Item 8. Financial Statements and Supplementary Data

Item 8. Financial Statements and Supplementary Data

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Shares Held at December 31,

AT&T Common

Charter Common

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

CenterPoint Energy, Inc.

Houston, Texas

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CenterPoint Energy, Inc. and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2020 expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisitions - Vectren Corporation - Intangible Assets - Refer to Note 4 to the financial statements

Critical Audit Matter Description

The Company completed the acquisition of Vectren Corporation (“Vectren”) for $6 billion in cash on February 1, 2019. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including intangible assets and goodwill of $4.6 billion. Of the intangible assets acquired, $297 million was allocated to identifiable intangible assets such as customer relationships and trade name with the remainder of $4.3 billion being recorded as goodwill. Management estimated the fair value of the identifiable intangible assets using the multi-period excess earnings method, which is a specific discounted cash flow method. In addition, the determination of the business fair value required management to make significant estimates and assumptions related to discount rates and future cash flows. Determining the discount rates for the nonregulated businesses acquired required management to estimate the appropriate entity specific risk premiums for those nonregulated businesses based on evaluation of industry and entity-specific risks which included expectations about future market or economic conditions.

Changes in these assumptions could have a significant impact on either the amount of the identified intangible assets, the resulting amount of goodwill, or both.

Given the fair value determination of intangible assets acquired required management to make significant estimates and assumptions related to the forecasts of future cash flows and the company specific risk premium affecting the discount rate, performing audit procedures to evaluate the reasonableness of these estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the forecasts of future cash flows and company specific risk premium affecting the discount rate for the intangible assets of the nonregulated businesses acquired included the following, among others:


•	We tested the effectiveness of controls over acquisition valuation, including management’s controls over the forecasts of future cash flows and selection of the company specific risk premium assumption used in the determinations of the discount rates.


•	We considered the impact of changes to the discount rate and long-term growth rate on the fair value.


•	We evaluated the value at which acquired assets were recorded under the applicable accounting guidance based on the regulated nature of the entity.


•	We assessed the reasonableness of management’s forecasts by comparing the forecasts to:


◦	Historical revenues and operating margins.


◦	Internal communications to management and the Board of Directors.


◦	Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.


•	We evaluated whether the estimated future cash flows were consistent with evidence obtained in other areas of the audit.


•	We involved our fair value specialists who assisted in:


◦	Assessing the appropriateness of the valuation methodology used to determine the customer relationship intangible assets and the company specific risk premiums.


◦	Testing the determined discount rates by independently estimating a discount rate for each business using a process consistent with generally accepted valuation practices.

Goodwill - Refer to Note 6 to the financial statements

Critical Audit Matter Description

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. In its annual goodwill impairment test on July 1, 2019 (“measurement date”) and as triggering events are identified, the Company used the discounted cash flow model and a market approach to estimate fair value of each reporting unit, which required management to make significant estimates and assumptions related to forecasts of future revenues and operating margins based on certain assumptions including (i) future capital expenditures and rate base growth, (ii) estimated future rate changes, (iii) discount rates, and (iv) long-term growth rates. Changes in these assumptions could have a significant impact on the fair value of a reporting unit, the amount of any goodwill impairment charge, or both. The Company’s goodwill is $5.2 billion as of December 31, 2019, of which $4.3 billion resulted from the acquisition of Vectren. The fair value of each reporting unit exceeded the carrying value as of the measurement date and, therefore, no impairment was recognized.

Given the significant assumptions used by management to estimate fair value including (i) future capital expenditures and rate base growth, (ii) estimated future rate changes, (iii) discount rates, and (iv) long-term growth rates, performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to forecasts of future revenue and operating margin, specifically for reporting units containing unregulated business units and Vectren rate regulated jurisdictions, required a high degree of auditor judgment and an increased extent of effort, including the need to involve fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the assumptions used to forecast future revenue and operating margin used by management within the discounted cash flow model included the following, among others:


•	We tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the determination of fair value, such as controls related to management’s forecasts of future capital expenditures, future rate base growth, estimated future rate changes, discount rates, and long-term growth rates.


•	We evaluated the reasonableness of management’s forecasts by comparing the forecasts to:


◦	Historical revenues, operating margins, capital expenditures, rate base growth, and rate changes.


◦	Internal communications to management and the Board of Directors.


◦	Forecasted information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies.


•	We compared future rate changes to the Company’s scheduled rate filings and the amount of capital expenditures for the regulated entities to communications with regulators including integrated resource plans.


•	We compared actual revenue growth and capital expenditures results for 2019 to the planned results as of the acquisition date.


•	We evaluated the impact of changes in management’s forecasts from the measurement date to December 31, 2019.


•	We involved our fair value specialists who assisted in:


◦	Assessing the appropriateness of the valuation methodology used to determine the company specific risk premiums in calculating the discount rate.


◦	Testing the determined discount rates by independently estimating a discount rate for each business using a process consistent with generally accepted valuation practices.


◦	Evaluating the reasonableness of the long-term growth rate through a comparison to industry reports and peer companies.

Impact of Rate Regulation on the Financial Statements - Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company, through its regulated electric and gas subsidiaries is subject to rate regulation by the relevant state public utility commissions and, in Texas by the Railroad Commission, and the Federal Energy Regulatory Commission (collectively, “the Commissions”), and those municipalities (in Texas only) served by the Company. Management has determined it meets the requirements under accounting principles generally accepted in the United States of America to prepare its financial statements applying the specialized rules to account for the effects of cost-based rate regulation. Accounting for the economics of rate regulation impacts multiple financial statement line items and disclosures, such as property, plant, and equipment, net; regulatory assets and liabilities; utility revenues; operation and maintenance expense; and depreciation and amortization expense; and income tax expense.

The Company’s rates are subject to regulatory rate-setting processes by certain municipalities and the Commissions. Rates are determined and approved in regulatory proceedings based on an analysis of the Company’s costs to provide utility service and a return on, and recovery of, the Company’s investment in the utility business. Regulatory decisions can have an impact on the recovery of costs, the rate of return earned on investment, and the timing and amount of assets to be recovered by rates. The regulation of rates is premised on the full recovery of prudently incurred costs and a reasonable rate of return on invested capital. Decisions to be made by the Commissions in the future will impact the accounting for regulated operations, including decisions about the amount of allowable costs and return on invested capital included in rates and any refunds that may be required. While the Company has indicated it expects to recover costs from customers through regulated rates, there is a risk that the Commissions will not approve: (1) full recovery of the costs of providing utility service, or (2) full recovery of all amounts invested in the utility business and a reasonable return on that investment.

We identified the impact of rate regulation as a critical audit matter due to the significant judgments made by management to support its assertions about affected account balances and disclosures and the high degree of subjectivity involved in assessing the impact of future regulatory actions on the financial statements. Management judgments include assessing the likelihood of (1) recovery in future rates of incurred costs, (2) a disallowance of capital investments made by the Company and (3) refunds to customers. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the rate setting process due its inherent complexities.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the uncertainty of future decisions by the Commissions included the following, among others:


•	We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred and deferred as regulatory assets, and (2) refund or future reductions in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.

•

We tested the effectiveness of management’s controls over the evaluation of the likelihood of (1) the recovery in future rates of costs incurred and deferred as regulatory assets, and (2) refund or future reductions in rates that should be reported as regulatory liabilities. We also tested the effectiveness of management’s controls over the initial recognition of amounts as regulatory assets or liabilities; and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates or of a future reduction in rates.


•	We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.


•	For matters with a high degree of subjectivity, we read relevant regulatory orders issued by the Commissions for the Company and other public utilities in the states the Company operates in, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedence of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.

•

For matters with a high degree of subjectivity, we read relevant regulatory orders issued by the Commissions for the Company and other public utilities in the states the Company operates in, regulatory statutes, interpretations, procedural memorandums, filings made by interveners, and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on precedence of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness.


•	For regulatory matters in process, we inspected the Company’s filings with the Commission and the filings with the Commission by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.


•	We evaluated management’s plans regarding property, plant, and equipment for indications of potential impairment. We inspected the capital-projects budget and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life. We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management’s assertion regarding probability of a disallowance of long-lived assets.

•

We evaluated management’s plans regarding property, plant, and equipment for indications of potential impairment. We inspected the capital-projects budget and inquired of management to identify projects that are designed to replace assets that may be retired prior to the end of the useful life. We inspected minutes of the board of directors and regulatory orders and other filings with the Commissions to identify any evidence that may contradict management’s assertion regarding probability of a disallowance of long-lived assets.


•	We evaluated regulatory filings for any evidence that intervenors are challenging full recovery of the cost of any capital projects and inquired of management to assess whether capitalized costs are probable of disallowance.


•	We obtained an analysis from management regarding probability of recovery for regulatory assets or refund or future reduction in rates for regulatory liabilities not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery or a future reduction in rates.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 27, 2020

We have served as the Company’s auditor since 1932.

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED INCOME



	Year Ended December 31,
	2019			2018			2017
	(in millions, except per share amounts)
Revenues:
Utility revenues	$	7,162		$	6,163		$	5,603
Non-utility revenues	5,139			4,426			4,011
Total	12,301			10,589			9,614
Expenses:
Utility natural gas, fuel and purchased power	1,683			1,410			1,109
Non-utility cost of revenues, including natural gas	4,029			4,364			3,785
Operation and maintenance	3,550			2,335			2,157
Depreciation and amortization	1,287			1,243			1,036
Taxes other than income taxes	478			406			391
Goodwill impairment	48			—			—
Total	11,075			9,758			8,478
Operating Income	1,226			831			1,136
Other Income (Expense):
Gain (loss) on marketable securities	282			(22		)	7
Gain (loss) on indexed debt securities	(292		)	(232		)	49
Interest and other finance charges	(528		)	(361		)	(313		)
Interest on Securitization Bonds	(39		)	(59		)	(77		)
Equity in earnings of unconsolidated affiliates, net	230			307			265
Other, net	50			50			(4		)
Total	(297		)	(317		)	(73		)
Income Before Income Taxes	929			514			1,063
Income tax expense (benefit)	138			146			(729		)
Net Income	791			368			1,792
Preferred stock dividend requirement	117			35			—
Income Available to Common Shareholders	$	674		$	333		$	1,792

Basic Earnings Per Common Share	$	1.34		$	0.74		$	4.16

Diluted Earnings Per Common Share	$	1.33		$	0.74		$	4.13

Weighted Average Common Shares Outstanding, Basic	502			449			431

Weighted Average Common Shares Outstanding, Diluted	505			452			434

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Net income	$	791		$	368		$	1,792
Other comprehensive income (loss):
Adjustment to pension and other postretirement plans (net of tax expense (benefit) of $4, ($2) and $6, respectively)	12			(10		)	6
Net deferred gain (loss) from cash flow hedges (net of tax expense (benefit) of ($1), ($4) and ($2), respectively)	(2		)	(15		)	(3		)
Reclassification of deferred loss from cash flow hedges realized in net income (net of tax expense of $-0-, $-0- and $-0-, respectively)	1			—			—
Other comprehensive loss from unconsolidated affiliates (net of tax of $-0-, $-0-, and $-0-, respectively)	(1		)	—			—
Other comprehensive income (loss)	10			(25		)	3
Comprehensive income	801			343			1795
Preferred stock dividend requirement	117			35			—
Comprehensive income available to common shareholders	$	684		$	308		$	1,795

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	December 31, 2019		December 31, 2018
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($216 and $335 related to VIEs, respectively)	$	241	$	4,231
Investment in marketable securities	822		540
Accounts receivable ($26 and $56 related to VIEs, respectively), less bad debt reserve of $21 and $18, respectively	1,249		1,190
Accrued unbilled revenues	586		378
Natural gas and coal inventory	277		194
Materials and supplies	269		200
Non-trading derivative assets	136		100
Taxes receivable	106		—
Prepaid expense and other current assets ($19 and $34 related to VIEs, respectively)	161		192
Total current assets	3,847		7,025
Property, Plant and Equipment, net	20,945		14,044
Other Assets:
Goodwill	5,164		867
Regulatory assets ($788 and $1,059 related to VIEs, respectively)	2,117		1,967
Non-trading derivative assets	58		38
Investment in unconsolidated affiliates	2,408		2,482
Preferred units - unconsolidated affiliate	363		363
Intangible assets, net	321		65
Other	216		158
Total other assets	10,647		5,940
Total Assets	$	35,439	$	27,009

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS, cont.



	December 31, 2019			December 31, 2018
	(in millions, except par value and shares)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current portion of VIE Securitization Bonds long-term debt	$	231		$	458
Indexed debt, net	19			24
Current portion of other long-term debt	618			—
Indexed debt securities derivative	893			601
Accounts payable	1,138			1,240
Taxes accrued	241			204
Interest accrued	158			121
Dividends accrued	—			187
Customer deposits	125			86
Non-trading derivative liabilities	51			126
Other	414			255
Total current liabilities	3,888			3,302
Other Liabilities:
Deferred income taxes, net	3,928			3,239
Non-trading derivative liabilities	29			5
Benefit obligations	754			796
Regulatory liabilities	3,474			2,525
Other	763			402
Total other liabilities	8,948			6,967
Long-term Debt:
VIE Securitization Bonds, net	746			977
Other long-term debt, net	13,498			7,705
Total long-term debt, net	14,244			8,682
Commitments and Contingencies (Note 16)
Shareholders’ Equity:
Cumulative preferred stock, $0.01 par value, 20,000,000 shares authorized	—			—
Series A Preferred Stock, $0.01 par value, $800 aggregate liquidation preference, 800,000 shares outstanding	790			790
Series B Preferred Stock, $0.01 par value, $978 aggregate liquidation preference, 977,500 shares outstanding	950			950
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 502,242,061 shares and 501,197,784 shares outstanding, respectively	5			5
Additional paid-in capital	6,080			6,072
Retained earnings	632			349
Accumulated other comprehensive loss	(98		)	(108		)
Total shareholders’ equity	8,359			8,058
Total Liabilities and Shareholders’ Equity	$	35,439		$	27,009

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Cash Flows from Operating Activities:
Net income	$	791		$	368		$	1,792
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,287			1,243			1,036
Amortization of deferred financing costs	29			48			24
Deferred income taxes	69			48			(770		)
Amortization of intangible assets in Non-utility cost of revenues	24			—			—
Goodwill impairment	48			—			—
Unrealized loss (gain) on marketable securities	(282		)	22			(7		)
Loss (gain) on indexed debt securities	292			232			(49		)
Write-down of natural gas inventory	4			2			—
Equity in earnings of unconsolidated affiliates	(230		)	(307		)	(265		)
Distributions from unconsolidated affiliates	261			267			—
Pension contributions	(109		)	(69		)	(48		)
Changes in other assets and liabilities, excluding acquisitions:
Accounts receivable and unbilled revenues, net	226			(154		)	(216		)
Inventory	(52		)	1			(7		)
Taxes receivable	(106		)	—			30
Accounts payable	(455		)	220			136
Fuel cost recovery	92			33			(85		)
Non-trading derivatives, net	(64		)	103			(84		)
Margin deposits, net	(56		)	5			(55		)
Interest and taxes accrued	54			40			5
Net regulatory assets and liabilities	(114		)	28			(107		)
Other current assets	(22		)	—			(3		)
Other current liabilities	(107		)	(24		)	34
Other assets	103			6			(4		)
Other liabilities	(54		)	12			36
Other, net	9			12			24
Net cash provided by operating activities	1,638			2,136			1,417
Cash Flows from Investing Activities:
Capital expenditures	(2,506		)	(1,651		)	(1,426		)
Acquisitions, net of cash acquired	(5,991		)	—			(132		)
Distributions from unconsolidated affiliates in excess of cumulative earnings	42			30			297
Proceeds from sale of marketable securities	—			398			—
Proceeds from sale of assets	5			—			—
Purchase of investments	(6		)	—			—
Other, net	35			16			4
Net cash used in investing activities	(8,421		)	(1,207		)	(1,257		)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	—			(39		)	4
Proceeds from (payments of) commercial paper, net	1,891			(1,543		)	349
Proceeds from long-term debt, net	2,916			2,495			1,096
Payments of long-term debt	(1,302		)	(484		)	(1,211		)
Loss on reacquired debt	—			—			(5		)
Debt and equity issuance costs	(20		)	(47		)	(13		)
Payment of dividends on Common Stock	(577		)	(499		)	(461		)
Payment of dividends on preferred stock	(118		)	(11		)	—
Proceeds from issuance of Common Stock, net	—			1,844			—
Proceeds from issuance of preferred stock, net	—			1,740			—
Distribution to ZENS holders	—			(398		)	—
Other, net	(14		)	(5		)	(4		)
Net cash provided by (used in) financing activities	2,776			3,053			(245		)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(4,007		)	3,982			(85		)
Cash, Cash Equivalents and Restricted Cash at Beginning of Year	4,278			296			381
Cash, Cash Equivalents and Restricted Cash at End of Year	$	271		$	4,278		$	296

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY



	2019				2018				2017
	Shares	Amount			Shares	Amount			Shares	Amount
	(in millions of dollars and shares, except per share amounts)
Cumulative Preferred Stock, $0.01 par value; authorized 20,000,000 shares
Balance, beginning of year	2	$	1,740		—	$	—		—	$	—
Issuances of Series A Preferred Stock	—	—			1	790			—	—
Issuances of Series B Preferred Stock	—	—			1	950			—	—
Balance, end of year	2	1,740			2	1,740			—	—
Common Stock, $0.01 par value; authorized 1,000,000,000 shares
Balance, beginning of year	501	5			431	4			431	4
Issuances related to benefit and investment plans	1	—			—	—			—	—
Issuances of Common Stock	—	—			70	1			—	—
Balance, end of year	502	5			501	5			431	4
Additional Paid-in-Capital
Balance, beginning of year		6,072				4,209				4,195
Issuances related to benefit and investment plans		8				19				14
Issuances of Common Stock, net of issuance costs		—				1,844				—
Balance, end of year		6,080				6,072				4,209
Retained Earnings (Accumulated Deficit)
Balance, beginning of year		349				543				(668		)
Net income		791				368				1,792
Common Stock dividends declared ($0.8625, $1.1200 and $1.3475 per share, respectively)		(433		)		(523		)		(581		)
Series A Preferred Stock dividends declared ($30.6250, $32.1563 and $-0- per share, respectively)		(24		)		(26		)		—
Series B Preferred Stock dividends declared ($52.5000, $29.1667 and $-0- per share, respectively)		(51		)		(28		)		—
Adoption of ASU 2018-02		—				15				—
Balance, end of year		632				349				543
Accumulated Other Comprehensive Loss
Balance, beginning of year		(108		)		(68		)		(71		)
Other comprehensive income (loss)		10				(25		)		3
Adoption of ASU 2018-02		—				(15		)		—
Balance, end of year		(98		)		(108		)		(68		)
Total Shareholders’ Equity		$	8,359			$	8,058			$	4,688

See Combined Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member of

CenterPoint Energy Houston Electric, LLC

Houston, Texas

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CenterPoint Energy Houston Electric, LLC and subsidiaries (the “Company”, an indirect wholly owned subsidiary of CenterPoint Energy, Inc.) as of December 31, 2019 and 2018, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 27, 2020

We have served as the Company’s auditor since 1932.

