total CenterPoint Energy	$	2,600

(1)Total proceeds, net of discounts and issuance expenses and fees, of approximately $784 million were used for general limited liability company purposes, including capital expenditures and the repayment of all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool.

(2)Total proceeds, net of discounts and issuance expenses and fees, of approximately $789 million were used for general limited liability company purposes, including capital expenditures, the repayment of all or a portion of Houston Electric’s borrowings under the CenterPoint Energy money pool and the redemption of outstanding general mortgage bonds discussed below.

(3)Total proceeds, net of discounts and issuance expenses and fees, of approximately $495 million were used for general corporate purposes, including the issuance by CERC Corp.’s current subsidiaries, Indiana Gas and VEDO, of intercompany notes to CERC Corp. in June 2022; these subsidiaries used the funds to repay intercompany debt owed to VUH in connection with the Restructuring in June 2022.

(4)Total proceeds, net of transaction expenses and fees, of approximately $500 million were used for general corporate purposes, including the repayment of CERC’s outstanding commercial paper balances.

(5)As defined in the term loan agreement, which includes an adjustment of 0.10% per annum.

Debt Exchange. As a part of the Restructuring, on May 27, 2022, CERC Corp. and VUH completed an exchange with holders of VUH PPNs whereby CERC Corp. issued new senior notes with an aggregate principal amount of $302 million to such holders in exchange for all of their outstanding VUH PPNs with an aggregate principal amount of $302 million. The new CERC Corp. senior notes have the same principal amount, interest rate, and payment and maturity dates as the VUH PPNs for which they were exchanged. As a result of the exchange, CERC Corp. became the creditor for the PPNs originally issued by VUH, and CERC Corp. received $302 million of cash from VUH on June 30, 2022 in full repayment of the VUH PPNs. Orders received from the IURC and PUCO allow the reissuance of existing debt of Indiana Gas and VEDO to CERC, to continue to amortize existing issuance expenses and discounts, and to treat any potential exchange fees as discounts to be amortized over the life of the debt.

On September 6, 2022, CERC Corp. and VUH announced that CERC Corp. had commenced an offer to eligible holders to exchange any and all outstanding 6.10% senior notes due 2035 issued by Vectren Utility Holdings, Inc. (predecessor of VUH) for (1) up to $75 million aggregate principal amount of new senior notes issued by CERC Corp. and (2) cash. The new CERC Corp. senior notes issued in the exchange offer have the same interest rate and payment and maturity dates as the VUH notes for which they were exchanged. On October 5, 2022, in connection with the settlement of the exchange offer, CERC Corp. issued $75 million aggregate principal amount of 6.10% senior notes due 2035 in exchange for all outstanding VUH senior notes.

Debt Repayments and Redemptions. During the nine months ended September 30, 2022, the following debt instruments were repaid at maturity or redeemed prior to maturity with proceeds received from the sale of Energy Transfer units discussed further in Note 10:

Registrant	Repayment/Redemption Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
			(in millions)
CERC (1)	January 2022	Floating Rate Senior Notes	$	425	Three-month LIBOR plus 0.5%	2023
		Total CERC	425
Houston Electric	August 2022	General Mortgage Bonds	300		2.25%	2022
		Total Houston Electric	300
CenterPoint Energy (2)	January 2022	First Mortgage Bonds	5		0.82%	2022
CenterPoint Energy (3)	March 2022	Senior Notes	250		3.85%	2024
CenterPoint Energy (4)	March 2022	Senior Notes	350		4.25%	2028
		Total CenterPoint Energy	$	1,330

(1)In January 2022, CERC provided notice of partial redemption, and on January 31, 2022, CERC redeemed a portion ($425 million) of the outstanding $1 billion aggregate principal amount of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest on the principal amount being redeemed.

(2)First Mortgage Bonds issued by SIGECO.

(3)In March 2022, CenterPoint Energy provided notice of redemption, and on March 31, 2022, CenterPoint Energy redeemed all of the remaining outstanding senior notes of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $2 million, the write off of issuance costs of $1 million and an applicable make-whole premium of approximately $7 million, for a total redemption price of $260 million.

(4)In March 2022, CenterPoint Energy provided notice of partial redemption, and on March 31, 2022, CenterPoint Energy redeemed a portion ($350 million) of the outstanding $500 million aggregate principal amount of the series at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $6 million, the write off of issuance costs of $3 million and an applicable make-whole premium of approximately $34 million, for a total redemption price of $393 million.

Additionally, in October 2022, Houston Electric redeemed $200 million aggregate principal amount of its outstanding 5.60% general mortgage bonds due 2023 at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest of approximately $3 million and an applicable make-whole premium of approximately $2 million, for a total redemption price of $205 million.

Credit Facilities.

The Registrants had the following revolving credit facilities as of September 30, 2022:

Execution  Date	Registrant	Size of Facility		Draw Rate of LIBOR plus (1)	Financial Covenant Limit on Debt for Borrowed Money to Capital Ratio		Debt for Borrowed Money to Capital Ratio as of September 30, 2022 (2)	Termination Date
		(in millions)
February 4, 2021	CenterPoint Energy	$	2,400	1.625%	65.0%	(3)	59.9%	February 4, 2024
February 4, 2021	Houston Electric	300		1.375%	67.5%	(3)	52.3%	February 4, 2024
February 4, 2021	CERC	900		1.250%	65.0%		49.8%	February 4, 2024
	Total	$	3,600

(1)Based on current credit ratings.

(2)As defined in the revolving credit facility agreements, excluding Securitization Bonds.

(3)For CenterPoint Energy and Houston Electric, the financial covenant limit will temporarily increase to 70% if Houston Electric experiences damage from a natural disaster in its service territory and CenterPoint Energy 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 CenterPoint Energy delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of CenterPoint Energy’s certification or (iii) the revocation of such certification.

On June 30, 2022, in connection with the Restructuring, VUH repaid in full all outstanding indebtedness and terminated all remaining commitments and other obligations under its $400 million amended and restated credit agreement dated as of February 4, 2021. VUH did not incur any penalties in connection with the early termination.

The Registrants, including the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of September 30, 2022.

The table below reflects the utilization of the Registrants’ respective revolving credit facilities:

	September 30, 2022								December 31, 2021
Registrant	Loans		Letters of Credit		Commercial Paper (1)		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper (1)		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy	$	—	$	11	$	454	3.22	%	$	—	$	11	$	1,400	0.34	%
CenterPoint Energy (2)	—		—		—		—	%	—		—		350		0.21	%
Houston Electric	—		—		—		—	%	—		—		—		—	%
CERC	—		—		575		3.38	%	—		—		899		0.26	%
Total	$	—	$	11	$	1,029			$	—	$	11	$	2,649

(1)Outstanding commercial paper generally has maturities of 60 days or less and each Registrants’ commercial paper program is backstopped by such Registrants’ long-term credit facilities. Houston Electric does not have a commercial paper program.

(2)This credit facility was entered into by VUH and was guaranteed by SIGECO, Indiana Gas and VEDO. This credit facility was terminated in connection with the Restructuring, as discussed above.

Liens. As of September 30, 2022, Houston Electric’s assets were subject to liens securing approximately $6.3 billion of general mortgage bonds, including approximately $68 million held in trust to secure pollution control bonds that mature in 2028 for which CenterPoint Energy is obligated. The general mortgage bonds that are held in trust to secure pollution control bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations. As of September 30, 2022, Houston Electric could issue approximately $4.3 billion of additional general mortgage bonds on the basis of retired bonds and 70% of property additions.

Other. As of September 30, 2022, certain financial institutions agreed to issue, from time to time, up to $20 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. As of September 30, 2022, such financial institutions had issued $1 million of letters of credit on behalf of Vectren and certain of its subsidiaries.