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED INCOME



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Revenues	$	2,990		$	3,234		$	2,998
Expenses:
Operation and maintenance	1,477			1,452			1,402
Depreciation and amortization	648			917			724
Taxes other than income taxes	247			240			235
Total	2,372			2,609			2,361
Operating Income	618			625			637
Other Income (Expense):
Interest and other finance charges	(164		)	(138		)	(128		)
Interest on Securitization Bonds	(39		)	(59		)	(77		)
Other, net	21			(3		)	(8		)
Total	(182		)	(200		)	(213		)
Income Before Income Taxes	436			425			424
Income tax expense (benefit)	80			89			(9		)
Net Income	$	356		$	336		$	433

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Net income	$	356		$	336		$	433
Other comprehensive income (loss):
Net deferred loss from cash flow hedges (net of tax expense (benefit) of $-0-, ($4), and $-0-, respectively)	(1		)	(14		)	(1		)
Other comprehensive loss	(1		)	(14		)	(1		)
Comprehensive income	$	355		$	322		$	432

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS



	December 31, 2019			December 31, 2018
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents ($216 and $335 related to VIEs, respectively)	$	216		$	335
Accounts and notes receivable, net ($26 and $56 related to VIEs, respectively), less bad debt reserve of $1 and $1, respectively	238			283
Accounts and notes receivable—affiliated companies	523			20
Accrued unbilled revenues	117			110
Materials and supplies	147			135
Taxes receivable	—			5
Prepaid expenses and other current assets ($19 and $34 related to VIEs, respectively)	49			61
Total current assets	1,290			949
Property, Plant and Equipment, net	9,032			8,402
Other Assets:
Regulatory assets ($788 and $1,059 related to VIEs, respectively)	915			1,124
Other	25			32
Total other assets	940			1,156
Total Assets	$	11,262		$	10,507
LIABILITIES AND MEMBER’S EQUITY
Current Liabilities:
Current portion of VIE Securitization Bonds long-term debt	$	231		$	458
Accounts payable	268			262
Accounts and notes payable—affiliated companies	76			78
Taxes accrued	123			115
Interest accrued	69			64
Non-trading derivative liabilities	—			24
Other	63			89
Total current liabilities	830			1,090
Other Liabilities:
Deferred income taxes, net	1,030			1,023
Benefit obligations	75			91
Regulatory liabilities	1,288			1,298
Other	69			65
Total other liabilities	2,462			2,477
Long-Term Debt, net:
VIE Securitization Bonds, net	746			977
Other long-term debt, net	3,973			3,281
Total long-term debt, net	4,719			4,258
Commitments and Contingencies (Note 16)
Member’s Equity:
Common stock	—			—
Additional paid-in capital	2,486			1,896
Retained earnings	780			800
Accumulated other comprehensive loss	(15		)	(14		)
Total member’s equity	3,251			2,682
Total Liabilities and Member’s Equity	$	11,262		$	10,507

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CASH FLOWS



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Cash Flows from Operating Activities:
Net income	$	356		$	336		$	433
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	648			917			724
Amortization of deferred financing costs	12			11			13
Deferred income taxes	(24		)	(38		)	(98		)
Changes in other assets and liabilities:
Accounts and notes receivable, net	38			11			(73		)
Accounts receivable/payable–affiliated companies	(23		)	20			(46		)
Inventory	(12		)	(16		)	15
Accounts payable	13			(1		)	59
Taxes receivable	5			(5		)	6
Interest and taxes accrued	13			(2		)	7
Non-trading derivatives, net	(25		)	5			—
Net regulatory assets and liabilities	(48		)	(97		)	(148		)
Other current assets	(5		)	(2		)	(6		)
Other current liabilities	(9		)	(26		)	16
Other assets	5			(3		)	13
Other liabilities	(12		)	17			(4		)
Other, net	(14		)	(12		)	(6		)
Net cash provided by operating activities	918			1,115			905
Cash Flows from Investing Activities:
Capital expenditures	(1,025		)	(922		)	(875		)
Decrease (increase) in notes receivable–affiliated companies	(481		)	—			96
Other, net	11			11			3
Net cash used in investing activities	(1,495		)	(911		)	(776		)
Cash Flows from Financing Activities:
Proceeds from long-term debt, net	696			398			298
Payments of long-term debt	(458		)	(434		)	(411		)
Dividend to parent	(376		)	(209		)	(180		)
Increase (decrease) in notes payable–affiliated companies	(1		)	(59		)	60
Debt issuance costs	(8		)	(4		)	(3		)
Contribution from parent	590			200			—
Other, net	(1		)	—			—
Net cash provided by (used in) financing activities	442			(108		)	(236		)
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(135		)	96			(107		)
Cash, Cash Equivalents and Restricted Cash at Beginning of the Year	370			274			381
Cash, Cash Equivalents and Restricted Cash at End of the Year	$	235		$	370		$	274

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY



	2019				2018				2017
	Shares	Amount			Shares	Amount			Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of year	1,000	$	—		1,000	$	—		1,000	$	—
Balance, end of year	1,000	—			1,000	—			1,000	—
Additional Paid-in-Capital
Balance, beginning of year		1,896				1,696				1,696
Contribution from parent		590				200				—
Balance, end of year		2,486				1,896				1,696
Retained Earnings
Balance, beginning of year		800				673				420
Net income		356				336				433
Dividend to parent		(376		)		(209		)		(180		)
Balance, end of year		780				800				673
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year		(14		)		—				1
Other comprehensive loss		(1		)		(14		)		(1		)
Balance, end of year		(15		)		(14		)		—
Total Member’s Equity		$	3,251			$	2,682			$	2,369

See Combined Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholder of

CenterPoint Energy Resources Corp.

Houston, Texas

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CenterPoint Energy Resources Corp. and subsidiaries (the “Company”, an indirect wholly owned subsidiary of CenterPoint Energy, Inc.) as of December 31, 2019 and 2018, the related statements of consolidated income, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

/s/ DELOITTE & TOUCHE LLP

Houston, Texas

February 27, 2020

We have served as the Company’s auditor since 1997.

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED INCOME



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Revenues:
Utility revenues	$	2,911		$	2,931		$	2,606
Non-utility revenues	3,659			4,412			3,997
Total	6,570			7,343			6,603
Expenses:
Utility natural gas	1,312			1,410			1,109
Non-utility cost of revenue, including natural gas	3,503			4,364			3,785
Operation and maintenance	890			898			816
Depreciation and amortization	305			293			279
Taxes other than income taxes	162			156			147
Goodwill impairment	48			—			—
Total	6,220			7,121			6,136
Operating Income	350			222			467
Other Income (Expense):
Interest and other finance charges	(116		)	(122		)	(123		)
Other, net	(8		)	(8		)	(25		)
Total	(124		)	(130		)	(148		)
Income From Continuing Operations Before Income Taxes	226			92			319
Income tax expense (benefit)	14			22			(265		)
Income From Continuing Operations	212			70			584
Income from discontinued operations (net of tax expense of $-0-, $46, and $104, respectively)	—			138			161
Net Income	$	212		$	208		$	745

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME



	Year Ended December 31,
	2019		2018			2017
	(in millions)
Net income	$	212	$	208		$	745
Other comprehensive income (loss):
Adjustment to postretirement plans (net of tax expense of $2, $1 and $4, respectively)	5		1			4
Net deferred loss from cash flow hedges (net of tax expense (benefit) of $-0-, $-0- and ($1), respectively)	—		(1		)	(1		)
Other comprehensive income	5		—			3
Comprehensive income	$	217	$	208		$	748

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS



	December 31, 2019		December 31, 2018
	(in millions)
ASSETS
Current Assets:
Cash and cash equivalents	$	2	$	14
Accounts receivable, less bad debt reserve of $15 million and $17 million, respectively	693		894
Accrued unbilled revenue	257		268
Accounts and notes receivable — affiliated companies	10		120
Material and supplies	71		65
Natural gas inventory	202		194
Non-trading derivative assets	136		100
Prepaid expenses and other current assets	44		115
Total current assets	1,415		1,770
Property, Plant and Equipment, Net	5,836		5,226
Other Assets:
Goodwill	819		867
Regulatory assets	191		181
Non-trading derivative assets	58		38
Other	120		132
Total other assets	1,188		1,218
Total Assets	$	8,439	$	8,214

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

CONSOLIDATED BALANCE SHEETS, cont.



	December 31, 2019		December 31, 2018
	(in millions)
LIABILITIES AND STOCKHOLDER’S EQUITY
Current Liabilities:
Accounts payable	$	557	$	856
Accounts and notes payable–affiliated companies	48		50
Taxes accrued	84		82
Interest accrued	38		38
Customer deposits	76		75
Non-trading derivative liabilities	44		102
Other	191		137
Total current liabilities	1,038		1,340
Other Liabilities:
Deferred income taxes, net	470		406
Non-trading derivative liabilities	14		5
Benefit obligations	83		93
Regulatory liabilities	1,219		1,227
Other	428		329
Total other liabilities	2,214		2,060
Long-Term Debt	2,546		2,371
Commitments and Contingencies (Note 16)
Stockholder’s Equity:
Common stock	—		—
Additional paid-in capital	2,116		2,015
Retained earnings	515		423
Accumulated other comprehensive income	10		5
Total stockholder’s equity	2,641		2,443
Total Liabilities and Stockholder’s Equity	$	8,439	$	8,214

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CASH FLOWS



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Cash Flows from Operating Activities:
Net income	$	212		$	208		$	745
Less: Income from discontinued operations, net of tax	—			138			161
Income from continuing operations	212			70			584
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	305			293			279
Amortization of deferred financing costs	9			9			9
Deferred income taxes	7			31			(224		)
Goodwill impairment	48			—			—
Write-down of natural gas inventory	4			2			—
Changes in other assets and liabilities:
Accounts receivable and unbilled revenues, net	252			(155		)	(143		)
Accounts receivable/payable–affiliated companies	(6		)	9			—
Inventory	(12		)	17			(22		)
Accounts payable	(305		)	163			64
Fuel cost recovery	86			33			(85		)
Interest and taxes accrued	2			—			(41		)
Non-trading derivatives, net	(60		)	98			(82		)
Margin deposits, net	(56		)	5			(55		)
Net regulatory assets and liabilities	(10		)	50			(27		)
Other current assets	1			4			2
Other current liabilities	22			(3		)	15
Other assets	5			5			(8		)
Other liabilities	(38		)	6			6
Other, net	—			1			6
Net cash provided by operating activities from continuing operations	466			638			278
Net cash provided by operating activities from discontinued operations	—			176			—
Net cash provided by operating activities	466			814			278
Cash Flows from Investing Activities:
Capital expenditures	(776		)	(633		)	(513		)
Acquisitions, net of cash acquired	—			—			(132		)
(Increase) decrease in notes receivable–affiliated companies	114			(114		)	—
Other, net	—			3			2
Net cash used in investing activities from continuing operations	(662		)	(744		)	(643		)
Net cash provided by investing activities from discontinued operations	—			47			297
Net cash used in investing activities	(662		)	(697		)	(346		)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings, net	—			(39		)	4
Proceeds from (payments of) commercial paper, net	167			(688		)	329
Proceeds from long-term debt	—			599			298
Payments of long-term debt	—			—			(550		)
Dividends to parent	(120		)	(360		)	(601		)
Debt issuance costs	—			(5		)	(4		)
Loss on reacquired debt	—			—			(5		)
Contribution from parent	129			960			38
Increase (decrease) in notes payable–affiliated companies	—			(570		)	570
Other, net	(3		)	(1		)	—
Net cash provided by (used in) financing activities from continuing operations	173			(104		)	79
Net cash provided by financing activities from discontinued operations	—			—			—
Net cash provided by (used in) financing activities	173			(104		)	79
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	(23		)	13			11
Cash, Cash Equivalents and Restricted Cash at Beginning of Year	25			12			1
Cash, Cash Equivalents and Restricted Cash at End of Year	$	2		$	25		$	12

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

(An Indirect, Wholly-Owned Subsidiary of CenterPoint Energy, Inc.)

STATEMENTS OF CONSOLIDATED CHANGES IN EQUITY



	2019				2018				2017
	Shares	Amount			Shares	Amount			Shares	Amount
	(in millions, except share amounts)
Common Stock
Balance, beginning of year	1,000	$	—		1,000	$	—		1,000	$	—
Balance, end of year	1,000	—			1,000	—			1,000	—
Additional Paid-in-Capital
Balance, beginning of year		2,015				2,528				2,489
Contribution from parent		129				960				38
Capital distribution to parent associated with Internal Spin		(28		)		(1,473		)		—
Other		—				—				1
Balance, end of year		2,116				2,015				2,528
Retained Earnings
Balance, beginning of year		423				574				430
Net income		212				208				745
Dividend to parent		(120		)		(360		)		(601		)
Adoption of ASU 2018-02		—				1				—
Balance, end of year		515				423				574
Accumulated Other Comprehensive Income
Balance, beginning of year		5				6				3
Other comprehensive income		5				—				3
Adoption of ASU 2018-02		—				(1		)		—
Balance, end of year		10				5				6
Total Stockholder’s Equity		$	2,641			$	2,443			$	3,108

See Combined Notes to Consolidated Financial Statements

CENTERPOINT ENERGY, INC. AND SUBSIDIARIES

CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC AND SUBSIDIARIES

CENTERPOINT ENERGY RESOURCES CORP. AND SUBSIDIARIES

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Background

General. This combined Form 10-K is filed separately by three registrants: CenterPoint Energy, Inc., CenterPoint Energy Houston Electric, LLC and CenterPoint Energy Resources Corp. Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other Registrants or the subsidiaries of CenterPoint Energy other than itself or its subsidiaries.

Except as discussed in Note 14 to the Registrants’ Consolidated Financial Statements, no registrant has an obligation in respect of any other Registrant’s debt securities, and holders of such debt securities should not consider the financial resources or results of operations of any Registrant other than the obligor in making a decision with respect to such securities.

Included in this combined Form 10-K are the Financial Statements of CenterPoint Energy, Houston Electric and CERC, which are referred to collectively as the Registrants. The Combined Notes to the Consolidated Financial Statements apply to all Registrants and specific references to Houston Electric and CERC herein also pertain to CenterPoint Energy, unless otherwise indicated.

Background. CenterPoint Energy, Inc. is a public utility holding company and owns interests in Enable as described below. On the Merger Date, pursuant to the Merger Agreement, CenterPoint Energy consummated the previously announced Merger and acquired Vectren for approximately $6 billion in cash. On the Merger Date, Vectren became a wholly-owned subsidiary of CenterPoint Energy.

As of December 31, 2019, CenterPoint Energy’s operating subsidiaries were as follows:


•	Houston Electric owns and operates electric transmission and distribution facilities in the Texas Gulf Coast area that includes the city of Houston; and


•	CERC Corp. (i) owns and operates natural gas distribution systems in six states and (ii) obtains and offers competitive variable and fixed-price physical natural gas supplies and services primarily to commercial and industrial customers and electric and natural gas utilities in over 30 states through its wholly-owned subsidiary, CES.


•	Vectren holds three public utilities through its wholly-owned subsidiary, VUHI, a public utility holding company:


•	Indiana Gas provides energy delivery services to natural gas customers located in central and southern Indiana;


•	SIGECO provides energy delivery services to electric and natural gas customers located near Evansville in southwestern Indiana and owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market; and


•	VEDO provides energy delivery services to natural gas customers located near Dayton in west-central Ohio.


•	Vectren performs non-utility activities through:


•	Infrastructure Services, which provides underground pipeline construction and repair services through wholly-owned subsidiaries Miller Pipeline, LLC and Minnesota Limited, LLC and serves natural gas utilities across the United States, focusing on recurring integrity, station and maintenance work and opportunities for large transmission pipeline construction projects; and


•	ESG, which provides energy performance contracting and sustainable infrastructure services, such as renewables, distributed generation and combined heat and power projects.

For a description of CenterPoint Energy’s and CERC’s reportable segments, see Note 19. Houston Electric consists of a single reportable segment, Houston Electric T&D.

As of December 31, 2019, CenterPoint Energy, indirectly through CNP Midstream, owned approximately 53.7% of the common units representing limited partner interests in Enable, 50% of the management rights and 40% of the incentive distribution rights in Enable GP and also directly owned an aggregate of 14,520,000 Enable Series A Preferred Units. Enable owns, operates and develops natural gas and crude oil infrastructure assets.

Additionally, on February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23.

(2) Summary of Significant Accounting Policies


(a)	Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.


(b)	Principles of Consolidation

The accounts of the Registrants and their wholly-owned and majority-owned and controlled subsidiaries are included in the consolidated financial statements. All intercompany transactions and balances are eliminated in consolidation, except as described below.

Businesses within the Infrastructure Services reportable segment provide underground pipeline construction and repair services for customers that include NGD utilities. In accordance with consolidation guidance in ASC 980—Regulated Operations, costs incurred by NGD utilities for these pipeline construction and repair services are not eliminated in consolidation when capitalized and included in rate base by the NGD utility. Fees incurred by CenterPoint Energy’s and CERC’s NGD for pipeline construction and repair services that were capitalized totaled $162 million and $20 million, respectively, for the 11 months ended December 31, 2019.

As of December 31, 2019, CenterPoint Energy and Houston Electric had VIEs consisting of the Bond Companies, which are consolidated. The consolidated VIEs are wholly-owned, bankruptcy remote special purpose entities that were formed solely for the purpose of securitizing transition and system restoration related property. Creditors of CenterPoint Energy and Houston Electric have no recourse to any assets or revenues of the Bond Companies. The bonds issued by these VIEs are payable only from and secured by transition and system restoration property and the bondholders have no recourse to the general credit of CenterPoint Energy or Houston Electric.


(c)	Equity and Investments without a Readily Determinable Fair Value (CenterPoint Energy)

CenterPoint Energy generally uses the equity method of accounting for investments in entities in which it has an ownership interest between 20% and 50% and exercises significant influence. CenterPoint Energy also uses the equity method for investments in which it has ownership percentages greater than 50%, when it exercises significant influence, does not have control and is not considered the primary beneficiary, if applicable.

Under the equity method, CenterPoint Energy adjusts its investments each period for contributions made, distributions received, respective shares of comprehensive income and amortization of basis differences, as appropriate. CenterPoint Energy evaluates its equity method investments for impairment when events or changes in circumstances indicate there is a loss in value of the investment that is other than a temporary decline.

CenterPoint Energy considers distributions received from equity method investments which do not exceed cumulative equity in earnings subsequent to the date of investment to be a return on investment and classifies these distributions as operating activities in its Statements of Consolidated Cash Flows. CenterPoint Energy considers distributions received from equity method investments in excess of cumulative equity in earnings subsequent to the date of investment to be a return of investment and classifies these distributions as investing activities in its Statements of Consolidated Cash Flows.

Investments without a readily determinable fair value will be measured at cost, less impairment, plus or minus observable prices changes of an identical or similar investment of the same issuer.


(d)	Revenues

The Registrants record revenue for electricity delivery and natural gas sales and services under the accrual method and these revenues are recognized upon delivery to customers. Electricity deliveries not billed by month-end are accrued based on actual AMS data, daily supply volumes and applicable rates. Natural gas sales not billed by month-end are accrued based upon estimated purchased gas volumes, estimated lost and unaccounted for gas and currently effective tariff rates. Revenue for some pipeline construction services are based on the percentage of completion method. For further discussion, see Note 5.

(e) MISO Transactions

Indiana Electric is a member of the MISO. MISO-related purchase and sale transactions are recorded using settlement information provided by the MISO. These purchase and sale transactions are accounted for on at least a net hourly position, meaning net purchases within that interval are recorded on CenterPoint Energy’s Statements of Consolidated Income in Utility natural gas, fuel and purchased power, and net sales within that interval are recorded on CenterPoint Energy’s Statements of Consolidated Income in Utility revenues. On occasion, prior period transactions are resettled outside the routine process due to a change in the MISO’s tariff or a material interpretation thereof. Expenses associated with resettlements are recorded once the resettlement is probable and the resettlement amount can be estimated. Revenues associated with resettlements are recognized when the amount is determinable and collectability is reasonably assured.

(f) Guarantees

CenterPoint Energy recognizes guarantee obligations at fair value. CenterPoint Energy discloses parent company guarantees of a subsidiary’s obligation when that guarantee results in the exposure of a material obligation of the parent company even if the probability of fulfilling such obligation is considered remote. See Note 16(c) and (d).

(g) Long-lived Assets, Goodwill and Intangibles

The Registrants record property, plant and equipment at historical cost and expense repair and maintenance costs as incurred.

The Registrants periodically evaluate long-lived assets, including property, plant and equipment, and specifically identifiable intangibles subject to amortization, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. For rate regulated businesses, recoverability of long-lived assets is assessed by determining if a capital disallowance from a regulator is probable through monitoring the outcome of rate cases and other proceedings. For non-rate regulated businesses, recoverability is assessed based on an estimate of undiscounted cash flows attributable to the assets compared to the carrying value of the assets. As of December 31, 2019, CenterPoint Energy and CERC, as applicable, determined that the carrying value of long-lived and intangible assets associated with the Infrastructure Services and Energy Services reporting units were recoverable based on undiscounted cash flows, considering the likelihood of possible outcomes existing as of that date, including the assessment of the likelihood of a future sale of these assets. No long-lived asset or intangible asset impairments were recorded in 2019, 2018 or 2017.

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. Subsequent to the Registrant’s adoption of ASU 2017-04 Simplifying the Test for Goodwill Impairment on January 1, 2018, CenterPoint Energy and CERC recognize a goodwill impairment by the amount a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill within that reporting unit. CenterPoint Energy includes deferred tax assets and liabilities within its reporting unit’s carrying value for the purposes of annual and interim impairment tests, regardless of whether the estimated fair value reflects the disposition of such assets and liabilities. For further information about the goodwill impairment tests during 2019, see Note 6.

(h) Assets Held for Sale and Discontinued Operations

Generally, a long-lived asset to be sold is classified as held for sale in the period in which management, with approval from the Board of Directors, as applicable, commits to a plan to sell and a sale is expected to be completed within one year. The Registrants record assets and liabilities held for sale at the lower of their carrying value or their estimated fair value less cost to sell. If the disposal group reflects a component of a reporting unit and meets the definition of a business, the goodwill within that reporting unit is allocated to the disposal group based on the relative fair value of the components representing a business that will be retained and disposed. Goodwill is not allocated to a portion of a reporting unit that does not meet the definition of a business. A disposal group that meets the held for sale criteria and also represents a strategic shift to the Registrant, is also reflected as discontinued operations on the Statements of Consolidated Income, and prior periods are recast to reflect the earnings or losses from such businesses as income from discontinued operations, net of tax.

(i) Regulatory Assets and Liabilities

The Registrants apply the guidance for accounting for regulated operations to the Houston Electric T&D reportable segment, Indiana Electric Integrated segment and the Natural Gas Distribution reportable segment. The Registrants’ rate-regulated subsidiaries may collect revenues subject to refund pending final determination in rate proceedings. In connection with such revenues, estimated rate refund liabilities are recorded which reflect management’s current judgment of the ultimate outcomes of the proceedings.

The Registrants’ rate-regulated businesses recognize removal costs as a component of depreciation expense in accordance with regulatory treatment. In addition, a portion of the amount of removal costs collected from customers that relate to AROs has been reflected as an asset retirement liability in accordance with accounting guidance for AROs.

For further detail on the Registrants’ regulatory assets and liabilities, see Note 7.

(j) Depreciation and Amortization Expense

The Registrants compute depreciation and amortization using the straight-line method based on economic lives or regulatory-mandated recovery periods. Amortization expense includes amortization of certain regulatory assets and other intangibles.

(k) Capitalization of Interest and AFUDC

The Registrants capitalize interest and AFUDC as a component of projects under construction and amortize it over the assets’ estimated useful lives once the assets are placed in service. AFUDC represents the composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction for subsidiaries that apply the guidance for accounting for regulated operations. Although AFUDC increases both utility plant and earnings, it is realized in cash when the assets are included in rates.



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Interest and AFUDC debt (1)	$	36	$	8	$	3	$	8	$	6	$	2	$	9	$	6	$	2
AFUDC equity (2)	22		15		3		12		10		2		11		10		1


(1)	Included in Interest and other finance charges on the Registrants’ respective Statements of Consolidated Income.


(2)	Included in Other Income (Expense) on the Registrants’ respective Statements of Consolidated Income.

(l) Income Taxes

Houston Electric and CERC are included in CenterPoint Energy’s U.S. federal consolidated income tax return. Houston Electric and CERC report their income tax provision on a separate entity basis pursuant to a tax sharing agreement with CenterPoint Energy. Current federal and certain state income taxes are payable to or receivable from CenterPoint Energy.

The Registrants use the asset and liability method of accounting for deferred income taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established against deferred tax

assets for which management believes realization is not considered to be more likely than not. The Registrants recognize interest and penalties as a component of income tax expense (benefit), as applicable, in their respective Statements of Consolidated Income. CenterPoint Energy reports the income tax provision associated with its interest in Enable in income tax expense (benefit) in its Statements of Consolidated Income.

On December 22, 2017, President Trump signed into law comprehensive tax reform legislation informally called the Tax Cuts and Jobs Acts, or TCJA, which resulted in significant changes to federal tax laws effective January 1, 2018. See Note 15 for further discussion of the impacts of tax reform implementation.

To the extent certain EDIT of the Registrants’ rate-regulated subsidiaries may be recoverable or payable through future rates, regulatory assets and liabilities have been recorded, respectively.

The Registrants use the portfolio approach to recognize income tax effects on other comprehensive income from accumulated other comprehensive income.

Investment tax credits are deferred and amortized to income over the approximate lives of the related property.

(m) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at the invoiced amount and do not bear interest. Management reviews the outstanding accounts receivable, as well as the bad debt write-offs experienced in the past, and establishes an allowance for doubtful accounts. Account balances are charged off against the allowance when management determines it is probable the receivable will not be recovered.

The table below summarizes the Registrants’ provision for doubtful accounts for 2019, 2018 and 2017:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Provision for doubtful accounts	$	16	$	—	$	12	$	16	$	—	$	16	$	14	$	1	$	13

(n) Inventory

The Registrants’ inventory consists principally of materials and supplies, and for CERC, natural gas, and for CenterPoint Energy, coal inventory. Materials and supplies are valued at the lower of average cost or market. Materials and supplies are recorded to inventory when purchased and subsequently charged to expense or capitalized to plant when installed. Natural gas inventories of CERC’s Energy Services reportable segment at locations qualifying for and utilizing the fair value hedge accounting election are valued at fair value; inventories at locations not qualifying for or not utilizing the fair value hedge accounting election are valued at the lower of average cost or market. During 2019, 2018 and 2017, CERC recorded write-downs of natural gas inventory to the lower of average cost or market which are disclosed on the respective Statements of Consolidated Cash Flows.

(o) Derivative Instruments

The Registrants are exposed to various market risks. These risks arise from transactions entered into in the normal course of business. The Registrants utilize derivative instruments such as physical forward contracts, swaps and options to mitigate the impact of changes in commodity prices, weather and interest rates on operating results and cash flows. Such derivatives are recognized in the Registrants’ Consolidated Balance Sheets at their fair value unless the Registrant elects the normal purchase and sales exemption for qualified physical transactions. A derivative may be designated as a normal purchase or normal sale if the intent is to physically receive or deliver the product for use or sale in the normal course of business. CenterPoint Energy and CERC have elected to record changes in the fair value of amounts excluded from the assessment of effectiveness immediately in their Statements of Consolidated Income.

CenterPoint Energy has a Risk Oversight Committee composed of corporate and reportable segment officers that oversees commodity price, weather and credit risk activities, including the Registrants’ marketing, risk management services and hedging activities. The committee’s duties are to establish the Registrants’ commodity risk policies, allocate board-approved commercial risk limits, approve the use of new products and commodities, monitor positions and ensure compliance with the Registrants’ risk

management policies and procedures and limits established by CenterPoint Energy’s Board of Directors. The Registrants’ policies prohibit the use of leveraged financial instruments. A leveraged financial instrument, for this purpose, is a transaction involving a derivative whose financial impact will be based on an amount other than the notional amount or volume of the instrument.

(p) Investments in Equity Securities (CenterPoint Energy and CERC)

CenterPoint Energy and CERC report equity securities at estimated fair value in their respective Consolidated Balance Sheets, and any unrealized holding gains and losses are recorded as Other Income (Expense) in their respective Statements of Consolidated Income.

(q) Environmental Costs

The Registrants expense or capitalize environmental expenditures, as appropriate, depending on their future economic benefit. The Registrants expense amounts that relate to an existing condition caused by past operations that do not have future economic benefit. The Registrants record undiscounted liabilities related to these future costs when environmental assessments and/or remediation activities are probable and the costs can be reasonably estimated.

(r) Cash and Cash Equivalents and Restricted Cash

For purposes of reporting cash flows, the Registrants consider cash equivalents to be short-term, highly-liquid investments with maturities of three months or less from the date of purchase. Cash and cash equivalents held by the Bond Companies (VIEs) solely to support servicing the Securitization Bonds as of December 31, 2019 and 2018 are reflected on CenterPoint Energy’s and Houston Electric’s Consolidated Balance Sheets.

In connection with the issuance of Securitization Bonds, CenterPoint Energy and Houston Electric were required to establish restricted cash accounts to collateralize the bonds that were issued in these financing transactions. These restricted cash accounts are not available for withdrawal until the maturity of the bonds and are not included in cash and cash equivalents. For more information on restricted cash see Note 20.

(s) Preferred Stock and Dividends

Preferred stock is evaluated to determine balance sheet classification, and all conversion and redemption features are evaluated for bifurcation treatment. Proceeds received net of issuance costs are recognized on the settlement date. Cash dividends become a liability once declared. Income available to common stockholders is computed by deducting from net income the dividends accumulated and earned during the period on cumulative preferred stock.

(t) Purchase Accounting

The Registrants evaluate acquisitions to determine when a set of acquired activities and assets represent a business. When control of a business is obtained, the Registrants apply the acquisition method of accounting and record the assets acquired, liabilities assumed and any non-controlling interest obtained based on fair value at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the net assets acquired is recorded as goodwill. The results of operations of the acquired business are included in the Registrants’ respective Statements of Consolidated Income beginning on the date of the acquisition.

(u) New Accounting Pronouncements

The following table provides an overview of certain recently adopted or issued accounting pronouncements applicable to all the Registrants, unless otherwise noted.



Recently Adopted Accounting Standards
ASU Number and Name	Description	Date of Adoption	Financial Statement Impact upon Adoption
ASU 2016-02- Leases (Topic 842) and related amendments	ASU 2016-02 provides a comprehensive new lease model that requires lessees to recognize assets and liabilities for most leases and would change certain aspects of lessor accounting. Transition method: modified retrospective	January 1, 2019	The Registrants adopted the standard and recognized a right-of-use asset and lease liability on their statement of financial position with no material impact on their results of operations and cash flows. See Note 22 for more information.



Issued, Not Yet Effective Accounting Standards
ASU Number and Name	Description	Effective Date	Financial Statement Impact upon Adoption
ASU 2016-13- Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	This standard, including standards amending this standard, requires a new model called CECL to estimate credit losses for (1) financial assets subject to credit losses and measured at amortized cost and (2) certain off-balance sheet credit exposures. Upon initial recognition of the exposure, the CECL model requires an entity to estimate the credit losses expected over the life of an exposure based on historical information, current information and reasonable and supportable forecasts, including estimates of prepayments. Transition method: modified retrospective	January 1, 2020 Early adoption is permitted	The adoption of this standard will result in an immaterial adjustment to the carrying value of the Registrants’ accounts receivable, net. The adoption of this standard will not have a material impact on the Registrants’ financial position, results of operations or cash flows.
ASU 2018-13- Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement	This standard eliminates, modifies and adds certain disclosure requirements for fair value measurements. Transition method: prospective for additions and one modification and retrospective for all other amendments	Adoption of eliminations and modifications as of September 30, 2018; Additions will be adopted January 1, 2020	The adoption of this standard did not impact the Registrants’ financial position, results of operations or cash flows. Note 10 reflects the disclosures modified upon adoption.
ASU 2018-15-Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	This standard aligns accounting for implementation costs incurred in a cloud computing arrangement that is accounted for as a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The update also prescribes the balance sheet, income statement and cash flow classification of the capitalized implementation costs and related amortization expense and requires additional quantitative and qualitative disclosures. Transition method: retrospective or prospective	January 1, 2020 Early adoption is permitted	The adoption of this standard will require the Registrants to capitalize certain costs to implement cloud computing arrangements that are accounted for as service contracts within Prepaid expenses and other current assets on the Registrants’ consolidated balance sheets and record the amortization of such assets within Operation and maintenance expenses on the Registrants’ statements of consolidated income. The adoption of this standard will not have a material impact on the Registrants’ financial position, results of operations, cash flows or disclosures.

Management believes that other recently adopted standards and recently issued standards that are not yet effective will not have a material impact on the Registrants’ financial position, results of operations or cash flows upon adoption.

(3) Property, Plant and Equipment

(a) Property, Plant and Equipment

Property, plant and equipment includes the following:



		December 31, 2019						December 31, 2018
	Weighted Average Useful Lives	Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net		Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net
	(in years)	(in millions)
CenterPoint Energy
Electric Transmission & Distribution	37	$	14,360	$	4,634	$	9,726	$	12,148	$	3,746	$	8,402
Electric Generation (1)	27	1,780		698		1,082		—		—		—
Natural Gas Distribution	29	12,695		3,731		8,964		7,257		2,128		5,129
Energy Services (2)	27	136		53		83		121		43		78
Infrastructure Services (3)	10	317		22		295		—		—		—
Other property	19	1,397		602		795		741		306		435
Total		$	30,685	$	9,740	$	20,945	$	20,267	$	6,223	$	14,044
Houston Electric
Electric Transmission	46	$	3,358	$	674	$	2,684	$	3,077	$	650	$	2,427
Electric Distribution	35	7,876		2,586		5,290		7,524		2,553		4,971
Other transmission & distribution property	19	1,595		537		1,058		1,547		543		1,004
Total		$	12,829	$	3,797	$	9,032	$	12,148	$	3,746	$	8,402



		December 31, 2019						December 31, 2018
	Weighted Average Useful Lives	Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net		Property, Plant and Equipment, Gross		Accumulated Depreciation & Amortization		Property, Plant and Equipment, Net
	(in years)	(in millions)
CERC
Natural Gas Distribution	29	$	7,933	$	2,208	$	5,725	$	7,257	$	2,128	$	5,129
Energy Services (2)	27	136		53		83		121		43		78
Other property	16	55		27		28		53		34		19
Total		$	8,124	$	2,288	$	5,836	$	7,431	$	2,205	$	5,226

(1)

SIGECO and AGC own a 300 MW unit at the Warrick Power Plant (Warrick Unit 4) as tenants in common. SIGECO’s share of the cost of this unit as of December 31, 2019, is $194 million with accumulated depreciation totaling $137 million. AGC and SIGECO share equally in the cost of operation and output of the unit. SIGECO’s share of operating costs is included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income.


(2)	On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23.


(3)	On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the businesses within its Infrastructure Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23.

(b) Depreciation and Amortization

The following table presents depreciation and amortization expense for 2019, 2018 and 2017:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Depreciation	$	920	$	339	$	281	$	626	$	342	$	264	$	619	$	354	$	243
Amortization of securitized regulatory assets	271		271		—		531		531		—		329		329		—
Other amortization	96		38		24		86		44		29		88		41		36
Total	$	1,287	$	648	$	305	$	1,243	$	917	$	293	$	1,036	$	724	$	279

(c) AROs

The Registrants recorded AROs associated with the removal of asbestos and asbestos-containing material in its buildings, including substation building structures. CenterPoint Energy recorded AROs relating to the closure of the ash ponds at A.B. Brown and F.B. Culley. CenterPoint Energy and Houston Electric also recorded AROs relating to treated wood poles for electric distribution, distribution transformers containing PCB (also known as Polychlorinated Biphenyl), and underground fuel storage tanks. CenterPoint Energy and CERC also recorded AROs relating to gas pipelines abandoned in place. The estimates of future liabilities were developed using historical information, and where available, quoted prices from outside contractors.

A reconciliation of the changes in the ARO liability recorded in Other non-current liabilities on each of the Registrants’ respective Consolidated Balance Sheets is as follows:



	December 31, 2019						December 31, 2018
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy			Houston Electric			CERC
	(in millions)
Beginning balance	$	258	$	34	$	221	$	281		$	35		$	243
Addition from Merger with Vectren	116		—		—		—			—			—
Accretion expense (1)	16		1		10		10			1			9
Revisions in estimates (2)	149		7		94		(33		)	(2		)	(31		)
Ending balance	$	539	$	42	$	325	$	258		$	34		$	221


(1)	Reflected in Regulatory assets on each of the Registrants’ respective Consolidated Balance Sheets.

(2)

In 2019, the Registrants reflected an increase in their respective ARO liability, which is primarily attributable to decreases in the long-term interest rates used for discounting in the ARO calculation and increased estimated closure costs for CenterPoint Energy’s electric generation. In 2018, CenterPoint Energy and CERC reflected a decrease in their respective ARO liability, which is primarily attributable to increases in the long-term interest rates used for discounting in the ARO calculation.

(4) Mergers and Acquisitions (CenterPoint Energy)

Merger with Vectren. On the Merger Date, pursuant to the Merger Agreement, CenterPoint Energy consummated the previously announced Merger and acquired Vectren for approximately $6 billion in cash. Each share of Vectren common stock issued and outstanding immediately prior to the closing was canceled and converted into the right to receive $72.00 in cash per share, without interest. At the closing, each stock unit payable in Vectren common stock or whose value is determined with reference to the value of Vectren common stock, whether vested or unvested, was canceled with cash consideration paid in accordance with the terms of the Merger Agreement. These amounts did not include a stub period cash dividend of $0.41145 per share, which was declared, with CenterPoint Energy’s consent, by Vectren’s board of directors on January 16, 2019, and paid to Vectren stockholders as of the record date of February 1, 2019.

Pursuant to the Merger Agreement and immediately subsequent to the close of the Merger, CenterPoint Energy cash settled $78 million in outstanding share-based awards issued prior to the Merger Date by Vectren to its employees. As a result of the Merger, CenterPoint Energy assumed a liability for these share-based awards of $41 million and recorded an incremental cost of $37 million in Operation and maintenance expenses on its Statements of Consolidated Income during the year ended December 31, 2019 for the accelerated vesting of the awards in accordance with the Merger Agreement.

Subsequent to the close of the Merger, CenterPoint Energy recognized severance totaling $61 million to employees terminated immediately subsequent to the Merger close, inclusive of change of control severance payments to executives of Vectren under existing agreements, and which is included in Operation and maintenance expenses on its Statements of Consolidated Income during the year ended December 31, 2019. Total severance cost for the year ended December 31, 2019 was $102 million.

In connection with the Merger, VUHI and VCC made offers to prepay certain outstanding guaranteed senior notes as required pursuant to certain note purchase agreements previously entered into by VUHI and VCC. See Note 14 for further details.

Following the closing, shares of Vectren common stock, which previously traded under the ticker symbol “VVC” on the NYSE, ceased trading on and were delisted from the NYSE.

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 value of Vectren’s tangible and intangible assets and liabilities subject to these rate-setting

provisions approximate their carrying values on the Merger Date. 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 purchase price allocation as of December 31, 2019 (in millions):



Cash and cash equivalents	$	16
Other current assets	577
Property, plant and equipment, net	5,147
Identifiable intangibles	297
Regulatory assets	338
Other assets	141
Total assets acquired	6,516
Current liabilities	648
Regulatory liabilities	938
Other liabilities	886
Long-term debt	2,401
Total liabilities assumed	4,873
Net assets acquired	1,643
Goodwill	4,339
Total purchase price consideration	$	5,982

CenterPoint Energy completed a final valuation analysis necessary to determine the fair market values of all of Vectren’s assets and liabilities and the allocation of its purchase price. Changes from the preliminary purchase price allocation originally reported in the first quarter of 2019 primarily included additional information obtained related to intangible assets and the allocation of the fair value between reporting units.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recognized as goodwill, which is primarily attributable to significant potential strategic benefits to CenterPoint Energy, including growth opportunities for more rate-regulated investment, more customers for existing products and services and additional products and services for existing customers. Additionally, CenterPoint Energy believes the Merger will increase geographic and business diversity as well as scale in attractive jurisdictions and economies. The value assigned to goodwill will not be deductible for tax purposes.

The fair value of the identifiable intangible assets and related useful lives as included in the purchase price allocation as of December 31, 2019 include:



	Weighted Average Useful Lives	Estimated Fair Value
	(in years)	(in millions)
Operation and maintenance agreements	24	$	12
Customer relationships	18	200
Construction backlog	1	27
Trade names	10	58
Total		$	297

Amortization expense related to the operation and maintenance agreements and construction backlog was $24 million in 2019, and is included in Non-utility cost of revenues, including natural gas on CenterPoint Energy’s Statements of Consolidated Income.

Amortization expense related to customer relationships and trade names was $16 million in 2019 and is included in Depreciation and amortization expense on CenterPoint Energy’s Statements of Consolidated Income.

The results of operations for Vectren included in CenterPoint Energy’s Consolidated Financial Statements from the Merger Date for the year ended December 31, 2019 are as follows:



	(in millions)
Operating revenues	$	2,729
Net income	190

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.



	Year Ended December 31,
	2019			2018
	(in millions)
Operating revenues	$	12,547		$	13,282
Net income	812		(1)	458		(2)


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


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

CenterPoint Energy incurred integration costs in connection with the Merger of $83 million for the year ended December 31, 2019, which were included in Operation and maintenance expenses in CenterPoint Energy’s Statements of Consolidated Income.

Acquisition of Utility Pipeline Construction Company. An acquisition was made during the year ended December 31, 2019 by CenterPoint Energy’s Infrastructure Services reportable segment, resulting in goodwill and intangible assets of approximately $6 million and $8 million, respectively. The intangible assets primarily relate to backlog and customer relationships. The allocation of the $25 million purchase price has been finalized. The results of operations for the acquired company have been included in CenterPoint Energy’s consolidated financial statements from the date of acquisition and are not significant to the consolidated financial results of CenterPoint Energy. Pro forma results of operations have not been presented for the acquisition because the effects of the acquisition were not significant to CenterPoint Energy’s consolidated financial results for all periods presented.

(5) Revenue Recognition

The Registrants adopted ASC 606, Revenue from Contracts with Customers, and all related amendments on January 1, 2018 using the modified retrospective method for those contracts that were not completed as of the date of adoption. Application of the new revenue standard did not result in a cumulative effect adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. The adoption of the new standard did not have a material impact on the Registrants’ financial position, results of operations or cash flows.

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Registrants expect to be entitled to receive in exchange for these goods or services.

The following tables disaggregate revenues by reportable segment and major source:

CenterPoint Energy



	Year Ended December 31, 2019
	Houston Electric T&D (1)			Indiana Electric Integrated (1) (4)		Natural Gas Distribution (1) (4)			Energy Services (2)			Infrastructure Services (2) (4)			Corporate and Other (2) (4)		Total
	(in millions)
Revenue from contracts	$	2,984		$	523	$	3,680		$	479		$	1,190		$	295	$	9,151
Derivatives income	6			—		2			3,303			—			—		3,311
Other (3)	6			—		1			—			—			5		12
Eliminations	—			—		(40		)	(129		)	(4		)	—		(173		)
Total revenues	$	2,996		$	523	$	3,643		$	3,653		$	1,186		$	300	$	12,301

	Year Ended December 31, 2018
	Houston Electric T&D (1)			Indiana Electric Integrated (1)		Natural Gas Distribution (1)			Energy Services (2)			Infrastructure Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	3,235		$	—	$	3,011		$	493		$	—		$	6	$	6,745
Derivatives income	(2		)	—		(2		)	4,028			—			—		4,024
Other (3)	(1		)	—		(42		)	—			—			9		(34		)
Eliminations	—			—		(36		)	(110		)	—			—		(146		)
Total revenues	$	3,232		$	—	$	2,931		$	4,411		$	—		$	15	$	10,589

	Year Ended December 31, 2017
	Houston Electric T&D (1)			Indiana Electric Integrated (1)		Natural Gas Distribution (1)			Energy Services (2)			Infrastructure Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	3,001		$	—	$	2,638		$	480		$	—		$	5	$	6,124
Derivatives income	(1		)	—		—			3,569			—			—		3,568
Other (3)	(3		)	—		1			—			—			9		7
Eliminations	—			—		(33		)	(52		)	—			—		(85		)
Total revenues	$	2,997		$	—	$	2,606		$	3,997		$	—		$	14	$	9,614


(1)	Reflected in Utility revenues in the Statements of Consolidated Income.


(2)	Reflected in Non-utility revenues in the Statements of Consolidated Income.

(3)

Primarily consists of income from ARPs and leases. ARPs are contracts between the utility and its regulators, not between the utility and a customer. The Registrants recognize ARP revenue as other revenues when the regulator-specified conditions for recognition have been met. Upon recovery of ARP revenue through incorporation in rates charged for utility service to customers, ARP revenue is reversed and recorded as revenue from contracts with customers. The recognition of ARP revenues and the reversal of ARP revenues upon recovery through rates charged for utility service may not occur in the same period.


(4)	Reflects revenues from Vectren subsidiaries for the period from February 1, 2019 to December 31, 2019.

Houston Electric



	Year Ended December 31,
	2019		2018			2017
	(in millions)
Revenue from contracts	$	2,984	$	3,235		$	3,001
Other (1)	6		(1		)	(3		)
Total revenues	$	2,990	$	3,234		$	2,998

(1)

CERC



	Year Ended December 31, 2019
	Natural Gas Distribution (1)			Energy Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	2,945		$	480		$	5	$	3,430
Derivatives income	2			3,302			—		3,304
Other (3)	4			—			—		4
Eliminations	(40		)	(128		)	—		(168		)
Total revenues	$	2,911		$	3,654		$	5	$	6,570

	Year Ended December 31, 2018
	Natural Gas Distribution (1)			Energy Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	3,011		$	493		$	1	$	3,505
Derivatives income	(2		)	4,028			—		4,026
Other (3)	(42		)	—			—		(42		)
Eliminations	(36		)	(110		)	—		(146		)
Total revenues	$	2,931		$	4,411		$	1	$	7,343

	Year Ended December 31, 2017
	Natural Gas Distribution (1)			Energy Services (2)			Corporate and Other (2)		Total
	(in millions)
Revenue from contracts	$	2,638		$	480		$	—	$	3,118
Derivatives income	—			3,569			—		3,569
Other (3)	1			—			—		1
Eliminations	(33		)	(52		)	—		(85		)
Total revenues	$	2,606		$	3,997		$	—	$	6,603


(1)	Reflected in Utility revenues in the Statements of Consolidated Income.


(2)	Reflected in Non-utility revenues in the Statements of Consolidated Income.

(3)

Revenues from Contracts with Customers

Houston Electric T&D (CenterPoint Energy and Houston Electric). Houston Electric distributes electricity to customers over time and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by the PUCT, is recognized as electricity is delivered and represents amounts both billed and unbilled. Discretionary services

requested by customers are provided at a point in time with control transferring upon the completion of the service. Revenue for discretionary services is recognized upon completion of service based on the tariff rates set by the PUCT. Payments for electricity distribution and discretionary services are aggregated and received on a monthly basis. Houston Electric performs transmission services over time as a stand-ready obligation to provide a reliable network of transmission systems. Revenue is recognized upon time elapsed, and the monthly tariff rate set by the PUCT. Payments are received on a monthly basis.

Indiana Electric Integrated (CenterPoint Energy). Indiana Electric generates, distributes and transmits electricity to customers over time, and customers consume the electricity when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by state regulators, is recognized as electricity is delivered and represents amounts both billed and unbilled. Customers are billed monthly and payment terms, set by the regulator, require payment within a month of billing.

Natural Gas Distribution (CenterPoint Energy and CERC). CERC distributes and transports natural gas to customers over time, and customers consume the natural gas when delivered. Revenue, consisting of both volumetric and fixed tariff rates set by the state governing agency for that service area, is recognized as natural gas is delivered and represents amounts both billed and unbilled. Discretionary services requested by the customer are satisfied at a point in time and revenue is recognized upon completion of service and the tariff rates set by the applicable state regulator. Payments of natural gas distribution, transportation and discretionary services are aggregated and received on a monthly basis.

Energy Services (CenterPoint Energy and CERC). The majority of CES natural gas sales contracts are considered a derivative, as the contracts typically have a stated minimum or contractual volume of delivery.

For contracts in which CES delivers the full requirement of the natural gas needed by the customer and a volume is not stated, a contract as defined under ASC 606 is created upon the customer’s exercise of its option to take natural gas. CES supplies natural gas to retail customers over time as customers consume the natural gas when delivered. For wholesale customers, CES supplies natural gas at a point in time because the wholesale customer is presumed to have storage capabilities. Control is transferred to both types of customers upon delivery of natural gas. Revenue is recognized on a monthly basis based on the estimated volume of natural gas delivered and the price agreed upon with the customer. Payments are received on a monthly basis.

AMAs are natural gas sales contracts under which CES also assumes management of a customer’s physical storage and/or transportation capacity. AMAs have two distinct performance obligations, which consist of natural gas sales and natural gas delivery because delivery could occur separate from the sale of natural gas (e.g., from storage to customer premises). Most AMAs’ natural gas sales performance obligations are accounted for as embedded derivatives. The transaction price is allocated between the sale of natural gas and the delivery based on the stand-alone selling price as stated in the contract. CES performs natural gas delivery over time as customers take delivery of the natural gas and recognizes revenue on an aggregated monthly basis based on the volume of natural gas delivered and the fees stated within the contract. Payments are received on a monthly basis.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23.

Infrastructure Services (CenterPoint Energy). Infrastructure Services provides underground pipeline construction and repair services. The contracts are generally less than one year in duration and consist of fixed price, unit, and time and material customer contracts. Under unit or time and material contracts, Infrastructure Services performs construction and repair services under specific work-orders at prices established by master service agreements. The performance obligation is defined at the work-order level. These services are billed to customers monthly or more frequently for work completed based on units completed or the costs of time and material incurred and generally require payment within 30 days of billing. Infrastructure Services has the right to consideration from customers in an amount that corresponds directly with the performance obligation satisfied, and therefore recognizes revenue at a point in time in the amount to which it has the right to invoice, which results in accrued unbilled revenues at the end of each accounting period.

Under fixed price contracts, Infrastructure Services performs larger scale construction and repair services. Each contract is typically accounted for as a single performance obligation. Services performed under fixed price contracts are typically billed per the terms of the contract, which can range from completion of specific milestones to scheduled billing intervals. Billings occur monthly or more frequently for work completed and generally require payment within 30 days of billing. Revenue for fixed price contracts is recognized over time as control is transferred using the input method, considering costs incurred relative to total expected cost. Total expected cost is therefore a significant judgment affecting the amount and timing of revenue recognition. Infrastructure Services’ revenues are not subject to significant returns, refunds or warranty obligations.

Contract Balances. When the timing of delivery of service is different from the timing of the payments made by customers and when the right to consideration is conditioned on something other than the passage of time, the Registrants recognize either a contract asset (performance precedes billing) or a contract liability (customer payment precedes performance). Those customers that prepay are represented by contract liabilities until the performance obligations are satisfied. The Registrants’ contract assets are included in Accrued unbilled revenues in their Consolidated Balance Sheets. On an aggregate basis as of December 31, 2019, the Registrants’ contract assets primarily relate to contracts in the Infrastructure Services segment where revenue is recognized using the input method. The Registrants’ contract liabilities are included in Accounts payable and Other current liabilities in their Consolidated Balance Sheets. On an aggregate basis as of December 31, 2019, the Registrants’ contract liabilities primarily relate to ESG contracts where revenue is recognized using the input method.

The opening and closing balances of accounts receivable, other accrued unbilled revenue, contract assets and contract liabilities from contracts with customers for the year ended December 31, 2019 are as follows:

CenterPoint Energy



	Accounts Receivable		Other Accrued Unbilled Revenues		Contract Assets		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2018 (1)	$	516	$	373	$	—	$	3
Closing balance as of December 31, 2019	800		579		61		34
Increase	$	284	$	206	$	61	$	31


(1)	Opening balances related to Vectren are as of February 1, 2019, and are thus excluded from the opening balance as of December 31, 2018.

The amount of revenue recognized in the year ended December 31, 2019 that was included in the opening contract liability was $47 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between CenterPoint Energy’s performance and the customer’s payment, plus the addition of obligations acquired in the Merger.

Houston Electric



	Accounts Receivable			Other Accrued Unbilled Revenues		Contract Liabilities
	(in millions)
Opening balance as of December 31, 2018	$	234		$	110	$	3
Closing balance as of December 31, 2019	210			117		3
Increase (decrease)	$	(24	)	$	7	$	—

The amount of revenue recognized in the year ended December 31, 2019 that was included in the opening contract liability was $3 million. The difference between the opening and closing balances of the contract liabilities primarily results from the timing difference between Houston Electric’s performance and the customer’s payment.

CERC



	Accounts Receivable		Other Accrued Unbilled Revenues
	(in millions)
Opening balance as of December 31, 2018	$	282	$	263
Closing balance as of December 31, 2019	282		250
Increase (decrease)	$	—	$	(13	)

CERC does not have any opening or closing contract asset or contract liability balances.

Remaining Performance Obligations (CenterPoint Energy). The table below discloses (1) the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period for contracts and (2) when CenterPoint Energy expects to recognize this revenue. Such contracts include fixed price contracts and energy performance and sustainable infrastructure services contracts of ESG, which are included in Corporate and Other.



	Rolling 12 Months		Thereafter		Total
	(in millions)
Revenue expected to be recognized on contracts in place as of December 31, 2019:
Infrastructure Services	$	254	$	—	$	254
Corporate and Other	84		752		836
	$	338	$	752	$	1,090

Practical Expedients and Exemption. Sales taxes and other similar taxes collected from customers are excluded from the transaction price. For contracts for which revenue from the satisfaction of the performance obligations is recognized in the amount invoiced, the practical expedient was elected and revenue expected to be recognized on these contracts has not been disclosed.

(6) Goodwill and Other Intangibles (CenterPoint Energy and CERC)

CenterPoint Energy’s goodwill by reportable segment as of December 31, 2018 and changes in the carrying amount of goodwill as of December 31, 2019 are as follows:



	December 31, 2018		Additions (1)		Impairment		December 31, 2019
	(in millions)
Indiana Electric Integrated	$	—	$	1,121	$	—	$	1,121
Natural Gas Distribution	746		2,566		—		3,312
Energy Services (2)	110		—		48		62
Infrastructure Services	—		220		—		220
Corporate and Other	11		438		—		449
Total	$	867	$	4,345	$	48	$	5,164


(1)	This represents the allocation of goodwill to reportable segments from the Merger, changes from preliminary amounts previously reported and includes the final determination of fair value for each reportable segment. See Note 4.

(2)

Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012. As of December 31, 2019, CenterPoint Energy and CERC identified a triggering event to perform an interim goodwill impairment test and recognized a goodwill impairment on their Energy Services reporting unit which is included in Goodwill impairment on CenterPoint Energy’s and CERC’s Consolidated Statements of Income.

CERC’s goodwill by reportable segment as of December 31, 2019 and December 31, 2018 is as follows:



	December 31, 2018		Impairment		December 31, 2019
			(in millions)
Natural Gas Distribution	$	746	$	—	$	746
Energy Services (1)	110		48		62
Corporate and Other	11		—		11
Total	$	867	$	48	$	819


(1)	Amount presented is net of the accumulated goodwill impairment charge of $252 million recorded in 2012.

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 CenterPoint Energy’s Corporate and Other reportable segment. The estimated fair value of a reporting unit is primarily determined based on an income approach or a weighted combination of income and market approaches. If the carrying amount of the reporting unit is in excess of the estimated fair value of the reporting unit, then the excess amount is the impairment charge that should be recorded, not to exceed the carrying amount of goodwill. See Note 2(g) for further discussion.

CenterPoint Energy and CERC performed the annual goodwill impairment test on July 1 of each of 2019 and 2018 and determined that no goodwill impairment charge was required for any reporting unit in its annual test.

In connection with its preparation of financial statements for the year ended December 31, 2019, CenterPoint Energy and CERC, as applicable, identified triggering events for interim goodwill impairment tests at the Infrastructure Services and Energy Services reporting units. Early stage bids received from market participants during the exploration of strategic alternatives for these businesses at year-end indicated that the fair value of each reporting unit was more likely than not below the carrying value.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the businesses within its Infrastructure Services reporting unit. Per the Securities Purchase Agreement, VISCO will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes requiring the net deferred tax liabilities of approximately $123 million within the reporting unit as of December 31, 2019 to be recognized as a benefit to deferred income tax expense by CenterPoint Energy upon closing; therefore, any deferred tax assets and liabilities within the reporting unit are not included in the carrying amount of the assets and liabilities that will be transferred to the buyer. For further information, see Note 23.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reporting unit. Per the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. For further information, see Note 23.

The fair value of the Infrastructure Services reporting unit was estimated using a market approach deriving an estimated fair value as of December 31, 2019 based on the economic terms agreed upon within the Securities Purchase Agreement, a Level 2 fair value measurement. As of December 31, 2019 the fair value of the Infrastructure Services reporting unit exceeded the carrying value (inclusive of deferred income tax liabilities of $123 million) and no impairment loss was recognized.

The fair value of the Energy Services reporting unit was estimated using a combination of the market approach and the income approach as of December 31, 2019, a Level 3 fair value measurement. CenterPoint Energy and CERC utilized the economic indicators of value received by market participants during the exploration of strategic alternatives to inform the fair value of substantially all of the businesses within this reporting unit as of December 31, 2019. Certain assets groups not constituting a business within the reporting unit were valued using an income approach. CenterPoint Energy and CERC recognized an impairment loss on their Energy Services reporting unit of $48 million, the amount by which the carrying value (inclusive of deferred income tax liabilities of $25 million) exceeded the fair value as of December 31, 2019.

The tables below present information on CenterPoint Energy’s other intangible assets recorded in Intangible assets, net on the Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CenterPoint Energy’s Statements of Consolidated Income, unless otherwise indicated.



	December 31, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
	(in millions)
Customer relationships (1)	$	286	$	(43	)	$	243	$	86	$	(27	)	$	59
Covenants not to compete	4		(4		)	—		4		(3		)	1
Trade names (1)	58		(5		)	53		—		—			—
Construction backlog (1) (2)	27		(23		)	4		—		—			—
Operation and maintenance agreements (1) (2)	12		(1		)	11		—		—			—
Other (1)	24		(14		)	10		16		(11		)	5
Total	$	411	$	(90	)	$	321	$	106	$	(41	)	$	65


(1)	The fair value of intangible assets acquired through acquisitions has been finalized. See Note 4.


(2)	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 Statements of Consolidated Income.



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization (1) (2)	$	25	$	10	$	13
Amortization expense of intangible assets recorded in Non-utility cost of revenues, including natural gas (2)	24		—		—


(1)	Includes $17 million for the year ended December 31, 2019 of amortization expense related to intangibles acquired in the Merger.


(2)	The fair value of intangible assets, and related amortization assumptions, acquired through acquisitions during the year ended December 31, 2019, has been finalized. See Note 4.

The tables below present information on CERC’s other intangible assets recorded in Other non-current assets on CERC’s Consolidated Balance Sheets and the related amortization expense included in Depreciation and amortization on CERC’s Statements of Consolidated Income.



	December 31, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Balance		Gross Carrying Amount		Accumulated Amortization			Net Balance
	(in millions)
Customer relationships	$	86	$	(32	)	$	54	$	86	$	(27	)	$	59
Covenants not to compete	4		(4		)	—		4		(3		)	1
Other	16		(14		)	2		16		(11		)	5
Total	$	106	$	(50	)	$	56	$	106	$	(41	)	$	65



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Amortization expense of intangible assets recorded in Depreciation and amortization	$	9	$	10	$	13

CenterPoint Energy and CERC estimate that amortization expense of intangible assets with finite lives for the next five years will be as follows:



	Amortization Expense
	CenterPoint Energy		CERC
	(in millions)
2020	$	29	$	6
2021	25		6
2022	25		6
2023	24		5
2024	22		5

(7) Regulatory Matters

The following is a list of regulatory assets and liabilities reflected on the Registrants’ respective Consolidated Balance Sheets as of December 31, 2019 and 2018. The “amortization through” columns indicate the latest year when a regulatory asset or regulatory liability category will be fully amortized:



	December 31, 2019
	CenterPoint Energy				Houston Electric				CERC
	Amortization Through	(in millions)			Amortization Through	(in millions)			Amortization Through	(in millions)
Regulatory Assets:
Current regulatory assets (1)	2020	$	12		n/a	$	—		2020	$	12
Non-current regulatory assets:
Securitized regulatory assets	2024	788			2024	788			n/a	—
Unrecognized equity return (2)	2024	(168		)	2024	(168		)	n/a	—
Unamortized loss on reacquired debt (3)	2046	62			2046	62			n/a	—
Pension and postretirement-related regulatory asset (3)	Various (a)	637			TBD (b)	34			Various (a)	22
Hurricane Harvey restoration costs (3)	Various	68			TBD (b)	64			TBD (c)	4
Regulatory assets related to TCJA (3) (4)	Various	30			TBD (b)	23			2023	7
Asset retirement obligation (3)	Perpetual	131			Perpetual	26			Perpetual	94
Other regulatory assets-not earning a return (5)	Various (d)	147			Various	57			Various	48
Other regulatory assets	Various	422			Various	29			Various	16
Total non-current regulatory assets		2,117				915				191
Total regulatory assets		2,129				915				203
Regulatory Liabilities:
Current regulatory liabilities (6)	2020	47			n/a	—			2020	47
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4)	Various	1,582			TBD (b)	821			Various	442
Estimated removal costs	Various	1,429			Various	244			Various	637
Other regulatory liabilities	Various	463			Various	223			Various	140
Total non-current regulatory liabilities		3,474				1,288				1,219
Total regulatory liabilities		3,521				1,288				1,266
Total regulatory assets and liabilities, net		$	(1,392	)		$	(373	)		$	(1,063	)


(a)	Pension and postretirement-related regulatory assets balances are measured annually, and the ending amortization period may change based on the actuarial valuation.


(b)	The recovery and amortization of these amounts are to be determined upon receipt of the final order.


(c)	The recovery and amortization of a portion of these amounts are expected to be determined in the next rate case.


(d)	Other regulatory assets not-earning a return includes items with different amortization periods; therefore, the amortization is accounted for through various periods.



	December 31, 2018
	CenterPoint Energy			Houston Electric			CERC
	(in millions)
Regulatory Assets:
Current regulatory assets (1)	$	77		$	—		$	77
Non-current regulatory assets:
Securitized regulatory assets	1,059			1,059			—
Unrecognized equity return (2)	(213		)	(213		)	—
Unamortized loss on reacquired debt (3)	68			68			—
Pension and postretirement-related regulatory asset (3)	725			33			30
Hurricane Harvey restoration costs (3)	68			64			4
Regulatory assets related to TCJA (3) (4)	33			23			10
Asset retirement obligation (3)	109			24			85
Other regulatory assets-not earning a return (3)	81			55			26
Other regulatory assets	37			11			26
Total non-current regulatory assets	1,967			1,124			181
Total regulatory assets	2,044			1,124			258
Regulatory Liabilities:
Current regulatory liabilities (6)	38			17			21
Non-current regulatory liabilities:
Regulatory liabilities related to TCJA (4)	1,323			847			476
Estimated removal costs	886			269			617
Other regulatory liabilities	316			182			134
Total non-current regulatory liabilities	2,525			1,298			1,227
Total regulatory liabilities	2,563			1,315			1,248
Total regulatory assets and liabilities, net	$	(519	)	$	(191	)	$	(990	)


(1)	Current regulatory assets are included in Prepaid expenses and other current assets in the Registrants’ respective Consolidated Balance Sheets.

(2)

The unrecognized equity return will be recognized as it is recovered in rates through 2024. The timing of CenterPoint Energy’s and Houston Electric’s recognition of the equity return will vary each period based on amounts actually collected during the period. The actual amounts recognized are adjusted at least annually to correct any over-collections or under-collections during the preceding 12 months.



	Year Ended December 31,
	2019				2018				2017
	CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric		CenterPoint Energy		Houston Electric

Allowed equity return recognized	$	45	$	45	$	74	$	74	$	42	$	42


(3)	Substantially all of these regulatory assets are not earning a return.


(4)	The EDIT and deferred revenues will be recovered or refunded to customers as required by tax and regulatory authorities. See Note 15 for additional information.


(5)	Regulatory assets acquired in the Merger and not earning a return were recorded at fair value as of the Merger Date. Such fair value adjustments are recognized over time until the regulatory asset is recovered.


(6)	Current regulatory liabilities are included in Other current liabilities in each of the Registrants’ respective Consolidated Balance Sheets.

Houston Electric Base Rate Case (CenterPoint Energy and Houston Electric)

On April 5, 2019, and subsequently adjusted in errata filings in May and June 2019, Houston Electric filed its base rate application with the PUCT and the cities in its service area seeking approval for revenue increases of approximately $194 million, exclusive of the EDIT refund discussed below.

The key proposals of the base rate case included:


•	a rate base of $6.4 billion with a 50% debt/50% equity capital structure and a 10.4% ROE;


•	a prudency determination on all capital investments made by Houston Electric since January 1, 2010;


•	the establishment of a rider to refund unprotected EDIT resulting from the TCJA; and


•	updated depreciation rates and approval to recover other costs.

On September 16, 2019, the ALJs issued a PFD. The PUCT began deliberating on the PFD (which is prepared by ALJs at a different state agency) during its November 14, 2019 open meeting, but delayed final determination for further consideration. The PUCT again discussed the Houston Electric rate case at its December 13, 2019 open meeting and concluded that the PUCT would consider settlement a reasonable approach to resolving the rate case and noted that Houston Electric had indicated settlement negotiations were already underway. Houston Electric updated the PUCT at its January 16, 2020 open meeting regarding the status of settlement discussions, indicating that the parties were working on a settlement and anticipated a final settlement in the near future. On January 23, 2020, Houston Electric filed a Stipulation and Settlement Agreement with the PUCT, which provides for the following, among other things:


•	an overall revenue requirement increase of approximately $13 million;


•	an ROE of 9.4%;


•	a capital structure of 57.5% debt/42.5% equity;


•	a refund of unprotected EDIT of $105 million plus carrying costs over approximately 30-36 months; and


•	recovery of all retail transmission related costs through the TCRF.

Also, Houston Electric is not required to make a one-time refund of capital recovery from its TCOS and DCRF mechanisms. Future TCOS filings will take into account both ADFIT and EDIT until the final order from Houston Electric’s next base rate proceeding. No rate base items are expected to be written off; however, approximately $12 million in rate case expenses were written off in 2019. A base rate case application must be filed for Houston Electric no later than four years from the date of the PUCT’s final order in the proceeding. Additionally, Houston Electric will not file a DCRF in 2020, nor will a subsequent separate proceeding with the PUCT be instituted regarding EDIT on Houston Electric’s securitized assets.

Furthermore, under the terms of the Stipulation and Settlement Agreement, Houston Electric agreed to adopt certain ring-fencing measures to increase its financial separateness from CenterPoint Energy, which include the following:


•	Houston Electric’s credit agreements and indentures shall not contain cross-default provisions by which a default by CenterPoint Energy or its other affiliates would cause a default at Houston Electric;


•	The financial covenant in Houston Electric’s credit agreement shall not be related to any entity other than Houston Electric. Houston Electric shall not include in its debt or credit agreements any financial covenants or rating agency triggers related to any entity other than Houston Electric;


•	Houston Electric shall not pledge its assets in respect of or guarantee any debt or obligation of any of its affiliates. Houston Electric shall not pledge, mortgage, hypothecate, or grant a lien upon the property of Houston Electric except pursuant to an exception in effect in Houston Electric’s current credit agreement, such as Houston Electric’s first mortgage and general mortgage;


•	Houston Electric shall maintain its own stand-alone credit facility, and Houston Electric shall not share its credit facility with any regulated or unregulated affiliate;


•	Houston Electric shall maintain ratings with all three major credit ratings agencies;


•	Houston Electric shall maintain a stand-alone credit rating;


•	Houston Electric’s first mortgage bonds and general mortgage bonds shall be secured only with assets of Houston Electric;


•	No Houston Electric assets may be used to secure the debt of CenterPoint Energy or its other affiliates;

•

Houston Electric shall not hold out its credit as being available to pay the debt of any affiliates (provided that, for the avoidance of doubt, Houston Electric is not considered to be holding its credit out to pay the debt of affiliates, or in breach of any other ring-fencing measure, with respect to the $68 million of Houston Electric general mortgage bonds that currently serve as collateral for certain outstanding CenterPoint Energy pollution control bonds);


•	Without prior approval of the PUCT, neither CenterPoint Energy nor any affiliate of CenterPoint Energy (excluding Houston Electric) may incur, guarantee, or pledge assets in respect of any incremental new debt that is dependent on: (1) the revenues of Houston Electric in more than a proportionate degree than the other revenues of CenterPoint Energy; or (2) the equity of Houston Electric;


•	Houston Electric shall not transfer any material assets or facilities to any affiliates, other than a transfer that is on an arm’s length basis consistent with the PUCT’s affiliate standards applicable to Houston Electric;


•	Except for its participation in an affiliate money pool, Houston Electric shall not commingle its assets with those of other CenterPoint Energy affiliates;


•	Except for its participation in an affiliate money pool, Houston Electric shall not lend money to or borrow money from CenterPoint Energy; and


•	Houston Electric shall notify the PUCT if its issuer credit rating or corporate credit rating as rated by any of the three major rating agencies falls below investment grade.

The PUCT approved the settlement at its February 14, 2020 open meeting. A final order from the PUCT is currently expected during the first quarter of 2020; however, motions for rehearing, if granted, could result in the order being issued after the first quarter of 2020. The rates are expected to be implemented 45 days after the final order is issued.

CenterPoint Energy and Houston Electric record pre-tax expense for (i) probable disallowances of capital investments and (ii) customer refund obligations and costs deferred in regulatory assets when recovery of such amounts is no longer considered probable.

(8) Stock-Based Incentive Compensation Plans and Employee Benefit Plans

(a) Stock-Based Incentive Compensation Plans (CenterPoint Energy)

CenterPoint Energy has LTIPs that provide for the issuance of stock-based incentives, including stock options, performance awards, restricted stock unit awards and restricted and unrestricted stock awards to officers, employees and non-employee directors. Approximately 14 million shares of Common Stock are authorized under these plans for awards. CenterPoint Energy issues new shares of its Common Stock to satisfy stock-based payments related to LTIPs. Equity awards are granted to employees without cost to the participants.

Compensation costs for the performance and stock unit awards granted under LTIPs are measured using fair value and expected achievement levels on the grant date. For performance awards with operational goals, the achievement levels are revised as goals are evaluated. The fair value of awards granted to employees is based on the closing stock price of CenterPoint Energy’s Common Stock on the grant date. The compensation expense is recorded on a straight-line basis over the vesting period. Forfeitures are estimated on the date of grant based on historical averages and estimates are updated periodically throughout the vesting period.

The performance awards granted in 2019, 2018 and 2017 are distributed based upon the achievement of certain objectives over a three-year performance cycle. The stock unit awards granted in 2019, 2018 and 2017 are service based. The stock unit awards generally vest at the end of a three-year period, provided, however, that stock unit awards granted to non-employee directors vested at the end of a one-year period (for awards granted in 2017) or vested immediately upon grant (for awards granted in 2019 and 2018). Upon vesting, both the performance and stock unit awards are issued to the participants along with the value of dividend equivalents earned over the performance cycle or vesting period.

The following table summarizes CenterPoint Energy’s expenses related to LTIPs for 2019, 2018 and 2017:



	Year Ended December 31,
	2019		2018		2017
	(in millions)
LTIP Compensation expense (1)	$	28	$	26	$	21
Income tax benefit recognized	7		6		8
Actual tax benefit realized for tax deductions	12		5		6


(1)	Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income and shown prior to any amounts capitalized.

The following tables summarize CenterPoint Energy’s LTIP activity for 2019:



	Year Ended December 31, 2019
	Shares (Thousands)		Weighted-Average Grant Date Fair Value		Remaining Average Contractual Life (Years)	Aggregate Intrinsic Value (2) (Millions)
Performance Awards (1)
Outstanding and non-vested as of December 31, 2018	3,818		$	23.91
Granted	1,413		31.16
Forfeited or canceled	(825	)	24.78
Vested and released to participants	(1,074	)	18.97
Outstanding and non-vested as of December 31, 2019	3,332		$	28.36	1.1	$	53

Stock Unit Awards
Outstanding and non-vested as of December 31, 2018	1,060		$	24.08
Granted	470		31.07
Forfeited or canceled	(131	)	27.95
Vested and released to participants	(433	)	20.72
Outstanding and non-vested as of December 31, 2019	966		$	28.46	1.2	$	26


(1)	Reflects maximum performance achievement.


(2)	Reflects the impact of current expectations of achievement and stock price.

The weighted average grant date fair values per unit of awards granted were as follows for 2019, 2018 and 2017:



	Year Ended December 31,
	2019		2018		2017
	(In millions, except for per unit amounts)
Performance Awards
Weighted-average grant date fair value per unit of awards granted	$	31.16	$	26.74	$	26.64
Total intrinsic value of awards received by participants	36		12		7
Vested grant date fair value	20		9		5

Stock Unit Awards
Weighted-average grant date fair value per unit of awards granted	$	31.07	$	26.62	$	26.77
Total intrinsic value of awards received by participants	15		9		9
Vested grant date fair value	9		7		7

As of December 31, 2019, there was $34 million of total unrecognized compensation cost related to non-vested performance and stock awards which is expected to be recognized over a weighted-average period of 1.7 years.

(b) Pension Benefits (CenterPoint Energy)

CenterPoint Energy maintains a non-contributory qualified defined benefit pension plan covering eligible employees, with benefits determined using a cash balance formula. In addition to the non-contributory qualified defined benefit pension plan, CenterPoint Energy maintains unfunded non-qualified benefit restoration plans which allow participants to receive the benefits to which they would have been entitled under CenterPoint Energy’s non-contributory qualified pension plan except for federally mandated limits on qualified plan benefits or on the level of compensation on which qualified plan benefits may be calculated.

As a result of the Merger, CenterPoint Energy now also maintains three additional qualified defined benefit pension plans which are closed to new participants and a non-qualified supplemental retirement plan. The defined benefit pension plans cover eligible full-time regular employees and retirees of Vectren and are primarily non-contributory.

CenterPoint Energy’s net periodic cost includes the following components relating to pension, including the non-qualified benefit plans:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Service cost (1)	$	40		$	37		$	36
Interest cost (2)	96			79			89
Expected return on plan assets (2)	(105		)	(107		)	(97		)
Amortization of prior service cost (2)	9			9			9
Amortization of net loss (2)	52			43			58
Settlement cost (2) (3)	2			—			—
Curtailment gain (2) (4)	(1		)	—			—
Net periodic cost	$	93		$	61		$	95


(1)	Amounts presented in the table above are included in Operation and maintenance expense in CenterPoint Energy’s Statements of Consolidated Income, net of regulatory deferrals and amounts capitalized.


(2)	Amounts presented in the table above are included in Other, net in CenterPoint Energy’s Statements of Consolidated Income, net of regulatory deferrals.


(3)	A one-time, non-cash settlement cost is required when the total lump sum distributions or other settlements of plan benefit obligations during a plan year exceed the service cost and interest cost components of the net periodic cost for that year. In 2019, CenterPoint Energy recognized a non-cash settlement cost due to lump sum settlement payments.


(4)	A curtailment gain or loss is required when the expected future services of a significant number of employees are reduced or eliminated for the accrual of benefits. In 2019, CenterPoint Energy recognized a pension curtailment gain related to employees who were terminated after the Merger closed.

CenterPoint Energy used the following assumptions to determine net periodic cost relating to pension benefits:



	Year Ended December 31,
	2019		2018		2017
Discount rate	4.35	%	3.65	%	4.15	%
Expected return on plan assets	6.00		6.00		6.00
Rate of increase in compensation levels	4.60		4.45		4.50

In determining net periodic benefit cost, CenterPoint Energy uses fair value, as of the beginning of the year, as its basis for determining expected return on plan assets.

The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in the Consolidated Balance Sheets as well as the key assumptions of CenterPoint Energy’s pension plans. The measurement dates for plan assets and obligations were December 31, 2019 and 2018.



	December 31,
	2019			2018
	(in millions, except for actuarial assumptions)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	2,013		$	2,225
Plan obligations assumed in Merger	332			—
Service cost	40			37
Interest cost	96			79
Benefits paid	(244		)	(201		)
Actuarial (gain) loss (1)	216			(127		)
Plan amendment	1			—
Curtailment	(1		)	—
Benefit obligation, end of year	2,453			2,013
Change in Plan Assets
Fair value of plan assets, beginning of year	1,516			1,801
Plan assets assumed in Merger	286			—
Employer contributions	109			69
Benefits paid	(244		)	(201		)
Actual investment return	338			(153		)
Fair value of plan assets, end of year	2,005			1,516
Funded status, end of year	$	(448	)	$	(497	)

Amounts Recognized in Balance Sheets
Current liabilities-other	$	(8	)	$	(7	)
Other liabilities-benefit obligations	(440		)	(490		)
Net liability, end of year	$	(448	)	$	(497	)
Actuarial Assumptions
Discount rate (2)	3.20		%	4.35		%
Expected return on plan assets (3)	5.75			6.00
Rate of increase in compensation levels	4.95			4.60
Interest crediting rate	3.25			3.75


(1)	Significant sources of loss for 2019 include the decrease in discount rate from 4.35% to 3.20%. Significant sources of gain for 2018 include the increase in discount rate from 3.65% to 4.35% and the mortality projection scale change from MP2017 to MP2018.


(2)	The discount rate assumption was determined by matching the projected cash flows of CenterPoint Energy’s plans against a hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from one-half to 99 years.


(3)	The expected rate of return assumption was developed using the targeted asset allocation of CenterPoint Energy’s plans and the expected return for each asset class.

The following table displays pension benefits related to CenterPoint Energy’s pension plans that have accumulated benefit obligations in excess of plan assets:



	December 31,
	2019				2018
	Pension (Qualified)		Pension (Non-qualified)		Pension (Qualified)		Pension (Non-qualified)
	(in millions)
Accumulated benefit obligation	$	2,352	$	68	$	1,930	$	61
Projected benefit obligation	2,385		68		1,952		61
Fair value of plan assets	2,005		—		1,516		—

The accumulated benefit obligation for all defined benefit pension plans on CenterPoint Energy’s Consolidated Balance Sheets was $2,420 million and $1,991 million as of December 31, 2019 and 2018, respectively.

Multi-employer Pension Plan

CenterPoint Energy, through its Infrastructure Services reportable segment, participates in several industry wide multi-employer pension plans for its collective bargaining employees which provide for monthly benefits based on length of service. The risks of participating in multi-employer pension plans are different from the risks of participating in single-employer pension plans in the following respects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan allocable to such withdrawing employer may be borne by the remaining participating employers and (3) if CenterPoint Energy stops participation in some of its multi-employer pension plans, CenterPoint Energy may be required to pay those plans an amount based on its allocable share of the underfunded status of the plan, referred to as a withdrawal liability.

Expense is recognized as payments are accrued for work performed or when withdrawal liabilities are probable and estimable. Expense associated with multi-employer plans of $52 million during the year ended December 31, 2019. During 2019, CenterPoint Energy made contributions to these multi-employer plans on behalf of employees that participate in approximately 215 local unions. Contracts with these unions are negotiated with trade agreements through two primary contractor associations. These trade agreements have varying expiration dates ranging from 2020 through 2022. The average contribution related to these local unions was less than $1 million, and the largest contribution was approximately $5 million. Multiple unions can contribute to a single multi-employer plan. CenterPoint Energy made contributions to at least 72 plans in 2019, eight of which are considered significant plans based on, among other things, the amount of the contributions, the number of employees participating in the plan, and the funded status of the plan.

CenterPoint Energy’s participation in the significant plans is outlined in the following table. The EIN / Pension Plan Number column provides the EIN and three-digit pension plan numbers. The most recent Pension Protection Act Zone Status available in 2019 is for the plan year end at January 31, 2019 for the Central Pension Fund, May 31, 2019 for the Indiana Pension Laborers Fund, December 31, 2018 for the Pipeline Industry Benefit Fund, December 31, 2018 for the Laborers District Council & Contractors’ Pension Fund of Ohio, April 30, 2019 for the Ohio Operating Engineers Pension Fund, April 30, 2019 for the Operating Engineers Local 324 Fringe Benefit Fund, December 31, 2018 for the Minnesota Laborers Pension Fund, and December 31, 2018 for the Laborers’ Combined Fund of Western Pennsylvania. Generally, plans in the red zone are less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green zone are at least 80% funded. The FIP/RP Status Pending / Implemented column indicates plans for which a FIP or RP is either pending or has been implemented. The multi-employer contributions listed in the table below are CenterPoint Energy’s multi-employer contributions made in 2019.

Federal law requires pension plans in endangered status to adopt a FIP and plans in critical status to adopt a RP aimed at

restoring the financial health of the plan. In December 2014, the Multi-employer Pension Reform Act of 2014 was passed and permanently extended the Pension Protection Act of 2006 multi-employer plan critical and endangered status funding rules, among other things, including providing a provision for a plan sponsor to suspend or reduce benefit payments to preserve plans in critical and declining status.



		Pension Protection Act Zone Status		Multi-employer Contributions
Pension Fund	EIN/Pension Plan Number	2019	FIP/RP Status Pending/Implemented	2019		Surcharge Imposed
				(in millions)
Central Pension Fund	36-6052390-001	Green	No	$	12	No
Indiana Laborers Pension Fund	35-6027150-001	Green	No	5		No
Pipeline Industry Benefit Fund	73-0742835-001	Green	No	5		No
Laborers District Fund of Ohio	31-6129964-001	Green	No	4		No
Ohio Operating Engineers Pension Fund	31-6129968-001	Green	No	3		No
Operating Engineers Local #324 Fund (1)	38-1900637-001	Red	Implemented	3		No
Minnesota Laborers Pension Fund	41-6159599-001	Green	No	3		No
Laborers’ Combined Fund of Western PA (2)	25-6135576-001	Red	Implemented	2		No
Other				15
Total Contributions				$	52

(1)

The Operating Engineers Local #324 Fringe Benefits Fund was certified to be in “critical” status for the plan year ending April 30, 2019. In an effort to improve the plan’s funding situation, on March 17, 2011, the trustees adopted a plan amendment, which reduced benefit accruals and eliminated some ancillary benefits, and adopted an RP that will be effective from May 1, 2013 through April 30, 2023 or until the plan is no longer in critical status. On April 27, 2015, the trustees updated the RP to change the annual standard for meeting the requirements of the RP. The trustees further updated the RP on January 29, 2019. The annual standard is that actuarial projections updated for each year show the fund is expected to remain solvent for a 20-year projection period.


(2)	The Laborers’ Combined Fund of Western Pennsylvania was previously deemed in critical status. The trustees adopted a FIP that is scheduled to run through December 31, 2020 and provided for changes in adjustable benefits and increases in the employer contribution rate.

While not considered significant to CenterPoint Energy, there are four plans in red zone status receiving CenterPoint Energy contributions. There are also five other plans where CenterPoint Energy contributions exceed 5% of each plan’s total contributions; however, none of these plans are considered significant to CenterPoint Energy.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Purchase Agreement to sell the businesses within its Infrastructure Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23. As a result, CenterPoint Energy will no longer participate in the multi-employer pension plans discussed above.

(c) Postretirement Benefits

CenterPoint Energy provides certain healthcare and life insurance benefits for eligible retired employees on both a contributory and non-contributory basis. The Registrants’ employees (other than employees of Vectren and its subsidiaries) who were hired before January 1, 2018 and who have met certain age and service requirements at retirement, as defined in the plans, are eligible to participate in these benefit plans. Employees hired on or after January 1, 2018 are not eligible for these benefits, except that such employees represented by IBEW Local Union 66 are eligible to participate in certain of the benefits, subject to the applicable age and service requirements. With respect to retiree medical and prescription drug benefits, employees represented by the IBEW Local Union 66 who retire on or after January 1, 2017, and their dependents, receive any such benefits exclusively through the NECA/IBEW Family Medical Care Plan pursuant to the terms of the renegotiated collective bargaining agreement entered into in May 2016. Houston Electric and CERC are required to fund a portion of their obligations in accordance with rate orders. All other obligations are funded on a pay-as-you-go basis.

As a result of the Merger, CenterPoint Energy now maintains an additional postretirement benefit plan. The postretirement benefit plan provides health care and life insurance benefits, which are a combination of self-insured and fully insured programs, to eligible Vectren retirees on both a contributory and non-contributory basis.

Postretirement benefits are accrued over the active service period of employees. The net postretirement benefit cost includes the following components:



	Year Ended December 31,
	2019									2018									2017
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)
Service cost (1)	$	3		$	1		$	1		$	2		$	—		$	1		$	2		$	1		$	1
Interest cost (2)	15			7			5			13			8			4			16			9			5
Expected return on plan assets (2)	(5		)	(4		)	(1		)	(5		)	(4		)	(1		)	(5		)	(4		)	(1		)
Amortization of prior service cost (credit) (2)	(5		)	(6		)	1			(5		)	(5		)	1			(5		)	(6		)	1
Net postretirement benefit cost (credit)	$	8		$	(2	)	$	6		$	5		$	(1	)	$	5		$	8		$	—		$	6


(1)	Amounts presented in the table above are included in Operation and maintenance expense in each of the Registrants’ respective Statements of Consolidated Income, net of regulatory deferrals and amounts capitalized.


(2)	Amounts presented in the table above are included in Other, net in each of the Registrants’ respective Statements of Consolidated Income, net of regulatory deferrals.

The following assumptions were used to determine net periodic cost relating to postretirement benefits:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
Discount rate	3.20	%	3.20	%	3.20	%	3.60	%	3.60	%	3.60	%	4.15	%	4.15	%	4.15	%
Expected return on plan assets	4.60		4.70		4.15		4.55		4.75		3.85		4.50		4.75		3.60

The following table summarizes changes in the benefit obligation, plan assets, the amounts recognized in consolidated balance sheets and the key assumptions of the postretirement plans. The measurement dates for plan assets and benefit obligations were December 31, 2019 and 2018.



	December 31,
	2019									2018
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)
Change in Benefit Obligation
Benefit obligation, beginning of year	$	331		$	166		$	110		$	386		$	225		$	109
Plan obligations assumed in Merger	37			—			—			—			—			—
Service cost	3			1			1			2			—			1
Interest cost	15			7			5			13			8			4
Participant contributions	8			2			4			7			2			4
Benefits paid	(26		)	(13		)	(8		)	(25		)	(13		)	(9		)
Plan amendment	9			3			5			—			—			—
Actuarial (gain) loss (1)	(21		)	(4		)	(15		)	(52		)	(56		)	1
Benefit obligation, end of year	356			162			102			331			166			110
Change in Plan Assets
Fair value of plan assets, beginning of year	114			89			25			120			93			26
Employer contributions	17			10			3			14			9			4
Participant contributions	8			2			4			7			2			4
Benefits paid	(26		)	(13		)	(8		)	(25		)	(13		)	(9		)
Actual investment return	15			13			3			(2		)	(2		)	—
Fair value of plan assets, end of year	128			101			27			114			89			25
Funded status, end of year	$	(228	)	$	(61	)	$	(75	)	$	(217	)	$	(77	)	$	(85	)
Amounts Recognized in Balance Sheets
Current liabilities-other	$	(8	)	$	—		$	(3	)	$	(6	)	$	—		$	(3	)
Other liabilities-benefit obligations	(220		)	(61		)	(72		)	(211		)	(77		)	(82		)
Net liability, end of year	$	(228	)	$	(61	)	$	(75	)	$	(217	)	$	(77	)	$	(85	)
Actuarial Assumptions
Discount rate (2)	3.25		%	3.25		%	3.25		%	4.35		%	4.35		%	4.35		%
Expected return on plan assets (3)	3.95			4.05			3.35			4.60			4.70			4.15
Medical cost trend rate assumed for the next year - Pre-65	5.50			5.50			5.50			5.95			5.95			5.95
Medical/prescription drug cost trend rate assumed for the next year - Post-65	5.75			5.75			5.75			28.60			28.60			28.60
Prescription drug cost trend rate assumed for the next year - Pre-65	8.00			8.00			8.00			9.20			9.20			9.20
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.50			4.50			4.50			4.50			4.50			4.50
Year that the cost trend rates reach the ultimate trend rate - Pre-65	2028			2028			2028			2026			2026			2026
Year that the cost trend rates reach the ultimate trend rate - Post-65	2029			2029			2029			2027			2027			2027

(1)

Significant sources of gain for 2019 include favorable cost trend rates and benefit claims experience in addition to the change in mortality projection scale from MP2018 to MP2019. Significant sources of gain for 2018 include the increase in the discount rate from 3.60% to 4.35%, favorable benefit claims experience and cost trend rates in addition to the change in mortality projection scale from MP2017 to MP2018.


(2)	The discount rate assumption was determined by matching the projected cash flows of the plans against a hypothetical yield curve of high-quality corporate bonds represented by a series of annualized individual discount rates from one-half to 99 years.


(3)	The expected rate of return assumption was developed using the targeted asset allocation of the plans and the expected return for each asset class.

(d) Accumulated Other Comprehensive Income (Loss) (CenterPoint Energy and CERC)

CenterPoint Energy recognizes the funded status of its pension and other postretirement plans on its Consolidated Balance Sheets. To the extent this obligation exceeds amounts previously recognized in the Statements of Consolidated Income, CenterPoint Energy records a regulatory asset for that portion related to its rate regulated utilities. To the extent that excess liability does not relate to a rate regulated utility, the offset is recorded as a reduction to equity in accumulated other comprehensive income.

Amounts recognized in accumulated other comprehensive loss (gain) consist of the following:



	December 31,
	2019								2018
	Pension Benefits		Postretirement Benefits						Pension Benefits		Postretirement Benefits
	CenterPoint Energy		CenterPoint Energy			CERC			CenterPoint Energy		CenterPoint Energy			CERC
	(in millions)
Unrecognized actuarial loss (gain)	$	105	$	(16	)	$	(12	)	$	109	$	(7	)	$	(3	)
Unrecognized prior service cost	—		7			7			1		5			5
Deferred tax benefit	—		—			—			—		—			(9		)
Net amount recognized in accumulated other comprehensive loss (gain)	$	105	$	(9	)	$	(5	)	$	110	$	(2	)	$	(7	)

The changes in plan assets and benefit obligations recognized in other comprehensive income during 2019 are as follows:



	Pension Benefits			Postretirement Benefits
	CenterPoint Energy			CenterPoint Energy			CERC
	(in millions)
Net loss (gain)	$	4		$	(8	)	$	(6	)
Amortization of net loss	(8		)	—			—
Amortization of prior service cost	(1		)	1			(1		)
Total recognized in comprehensive income	$	(5	)	$	(7	)	$	(7	)
Total expense recognized in net periodic costs and Other comprehensive income	$	87		$	1		$	(1	)

(e) Pension Plan Assets (CenterPoint Energy)

In managing the investments associated with the benefit plans, CenterPoint Energy’s objective is to achieve and maintain a fully funded plan. This objective is expected to be achieved through an investment strategy that manages liquidity requirements while maintaining a long-term horizon in making investment decisions and efficient and effective management of plan assets.

As part of the investment strategy discussed above, CenterPoint Energy maintained the following weighted average allocation targets for its pension plans as of December 31, 2019:



	Minimum		Maximum
U.S. equity	19	%	29	%
International equity	8	%	18	%
Real estate	3	%	9	%
Fixed income	52	%	62	%
Cash	0	%	2	%

The following tables set forth by level, within the fair value hierarchy (see Note 10), CenterPoint Energy’s pension plan assets at fair value as of December 31, 2019 and 2018:



	Fair Value Measurements as of December 31,
	2019										2018
	(Level 1)			(Level 2)		(Level 3)		Total			(Level 1)			(Level 2)		(Level 3)		Total
	(in millions)
Cash	$	(7	)	$	—	$	—	$	(7	)	$	19		$	—	$	—	$	19
Corporate bonds:
Investment grade or above	—			699		—		699			—			368		—		368
Equity securities:
U.S. companies	69			—		—		69			60			—		—		60
Cash received as collateral from securities lending	61			—		—		61			77			—		—		77
U.S. treasuries	232			—		—		232			196			—		—		196
Mortgage backed securities	—			8		—		8			—			6		—		6
Asset backed securities	—			3		—		3			—			1		—		1
Municipal bonds	—			44		—		44			—			27		—		27
Mutual funds (2)	270			—		—		270			167			—		—		167
International government bonds	—			21		—		21			—			16		—		16
Obligation to return cash received as collateral from securities lending	(61		)	—		—		(61		)	(77		)	—		—		(77		)
Total investments at fair value	$	564		$	775	$	—	$	1,339		$	442		$	418	$	—	$	860
Investments measured by net asset value per share or its equivalent (1) (2)								666										656
Total Investments								$	2,005									$	1,516


(1)	Represents investments in common collective trust funds.


(2)	The amounts invested in mutual funds and common collective trust funds were allocated as follows:



	As of December 31,
	2019				2018
	Mutual Funds		Common Collective Trust Funds		Mutual Funds		Common Collective Trust Funds
International equities (1)	31	%	29	%	85	%	41	%
U.S. equities	49	%	51	%	15	%	5	%
Real estate	1	%	6	%	—	%	—	%
Fixed income	19	%	14	%	—	%	54	%


(1)	The amounts invested in international equities for 2018 include allocations of 34% in mutual funds and 4% in common collective trust funds,which were previously reported as allocations in emerging market equities.

The pension plans utilized both exchange traded and over-the-counter financial instruments such as futures, interest rate options and swaps that were marked to market daily with the gains/losses settled in the cash accounts. The pension plans did not include any holdings of CenterPoint Energy Common Stock as of December 31, 2019 or 2018.

(f) Postretirement Plan Assets

In managing the investments associated with the postretirement plans, the Registrants’ objective is to achieve and maintain a fully funded plan. This objective is expected to be achieved through an investment strategy that manages liquidity requirements while maintaining a long-term horizon in making investment decisions and efficient and effective management of plan assets.

As part of the investment strategy discussed above, the Registrants maintained the following weighted average allocation targets for the postretirement plans as of December 31, 2019:



	CenterPoint Energy				Houston Electric				CERC
	Minimum		Maximum		Minimum		Maximum		Minimum		Maximum
U.S. equity	13	%	23	%	13	%	23	%	15	%	25	%
International equity	3	%	13	%	3	%	13	%	2	%	12	%
Fixed income	69	%	79	%	69	%	79	%	68	%	78	%
Cash	0	%	2	%	0	%	2	%	0	%	2	%

The following table presents mutual funds by level, within the fair value hierarchy, the Registrants’ postretirement plan assets at fair value as of December 31, 2019 and 2018:



	Fair Value Measurements as of December 31,
	2019								2018
	Mutual Funds
	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
	(in millions)
CenterPoint Energy	$	128	$	—	$	—	$	128	$	114	$	—	$	—	$	114
Houston Electric	101		—		—		101		89		—		—		89
CERC	27		—		—		27		25		—		—		25

The amounts invested in mutual funds were allocated as follows:



	As of December 31,
	2019						2018
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
Fixed income	71	%	71	%	69	%	74	%	74	%	73	%
U.S. equities	21	%	21	%	24	%	19	%	19	%	21	%
International equities	8	%	8	%	7	%	7	%	7	%	6	%

(g) Benefit Plan Contributions

The Registrants made the following contributions in 2019 and expect to make the following minimum contributions in 2020 to the indicated benefit plans below:



	Contributions in 2019						Expected Minimum Contributions in 2020
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Qualified pension plans	$	86	$	—	$	—	$	76	$	—	$	—
Non-qualified pension plans	23		—		—		7		—		—
Postretirement benefit plans	17		10		3		17		9		3

The following benefit payments are expected to be paid by the pension and postretirement benefit plans:



	Pension Benefits		Postretirement Benefits
	CenterPoint Energy		CenterPoint Energy		Houston Electric		CERC
	(in millions)
2020	$	180	$	18	$	8	$	5
2021	178		18		8		4
2022	180		19		9		5
2023	181		20		10		5
2024	177		21		10		6
2025-2029	824		112		54		30

(h) Savings Plan

CenterPoint Energy maintains the CenterPoint Energy Savings Plan, a tax-qualified employee savings plan that includes a cash or deferred arrangement under Section 401(k) of the Code, and an employee stock ownership plan under Section 4975(e)(7) of the Code. Under the plan, participating employees may make pre-tax or Roth contributions and, if eligible, after-tax contributions up to certain federally mandated limits. Participating Registrants provide matching contributions and, as of January 1, 2020, nonelective contributions, if eligible, up to certain limits. CenterPoint Energy, through the Merger, also acquired additional defined contribution retirement savings plans sponsored by Vectren and its subsidiaries that are qualified under sections 401(a) and 401(k) of the Code, one of which merged into the CenterPoint Energy Savings Plan as of January 1, 2020.

The CenterPoint Energy Savings Plan has significant holdings of Common Stock. As of December 31, 2019, 11,051,800 shares of Common Stock were held by the savings plan, which represented approximately 13% of its investments. Given the concentration of the investments in Common Stock, the savings plan and its participants have market risk related to this investment. The savings plan limits the percentage of future contributions that can be invested in Common Stock to 25% and prohibits transfers of account balances where the transfer would result in more than 25% of a participant’s total account balance invested in Common Stock.

CenterPoint Energy allocates the savings plan benefit expense to Houston Electric and CERC related to their respective employees. The following table summarizes the Registrants’ savings plan benefit expense for 2019, 2018 and 2017:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Savings plan benefit expenses (1)	$	58	$	18	$	18	$	43	$	17	$	18	$	41	$	17	$	17


(1)	Amounts presented in the table above are included in Operation and maintenance expense in the Registrants’ respective Statements of Consolidated Income and shown prior to any amounts capitalized.

(i) Other Benefits Plans

The Registrants participate in CenterPoint Energy’s plans that provide postemployment benefits for certain former or inactive employees, their beneficiaries and covered dependents, after employment but before retirement (primarily healthcare and life insurance benefits for participants in the long-term disability plan).

CenterPoint Energy maintains non-qualified deferred compensation plans, including plans acquired in the Merger, that provide benefits payable to eligible directors, officers and select employees or their designated beneficiaries at specified future dates or upon termination, retirement or death. Benefit payments are made from the general assets of the participating Registrants.

Expenses related to other benefit plans were recorded as follows:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Postemployment benefits	$	2	$	1	$	1	$	3	$	4	$	1	$	6	$	1	$	4
Deferred compensation plans	4		1		—		3		1		—		3		1		—

Amounts related to other benefit plans were included in Benefit Obligations in the Registrants’ accompanying Consolidated Balance Sheets as follows:



	December 31, 2019						December 31, 2018
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Postemployment benefits	$	11	$	3	$	7	$	11	$	3	$	7
Deferred compensation plans	41		8		3		42		9		3
Split-dollar life insurance arrangements	32		1		—		36		1		—

(j) Change in Control Agreements and Other Employee Matters

CenterPoint Energy has a change in control plan, which was amended and restated on May 1, 2017. The plan generally provides, to the extent applicable, in the case of a change in control of CenterPoint Energy and covered termination of employment, for severance benefits of up to three times annual base salary plus bonus, and other benefits. Certain CenterPoint Energy officers, including the Executive Chairman, are participants under the plan.

Certain key employees of Vectren and its subsidiaries have change in control agreements or employment agreements that provide payments and other benefits upon a covered termination of employment.

As of December 31, 2019, the Registrants’ employees were covered by collective bargaining agreements as follows:



		Percentage of Employees Covered
	Agreement Expiration	CenterPoint Energy		Houston Electric		CERC
IBEW Local 66	May 2020	10	%	51	%	—
OPEIU Local 12 and Mankato	March and May 2021	2	%	—		3	%
Gas Workers Union Local 340	April 2020	3	%	—		12	%
IBEW Locals 949 & 1393 and USW Locals 12213 & 7441	December 2020	4	%	—		7	%
USW Locals 13-227 & 13-1 and IBEW Local 702	June and July 2022	5	%	—		12	%
Teamsters Local 135	September 2021	—		—		—
UWUA Local 175	October 2021	1	%	—		—
Trade Agreements of Infrastructure Services through the DCA and PLCA (1)	Various expiration dates in 2020–2022	27	%	—		—
Total		52	%	51	%	34	%

(1)

Infrastructure Services negotiates various trade agreements through contractor associations. The two primary associations are the DCA and the PLCA. These trade agreements are with a variety of construction unions including Laborer’s International Union of North America, International Union of Operating Engineers, United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry, and Teamsters. The trade agreements have varying expiration dates in 2020, 2021 and 2022. In addition, these subsidiaries have various project agreements and small local agreements. These agreements expire upon completion of a specific project or on various dates throughout the year.

(9) Derivative Instruments

(a) Non-Trading Activities

Commodity Derivative Instruments (CenterPoint Energy and CERC). CenterPoint Energy, through its Indiana utilities, and CERC, through CES, enter into certain derivative instruments to mitigate the effects of commodity price movements. Certain financial instruments used to hedge portions of the natural gas inventory of the Energy Services reportable segment are designated as fair value hedges for accounting purposes. Outstanding derivative instruments designated as economic hedges at the Indiana Utilities hedge long-term variable rate natural gas purchases. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging natural gas purchases, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. All other financial instruments do not qualify or are not designated as cash flow or fair value hedges.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23.

Interest Rate Risk Derivative Instruments. From time to time, the Registrants may enter into interest rate derivatives that are designated as economic or cash flow hedges. The objective of these hedges is to offset risk associated with interest rates borne by the Registrants in connection with an anticipated future fixed rate debt offering or other exposure to variable rate debt. The Indiana Utilities have authority to refund and recover mark-to-market gains and losses associated with hedging financing activity, and thus the gains and losses on derivatives are deferred in a regulatory liability or asset. For the impacts of cash flow hedges to Accumulated other comprehensive income, see Note 13.

The table below summarizes the Registrants’ outstanding interest rate hedging activity:



	December 31, 2019				December 31, 2018
Hedging Classification	Notional Principal
	CenterPoint Energy (1)		Houston Electric		CenterPoint Energy		Houston Electric
	(in millions)
Economic hedge	$	84	$	—	$	—	$	—
Cash flow hedge	—		—		450		450


(1)	Relates to interest rate derivative instruments at SIGECO.

Weather Hedges (CenterPoint Energy and CERC). CenterPoint Energy and CERC have weather normalization or other rate mechanisms that largely mitigate the impact of weather on NGD in Arkansas, Indiana, Louisiana, Mississippi, Minnesota, Ohio and Oklahoma, as applicable. CenterPoint Energy’s and CERC’s NGD in Texas and CenterPoint Energy’s electric operations in Texas and Indiana do not have such mechanisms, although fixed customer charges are historically higher in Texas for NGD compared to its other jurisdictions. As a result, fluctuations from normal weather may have a positive or negative effect on CenterPoint Energy’s and CERC’s NGD’s results in Texas and on CenterPoint Energy’s electric operations’ results in its Texas and Indiana service territories.

CenterPoint Energy and CERC, as applicable, enter into winter season weather hedges from time to time for certain NGD jurisdictions and electric operations’ service territory to mitigate the effect of fluctuations from normal weather on results of operations and cash flows. These weather hedges are based on heating degree days at 10-year normal weather. Houston Electric and Indiana Electric do not enter into weather hedges.

The tables below summarizes CenterPoint Energy’s and CERC’s weather hedge gain (loss) activity:

CenterPoint Energy



				Year Ended December 31,
Texas Operations	Winter Season	Bilateral Cap		2019		2018			2017
		(in millions)
NGD	2019 – 2020	$	8	$	2	$	—		$	—
NGD	2018 – 2019	9		—		—			—
NGD	2017 – 2018	8		—		(2		)	—
Electric operations	2019 – 2020	7		3		—			—
Electric operations	2018 – 2019	8		3		—			—
Electric operations	2017 – 2018	9		—		(2		)	—
Electric operations	2016 – 2017	9		—		—			(1		)
Total CenterPoint Energy (1)				$	8	$	(4	)	$	(1	)

CERC



				Year Ended December 31,
Texas Operations	Winter Season	Bilateral Cap		2019		2018			2017
		(in millions)
NGD	2019 – 2020	$	8	$	2	$	—		$	—
NGD	2018 – 2019	9		—		—			—
NGD	2017 – 2018	8		—		(2		)	—
Total CERC (1)				$	2	$	(2	)	$	—


(1)	Weather hedge gains (losses) are recorded in Revenues in the Statements of Consolidated Income.

(b) Derivative Fair Values and Income Statement Impacts

The following tables present information about derivative instruments and hedging activities. The first three tables provide a balance sheet overview of Derivative Assets and Liabilities as of December 31, 2019 and 2018, while the last two tables provide a breakdown of the related income statement impacts for the years ending December 31, 2019, 2018 and 2017.

Fair Value of Derivative Instruments and Hedged Items

CenterPoint Energy



		December 31, 2019				December 31, 2018
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
		(in millions)
Derivatives designated as cash flow hedges:
Interest rate derivatives	Current Liabilities: Non-trading derivative liabilities	$	—	$	—	$	—	$	24
Derivatives designated as fair value hedges:
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	12		—		1		7
Derivatives not designated as hedging instruments:
Natural gas derivatives (1) (2) (3)	Current Assets: Non-trading derivative assets	139		3		103		3
Natural gas derivatives (1) (2) (3)	Other Assets: Non-trading derivative assets	58		—		38		—
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	73		184		62		173
Natural gas derivatives (1) (2) (3)	Other Liabilities: Non-trading derivative liabilities	10		54		16		25
Interest rate derivatives	Other Liabilities	—		10		—		—
Indexed debt securities derivative	Current Liabilities	—		893		—		601
Total CenterPoint Energy		$	292	$	1,144	$	220	$	833


(1)	The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 2,226 Bcf or a net 374 Bcf long position and 1,674 Bcf or a net 140 Bcf long position as of December 31, 2019 and 2018, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure.

(2)

Natural gas contracts are presented on a net basis in CenterPoint Energy’s Consolidated Balance Sheets as they are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within CenterPoint Energy’s Consolidated Balance Sheets. The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below.


(3)	Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

Houston Electric



		December 31, 2019				December 31, 2018
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
		(in millions)
Derivatives designated as cash flow hedges:
Interest rate derivatives	Current Liabilities: Non-trading derivative liabilities	$	—	$	—	$	—	$	24
Total Houston Electric		$	—	$	—	$	—	$	24

CERC



		December 31, 2019				December 31, 2018
	Balance Sheet Location	Derivative Assets Fair Value		Derivative Liabilities Fair Value		Derivative Assets Fair Value		Derivative Liabilities Fair Value
		(in millions)
Derivatives designated as fair value hedges:
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	$	12	$	—	$	1	$	7
Derivatives not designated as hedging instruments:
Natural gas derivatives (1) (2) (3)	Current Assets: Non-trading derivative assets	139		3		103		3
Natural gas derivatives (1) (2) (3)	Other Assets: Non-trading derivative assets	58		—		38		—
Natural gas derivatives (1) (2) (3)	Current Liabilities: Non-trading derivative liabilities	73		177		62		173
Natural gas derivatives (1) (2) (3)	Other Liabilities: Non-trading derivative liabilities	10		39		16		25
Total CERC		$	292	$	219	$	220	$	208


(1)	The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 2,226 Bcf or a net 374 Bcf long position and 1,674 Bcf or a net 140 Bcf long position as of December 31, 2019 and 2018, respectively. Certain natural gas contracts hedge basis risk only and lack a fixed price exposure.

(2)

Natural gas contracts are presented on a net basis in CERC’s Consolidated Balance Sheets as they are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within CERC’s Consolidated Balance Sheets. The net of total non-trading natural gas derivative assets and liabilities is detailed in the Offsetting of Natural Gas Derivative Assets and Liabilities table below.


(3)	Derivative Assets and Derivative Liabilities include no material amounts related to physical forward transactions with Enable.

Cumulative Basis Adjustment for Fair Value Hedges (CenterPoint Energy and CERC)



CenterPoint Energy
		December 31, 2019					December 31, 2018
	Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item			Carrying Amount of Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
		(in millions)
Hedged items in fair value hedge relationship:
Natural gas inventory	Current Assets: Natural gas inventory	$	47	$	(13	)	$	57	$	1
Total CenterPoint Energy		$	47	$	(13	)	$	57	$	1



CERC
		December 31, 2019					December 31, 2018
	Balance Sheet Location	Carrying Amount of Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item			Carrying Amount of Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Item
		(in millions)
Hedged items in fair value hedge relationship:
Natural gas inventory	Current Assets: Natural gas inventory	$	47	$	(13	)	$	57	$	1
Total CERC		$	47	$	(13	)	$	57	$	1

Offsetting of Natural Gas Derivative Assets and Liabilities (CenterPoint Energy and CERC)



CenterPoint Energy
	December 31, 2019									December 31, 2018
	Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)
	(in millions)
Current Assets: Non-trading derivative assets	$	224		$	(88	)	$	136		$	166		$	(66	)	$	100
Other Assets: Non-trading derivative assets	68			(10		)	58			54			(16		)	38
Current Liabilities: Non-trading derivative liabilities	(187		)	136			(51		)	(183		)	81			(102		)
Other Liabilities: Non-trading derivative liabilities	(54		)	25			(29		)	(25		)	20			(5		)
Total CenterPoint Energy	$	51		$	63		$	114		$	12		$	19		$	31



CERC
	December 31, 2019									December 31, 2018
	Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)			Gross Amounts Recognized (1)			Gross Amounts Offset in the Consolidated Balance Sheets			Net Amount Presented in the Consolidated Balance Sheets (2)
	(in millions)
Current Assets: Non-trading derivative assets	$	224		$	(88	)	$	136		$	166		$	(66	)	$	100
Other Assets: Non-trading derivative assets	68			(10		)	58			54			(16		)	38
Current Liabilities: Non-trading derivative liabilities	(180		)	136			(44		)	(183		)	81			(102		)
Other Liabilities: Non-trading derivative liabilities	(39		)	25			(14		)	(25		)	20			(5		)
Total CERC	$	73		$	63		$	136		$	12		$	19		$	31


(1)	Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.


(2)	The derivative assets and liabilities on the Registrant’s respective Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.

Income Statement Impact of Hedge Accounting Activity (CenterPoint Energy and CERC)



CenterPoint Energy	Year Ended December 31,
	2019			2018			2017
	Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)
	Non-utility cost of revenues, including natural gas
	(in millions)
Total amounts presented in the statements of income in which the effects of hedges are recorded	$	4,029		$	4,364		$	3,785

Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged items - Natural gas inventory	(14		)	(13		)	14
Derivatives designated as hedging instruments	14			13			(14		)
Amounts excluded from effectiveness testing recognized in earnings immediately	(213		)	(149		)	(67		)


(1)	Income statement impact associated with cash flow hedge activity is related to gains and losses reclassified from Accumulated other comprehensive income into income. Amounts are immaterial for the years ended December 31, 2019, 2018 and 2017, respectively.



CERC	Year Ended December 31,
	2019			2018			2017
	Location and Amount of Gain (Loss) recognized in Income on Hedging Relationship (1)
	Non-utility cost of revenues, including natural gas
	(in millions)
Total amounts presented in the statements of income in which the effects of hedges are recorded	$	3,503		$	4,364		$	3,785

Gain (loss) on fair value hedging relationships:
Commodity contracts:
Hedged items - Natural gas inventory	(14		)	(13		)	14
Derivatives designated as hedging instruments	14			13			(14		)
Amounts excluded from effectiveness testing recognized in earnings immediately	(213		)	(149		)	(67		)


(1)	Income statement impact associated with cash flow hedge activity is related to gains and losses reclassified from Accumulated other comprehensive income into income. Amounts are immaterial for the years ended December 31, 2019, 2018 and 2017, respectively.

CenterPoint Energy



		Year Ended December 31,
	Income Statement Location	2019			2018			2017
		(in millions)
Effects of derivatives not designated as hedging instruments on the income statement:
Commodity contracts	Gains (Losses) in Non-utility revenues	$	214		$	107		$	211
Indexed debt securities derivative	Gain (loss) on indexed debt securities	(292		)	(232		)	49
Interest rate derivatives	Gains in Other Income (Expense)	—			2			—
Total CenterPoint Energy		$	(78	)	$	(123	)	$	260

CERC



		Year Ended December 31,
	Income Statement Location	2019		2018		2017
		(in millions)
Effects of derivatives not designated as hedging instruments on the income statement:
Commodity contracts	Gains (Losses) in Non-utility revenues	$	214	$	107	$	211
Total CERC		$	214	$	107	$	211

(c) Credit Risk Contingent Features (CenterPoint Energy and CERC)

CenterPoint Energy and CERC enter into financial derivative contracts containing material adverse change provisions. These provisions could require CenterPoint Energy or CERC to post additional collateral if the S&P or Moody’s credit ratings of CenterPoint Energy, Inc. or its subsidiaries, including CERC Corp., are downgraded.



	December 31, 2019				December 31, 2018
	CenterPoint Energy		CERC		CenterPoint Energy		CERC
	(in millions)
Aggregate fair value of derivatives containing material adverse change provisions in a net liability position	$	1	$	1	$	1	$	1
Fair value of collateral already posted	—		—		—		—
Additional collateral required to be posted if credit risk contingent features triggered	1		1		—		—

(d) Credit Quality of Counterparties (CenterPoint Energy and CERC)

In addition to the risk associated with price movements, credit risk is also inherent in CenterPoint Energy’s and CERC’s non-trading derivative activities. Credit risk relates to the risk of loss resulting from non-performance of contractual obligations by a counterparty. The following tables show the composition of counterparties to the non-trading derivative assets:

CenterPoint Energy



	December 31, 2019				December 31, 2018
	Investment Grade (1)		Total (3)		Investment Grade (1)		Total (3)
	(in millions)
Energy marketers	$	4	$	16	$	11	$	24
End users (2)	27		178		30		114
Total CenterPoint Energy	$	31	$	194	$	41	$	138

CERC



	December 31, 2019				December 31, 2018
	Investment Grade (1)		Total (3)		Investment Grade (1)		Total (3)
	(in millions)
Energy marketers	$	4	$	16	$	11	$	24
End users (2)	27		178		30		114
Total CERC	$	31	$	194	$	41	$	138


(1)	“Investment grade” is primarily determined using publicly available credit ratings and considers credit support (including parent company guarantees) and collateral (including cash and standby letters of credit). For unrated counterparties, CERC determines a synthetic credit rating by performing financial statement analysis and consider contractual rights and restrictions and collateral.


(2)	End users are comprised primarily of customers who have contracted to fix the price of a portion of their physical gas requirements for future periods.


(3)	The amounts reflected in the table above were not impacted by collateral netting.

(10) Fair Value Measurements

Assets and liabilities that are recorded at fair value in the Registrants’ Consolidated Balance Sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined below and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are exchange-traded derivatives and equity securities, as well as natural gas inventory that has been designated as the hedged item in a fair value hedge.

Level 2: Inputs, other than quoted prices included in Level 1, are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Fair value assets and liabilities that are generally included in this category are derivatives with fair values based on inputs from actively quoted markets. A market approach is utilized to value the Registrants’ Level 2 natural gas derivative assets or liabilities. CenterPoint Energy’s Level 2 indexed debt securities derivative is valued using an option model and a discounted cash flow model, which uses projected dividends on the ZENS-Related Securities and a discount rate as observable inputs.

Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Unobservable inputs reflect the Registrants’ judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Registrants develop these inputs based on the best information available, including the Registrants’ own data. A market approach is utilized to value the Registrants’ Level 3 assets or liabilities. As of December 31, 2019, CenterPoint Energy’s and CERC’s Level 3 assets and liabilities are comprised of physical natural gas forward contracts and options. Level 3 physical natural gas forward contracts and options are valued using a discounted cash flow model which includes illiquid forward price curve locations (ranging from $1.44 to $5.20 per MMBtu for CenterPoint Energy and from $1.44 to $5.20 per MMBtu for CERC) as an unobservable input. CenterPoint Energy’s and CERC’s Level 3 physical natural gas forward contracts and options derivative assets and liabilities consist of both long and short positions (forwards and options). Forward price decreases (increases) as of December 31, 2019 would have resulted in lower (higher) values, respectively, for long forwards and options and higher (lower) values, respectively, for short forwards and options.

The Registrants determine the appropriate level for each financial asset and liability on a quarterly basis and recognize transfers between levels at the end of the reporting period.

The following tables present information about the Registrants’ assets and liabilities (including derivatives that are presented net) measured at fair value on a recurring basis as of December 31, 2019 and December 31, 2018, and indicate the fair value hierarchy of the valuation techniques utilized by the Registrants to determine such fair value.

CenterPoint Energy



	December 31, 2019											December 31, 2018
	Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total
Assets	(in millions)
Corporate equities	$	825	$	—	$	—	$	—		$	825	$	542	$	—	$	—	$	—		$	542
Investments, including money market funds (2)	49		—		—		—			49		66		—		—		—			66
Natural gas derivatives (3)(4)	—		250		42		(98		)	194		—		173		47		(82		)	138
Hedged portion of natural gas inventory	—		—		—		—			—		1		—		—		—			1
Total assets	$	874	$	250	$	42	$	(98	)	$	1,068	$	609	$	173	$	47	$	(82	)	$	747



	December 31, 2019											December 31, 2018
	Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total
Liabilities
Indexed debt securities derivative	$	—	$	893	$	—	$	—		$	893	$	—	$	601	$	—	$	—		$	601
Interest rate derivatives	—		10		—		—			10		24		—		—		—			24
Natural gas derivatives (3)(4)	—		217		24		(161		)	80		—		191		17		(101		)	107
Hedged portion of natural gas inventory	13		—		—		—			13		—		—		—		—			—
Total liabilities	$	13	$	1,120	$	24	$	(161	)	$	996	$	24	$	792	$	17	$	(101	)	$	732

Houston Electric



	December 31, 2019										December 31, 2018
	Level 1		Level 2		Level 3		Netting		Total		Level 1		Level 2		Level 3		Netting		Total
Assets	(in millions)
Investments, including money market funds (2)	$	32	$	—	$	—	$	—	$	32	$	48	$	—	$	—	$	—	$	48
Total assets	$	32	$	—	$	—	$	—	$	32	$	48	$	—	$	—	$	—	$	48
Liabilities
Interest rate derivatives	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	—	$	24
Total liabilities	$	—	$	—	$	—	$	—	$	—	$	24	$	—	$	—	$	—	$	24

CERC



	December 31, 2019											December 31, 2018
	Level 1		Level 2		Level 3		Netting (1)			Total		Level 1		Level 2		Level 3		Netting (1)			Total
Assets	(in millions)
Corporate equities	$	2	$	—	$	—	$	—		$	2	$	2	$	—	$	—	$	—		$	2
Investments, including money market funds (2)	11		—		—		—			11		11		—		—		—			11
Natural gas derivatives (3)(4)	—		250		42		(98		)	194		—		173		47		(82		)	138
Hedged portion of natural gas inventory	—		—		—		—			—		1		—		—		—			1
Total assets	$	13	$	250	$	42	$	(98	)	$	207	$	14	$	173	$	47	$	(82	)	$	152
Liabilities
Natural gas derivatives (3)(4)	$	—	$	195	$	24	$	(161	)	$	58	$	—	$	191	$	17	$	(101	)	$	107
Hedged portion of natural gas inventory	13		—		—		—			13		—		—		—		—			—
Total liabilities	$	13	$	195	$	24	$	(161	)	$	71	$	—	$	191	$	17	$	(101	)	$	107


(1)	Amounts represent the impact of legally enforceable master netting arrangements that allow CenterPoint Energy and CERC to settle positive and negative positions and also include cash collateral posted with the same counterparties as follows:



	December 31, 2019				December 31, 2018
	CenterPoint Energy		CERC		CenterPoint Energy		CERC
	(in millions)
Cash collateral posted with the same counterparties	$	63	$	63	$	19	$	19


(2)	Amounts are included in Prepaid and Other Current Assets and Other Assets in the Consolidated Balance Sheets.


(3)	Natural gas derivatives include no material amounts related to physical forward transactions with Enable.

(4)

Level 1 natural gas derivatives include exchange-traded derivatives cleared by the CME, which deems that financial instruments cleared by the CME are settled daily in connection with posted cash payments. As a result of this exchange rule, CME-related derivatives are considered to have no fair value at the balance sheet date for financial reporting purposes, and are presented in Level 1 net of posted cash; however, the derivatives remain outstanding and subject to future commodity price fluctuations until they are settled in accordance with their contractual terms. Derivative transactions cleared on exchanges other than the CME (e.g., the Intercontinental Exchange or ICE) continue to be reported on a gross basis.

The following table presents additional information about assets or liabilities, including derivatives that are measured at fair value on a recurring basis for which CenterPoint Energy and CERC have utilized Level 3 inputs to determine fair value:



	Year Ended December 31,
	2019						2018						2017
	CenterPoint Energy			CERC			CenterPoint Energy			CERC			CenterPoint Energy			CERC
	(in millions)
Beginning balance	$	30		$	30		$	(622	)	$	46		$	(704	)	$	13
Total gains	17			17			30			30			96			47
Total settlements	(22		)	(22		)	(39		)	(39		)	(11		)	(11		)
Transfers into Level 3	(1		)	(1		)	5			5			14			14
Transfers out of Level 3 (1)	(6		)	(6		)	656			(12		)	(17		)	(17		)
Ending balance (2)	$	18		$	18		$	30		$	30		$	(622	)	$	46

The amount of total gains for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at the reporting date:
	$	12		$	12		$	18		$	18		$	87		$	38


(1)	During 2018, CenterPoint Energy transferred its indexed debt securities derivative from Level 3 to Level 2 to reflect changes in the significance of the unobservable inputs used in the valuation.


(2)	CenterPoint Energy and CERC did not have significant Level 3 purchases or sales during any of the years ended December 31, 2019, 2018 or 2017.

Estimated Fair Value of Financial Instruments

The fair values of cash and cash equivalents, investments in debt and equity securities classified as “trading” and short-term borrowings are estimated to be approximately equivalent to carrying amounts and have been excluded from the table below. The carrying amounts of non-trading derivative assets and liabilities and CenterPoint Energy’s ZENS indexed debt securities derivative are stated at fair value and are excluded from the table below. The fair value of each debt instrument is determined by multiplying the principal amount of each debt instrument by a combination of historical trading prices and comparable issue data. These liabilities, which are not measured at fair value in the Registrants’ Consolidated Balance Sheets, but for which the fair value is disclosed, would be classified as Level 2 in the fair value hierarchy.



	December 31, 2019						December 31, 2018
	CenterPoint Energy (1)		Houston Electric (1)		CERC		CenterPoint Energy (1)		Houston Electric (1)		CERC
Long-term debt, including current maturities	(in millions)
Carrying amount	$	15,093	$	4,950	$	2,546	$	9,140	$	4,717	$	2,371
Fair value	16,067		5,457		2,803		9,308		4,770		2,488


(1)	Includes Securitization Bond debt.

Items measured at Fair Value on a Non-recurring Basis

CenterPoint Energy and CERC recorded a goodwill impairment charge of $48 million related to its Energy Services reporting unit in 2019. See Note 6.

(11) Unconsolidated Affiliates (CenterPoint Energy and CERC)

CenterPoint Energy has the ability to significantly influence the operating and financial policies of Enable, a publicly traded MLP, and, accordingly, accounts for its investment in Enable’s common units using the equity method of accounting. Enable is considered to be a VIE because the power to direct the activities that most significantly impact Enable’s economic performance does not reside with the holders of equity investment at risk. However, CenterPoint Energy is not considered the primary beneficiary of Enable since it does not have the power to direct the activities of Enable that are considered most significant to the economic performance of Enable. As of December 31, 2019, CenterPoint Energy’s maximum exposure to loss related to Enable is limited to its investment in unconsolidated affiliate, its investment in Enable Series A Preferred Units and outstanding current accounts receivable from Enable.

Investment in Unconsolidated Affiliates (CenterPoint Energy):



	December 31, 2019		December 31, 2018
	(in millions)
Enable	$	2,406	$	2,482
Other (1)	2		—
Total	$	2,408	$	2,482


(1)	Represents the fair value of non-utility equity investments acquired in the Merger.

CenterPoint Energy evaluates its equity method investments for impairment when factors indicate that a decrease in value of its investment has occurred and the carrying amount of its investment may not be recoverable. An impairment loss is recognized in earnings when an impairment is deemed to be other than temporary. As of December 31, 2019, CenterPoint Energy’s investment in Enable is $10.29 per unit and Enable’s common unit price closed at $10.03 per unit (approximately $61 million below carrying value). Based on an analysis of its investment in Enable as of December 31, 2019, CenterPoint Energy believes that the decline in the value of its investment is temporary, and that the carrying value of its investment of $2.4 billion will be recovered.

Equity in Earnings of Unconsolidated Affiliates, net (CenterPoint Energy):



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Enable (1)	$	229	$	307	$	265
Other	1		—		—
Total	$	230	$	307	$	265


(1)	Equity earnings for the year ended December 31, 2019 includes CenterPoint Energy’s share of Enable’s $86 million goodwill impairment recorded in the fourth quarter of 2019.

Limited Partner Interest and Units Held in Enable (CenterPoint Energy):



	As of December 31,
	2019				2018
	Limited Partner Interest (1)		Common Units	Enable Series A Preferred Units (2)	Limited Partner Interest (1)		Common Units	Enable Series A Preferred Units (2)
CenterPoint Energy (3)	53.7	%	233,856,623	14,520,000	54.0	%	233,856,623	14,520,000
OGE	25.5	%	110,982,805	—	25.6	%	110,982,805	—
Public unitholders	20.8	%	90,361,937	—	20.4	%	88,392,983	—
Total Units Outstanding	100.0	%	435,201,365	14,520,000	100.0	%	433,232,411	14,520,000


(1)	Excludes the Enable Series A Preferred Units owned by CenterPoint Energy.


(2)	The carrying amount of the Enable Series A Preferred Units, reflected as Preferred units - unconsolidated affiliate on CenterPoint Energy’s Consolidated Balance Sheets, was $363 million as of both December 31, 2019 and 2018. No

impairment charges or adjustment to carrying value were made as no observable price changes were identified in the current or prior reporting periods.


(3)	Prior to the Internal Spin completed in September 2018, CenterPoint Energy’s investment in Enable’s common units, excluding the Enable Series A Preferred Units held directly by CenterPoint Energy, was held indirectly through CERC.

Generally, sales to any person or entity (including a series of sales to the same person or entity) of more than 5% of the aggregate of the common units CenterPoint Energy owns in Enable or sales to any person or entity (including a series of sales to the same person or entity) by OGE of more than 5% of the aggregate of the common units it owns in Enable are subject to mutual rights of first offer and first refusal set forth in Enable’s Agreement of Limited Partnership.

Interests Held in Enable GP (CenterPoint Energy):

CenterPoint Energy and OGE held the following interests in Enable GP as of both December 31, 2019 and 2018:



	Management Rights (1)		Incentive Distribution Rights (2)
CenterPoint Energy (3)	50	%	40	%
OGE	50	%	60	%


(1)	As of December 31, 2019, Enable is controlled jointly by CenterPoint Energy and OGE. Sale of CenterPoint Energy’s or OGE’s ownership interests in Enable GP to a third party is subject to mutual rights of first offer and first refusal, and CenterPoint Energy is not permitted to dispose of less than all of its interest in Enable GP.

(2)

Enable is expected to pay a minimum quarterly distribution of $0.2875 per common unit on its outstanding common units to the extent it has sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to Enable GP and its affiliates, within 60 days after the end of each quarter. If cash distributions to Enable’s unitholders exceed $0.330625 per common unit in any quarter, Enable GP will receive increasing percentages or incentive distributions rights, up to 50%, of the cash Enable distributes in excess of that amount. In certain circumstances Enable GP will have the right to reset the minimum quarterly distribution and the target distribution levels at which the incentive distributions receive increasing percentages to higher levels based on Enable’s cash distributions at the time of the exercise of this reset election. To date, no incentive distributions have been made.


(3)	Held indirectly through CNP Midstream.

Distributions Received from Enable (CenterPoint Energy and CERC):

CenterPoint Energy



	Year Ended December 31,
	2019				2018				2017
	Per Unit		Cash Distribution		Per Unit		Cash Distribution		Per Unit		Cash Distribution
	(in millions, except per unit amounts)
Enable common units (1)	$	1.2970	$	303	$	1.2720	$	297	$	1.2720	$	297
Enable Series A Preferred Units	2.5000		36		2.5000		36		2.5000		36
Total CenterPoint Energy			$	339			$	333			$	333

CERC



	Year Ended December 31,
	2018				2017
	Per Unit		Cash Distribution		Per Unit		Cash Distribution
	(in millions, except per unit amounts)
Enable common units (1)	$	0.9540	$	223	$	1.2720	$	297
Total CERC			223				297


(1)	Prior to the Internal Spin completed in September 2018, distributions from Enable were received by CERC. After such date, distributions from Enable were received directly by CenterPoint Energy (through CNP Midstream).

Transactions with Enable (CenterPoint Energy and CERC):



	Year Ended December 31,
	2019		2018		2017
CenterPoint Energy	(in millions)
Natural gas expenses, including transportation and storage costs (1)	$	120	$	122	$	115
Reimbursement of support services (2)	—		4		4
CERC
Natural gas expenses, including transportation and storage costs (1)	120		122		115
Reimbursement of support services (2)	—		4		4


(1)	Included in Non-utility costs of revenues, including natural gas on CenterPoint Energy’s and CERC’s respective Statements of Consolidated Income.


(2)	Represents amounts billed for certain support services provided to Enable. Actual support services costs are recorded net of reimbursement.



	December 31,
	2019		2018
CenterPoint Energy	(in millions)
Accounts payable for natural gas purchases from Enable	$	11	$	11
Accounts receivable for amounts billed for services provided to Enable	2		2
CERC
Accounts payable for natural gas purchases from Enable	11		11
Accounts receivable for amounts billed for services provided to Enable	2		2

CERC’s continuing involvement with Enable subsequent to the Internal Spin is limited to its natural gas purchases from Enable.

Summarized consolidated income (loss) information for Enable is as follows:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Operating revenues	$	2,960		$	3,431		$	2,803
Cost of sales, excluding depreciation and amortization	1,279			1,819			1,381
Depreciation and amortization	433			398			366
Operating income	569			648			528
Goodwill impairment	86			—			—
Net income attributable to Enable common units	360			485			400
Reconciliation of Equity in Earnings (Losses), net:
CenterPoint Energy’s interest	$	193		$	262		$	216
Basis difference amortization (1)	47			47			49
Loss on dilution, net of proportional basis difference recognition	(11		)	(2		)	—
CenterPoint Energy’s equity in earnings, net	$	229		$	307		$	265


(1)	Equity in earnings of unconsolidated affiliate includes CenterPoint Energy’s share of Enable earnings adjusted for the amortization of the basis difference of CenterPoint Energy’s original investment in Enable and its underlying equity in net assets of Enable. The basis difference is being amortized through the year 2048.

Summarized consolidated balance sheet information for Enable is as follows:



	December 31,
	2019			2018
	(in millions)
Current assets	$	389		$	449
Non-current assets	11,877			11,995
Current liabilities	780			1,615
Non-current liabilities	4,077			3,211
Non-controlling interest	37			38
Preferred equity	362			362
Accumulated other comprehensive loss	(3		)	—
Enable partners’ equity	7,013			7,218
Reconciliation of Investment in Enable:
CenterPoint Energy’s ownership interest in Enable partners’ equity	$	3,767		$	3,896
CenterPoint Energy’s basis difference	(1,361		)	(1,414		)
CenterPoint Energy’s equity method investment in Enable	$	2,406		$	2,482

Discontinued Operations (CERC):

On September 4, 2018, CERC completed the Internal Spin. CERC executed the Internal Spin to, among other things, enhance the access of CERC and CenterPoint Energy to low cost debt and equity through increased transparency and understandability of the financial statements, improve CERC’s credit quality by eliminating the exposure to Enable’s midstream business and provide clarity of internal reporting and performance metrics to enhance management’s decision making for CERC and CNP Midstream.

The Internal Spin represents a significant strategic shift that has a material effect on CERC’s operations and financial results and, as a result, CERC’s distribution of its equity investment in Enable met the criteria for discontinued operations classification. CERC has no continuing involvement in the equity investment of Enable. Therefore, CERC’s equity in earnings and related income taxes have been classified as Income from discontinued operations, net of tax, in CERC’s Statements of Consolidated Income for the periods presented. CERC’s equity method investment and related deferred income tax liabilities have been classified as Investment in unconsolidated affiliate - discontinued operations and Deferred income taxes, net - discontinued operations, respectively, in CERC’s Consolidated Balance Sheets for the periods presented. The following table presents amounts included in Income from discontinued operations, net of tax in CERC’s Statements of Consolidated Income.



	Year Ended December 31,
	2018		2017
	(in millions)
Equity in earnings of unconsolidated affiliate, net	$	184	$	265
Income tax expense	46		104
Income from discontinued operations, net of tax	$	138	$	161

(12) Indexed Debt Securities (ZENS) and Securities Related to ZENS (CenterPoint Energy)

(a) Investment in Securities Related to ZENS

A subsidiary of CenterPoint Energy holds shares of certain securities detailed in the table below, which are classified as trading securities and are expected to be held to facilitate CenterPoint Energy’s ability to meet its obligation under the ZENS. Unrealized gains and losses resulting from changes in the market value of the ZENS-Related Securities are recorded in CenterPoint Energy’s Statements of Consolidated Income.

(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 December 31, 2019. 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:

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 is less than or more than 2.309%. The adjusted principal amount is defined in the ZENS instrument as “contingent principal.” As of December 31, 2019, the ZENS, having an original principal amount of $828 million and a contingent principal amount of $75 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. As of December 31, 2019, the market value of such shares was approximately $822 million, which would provide an exchange amount of $944 for each $1,000 original principal amount of ZENS. At maturity of the ZENS in 2029, CenterPoint Energy will be obligated to pay in cash the higher of the contingent principal amount of the ZENS or an amount based on the then-current market value of the reference shares, which will include any additional publicly-traded securities distributed with respect to the current reference shares prior to maturity.

The ZENS obligation is bifurcated into a debt component and a derivative component (the holder’s option to receive the appreciated value of the reference shares at maturity). The bifurcated debt component accretes through interest charges annually up to the contingent principal amount of the ZENS in 2029. Such accretion will be reduced by annual cash interest payments, as described above. The derivative component is recorded at fair value and changes in the fair value of the derivative component are recorded in CenterPoint Energy’s Statements of Consolidated Income. Changes in the fair value of the ZENS-Related Securities held by CenterPoint Energy are expected to substantially offset changes in the fair value of the derivative component of the ZENS.

The following table sets forth summarized financial information regarding CenterPoint Energy’s investment in ZENS-Related Securities and each component of CenterPoint Energy’s ZENS obligation.



	ZENS-Related Securities			Debt Component of ZENS			Derivative Component of ZENS
	(in millions)
Balance as of December 31, 2016	$	953		$	114		$	717
Accretion of debt component of ZENS	—			27			—
2% interest paid	—			(17		)	—
Distribution to ZENS holders	—			(2		)	—
Gain on indexed debt securities	—			—			(49		)
Gain on ZENS-Related Securities	7			—			—
Balance as of December 31, 2017	960			122			668
Accretion of debt component of ZENS	—			21			—
2% interest paid	—			(17		)	—
Sale of ZENS-Related Securities	(398		)	—			—
Distribution to ZENS holders	—			(102		)	(46		)
Gain on indexed debt securities	—			—			(21		)
Loss on ZENS-Related Securities	(22		)	—			—
Balance as of December 31, 2018	540			24			601
Accretion of debt component of ZENS	—			17			—
2% interest paid	—			(17		)	—
Distribution to ZENS holders	—			(5		)	—
Loss on indexed debt securities	—			—			292
Gain on ZENS-Related Securities	282			—			—
Balance as of December 31, 2019	$	822		$	19		$	893

(13) Equity (CenterPoint Energy)

Dividends Declared and Paid (CenterPoint Energy)

CenterPoint Energy declared dividends on its Common Stock during 2019, 2018 and 2017 as presented in the table below:



Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)
October 17, 2019	November 21, 2019	December 12, 2019	$	0.2875	$	144
July 31, 2019	August 15, 2019	September 12, 2019	0.2875		145
April 25, 2019	May 16, 2019	June 13, 2019	0.2875		144
Total 2019			$	0.8625	$	433

December 12, 2018	February 21, 2019	March 14, 2019	$	0.2875	$	144
October 23, 2018	November 15, 2018	December 13, 2018	0.2775		139
July 26, 2018	August 16, 2018	September 13, 2018	0.2775		120
April 26, 2018	May 17, 2018	June 14, 2018	0.2775		120
Total 2018			$	1.1200	$	523



Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)
December 13, 2017	February 15, 2018	March 8, 2018	$	0.2775	$	120
October 25, 2017	November 16, 2017	December 8, 2017	0.2675		116
July 27, 2017	August 16, 2017	September 8, 2017	0.2675		115
April 27, 2017	May 16, 2017	June 9, 2017	0.2675		115
January 5, 2017	February 16, 2017	March 10, 2017	0.2675		115
Total 2017			$	1.3475	$	581

CenterPoint Energy declared dividends on its Series A Preferred Stock during 2019 and 2018 as presented in the table below:



Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)
July 31, 2019	August 15, 2019	September 3, 2019	$	30.6250	$	24
Total 2019			$	30.6250	$	24

December 12, 2018	February 15, 2019	March 1, 2019	$	32.1563	$	26
Total 2018			$	32.1563	$	26

CenterPoint Energy declared dividends on its Series B Preferred Stock during 2019 and 2018 as presented in the table below:



Declaration Date	Record Date	Payment Date	Per Share		Total (in millions)
October 17, 2019	November 15, 2019	December 2, 2019	$	17.5000	$	17
July 31, 2019	August 15, 2019	September 3, 2019	17.5000		17
April 25, 2019	May 15, 2019	June 3, 2019	17.5000		17
Total 2019			$	52.5000	$	51

December 12, 2018	February 15, 2019	March 1, 2019	$	17.5000	$	17
October 23, 2018	November 15, 2018	December 1, 2018	11.6667		11
Total 2018			$	29.1667	$	28

There were no Series A Preferred Stock or Series B Preferred Stock outstanding or dividends declared in 2017.

Dividend Requirement on Preferred Stock



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Series A Preferred Stock	$	49	$	18	$	—
Series B Preferred Stock	68		17		—
Total preferred stock dividend requirement	$	117	$	35	$	—

Series A Preferred Stock

On August 22, 2018, CenterPoint Energy completed the issuance of 800,000 shares of its Series A Preferred Stock, at a price of $1,000 per share, resulting in net proceeds of $790 million after issuance costs. The aggregate liquidation value of the Series A Preferred Stock is $800 million with a per share liquidation value of $1,000.

CenterPoint Energy used the net proceeds from the Series A Preferred Stock offering to fund a portion of the Merger and to pay related fees and expenses.

Dividends. The Series A Preferred Stock accrue cumulative dividends, calculated as a percentage of the stated amount per share, at a fixed annual rate of 6.125% per annum to, but excluding, September 1, 2023, and at an annual rate of three-month LIBOR plus a spread of 3.270% thereafter to be paid in cash if, when and as declared. If declared, prior to September 1, 2023, dividends are payable semi-annually in arrears on each March 1 and September 1, beginning on March 1, 2019, and, for the period commencing on September 1, 2023, dividends are payable quarterly in arrears each March 1, June 1, September 1 and December 1, beginning on December 1, 2023. Cumulative dividends earned during the applicable periods are presented on CenterPoint Energy’s Statements of Consolidated Income as Preferred stock dividend requirement.

Optional Redemption. On or after September 1, 2023, CenterPoint Energy may, at its option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $1,000 per share, plus any accumulated and unpaid dividends thereon to, but excluding, the redemption date.

At any time within 120 days after the conclusion of any review or appeal process instituted by CenterPoint Energy, if any, following the occurrence of a ratings event, CenterPoint Energy may, at its option, redeem the Series A Preferred Stock in whole, but not in part, at a redemption price in cash per share equal to $1,020 (102% of the liquidation value of $1,000) plus an amount equal to all accumulated and unpaid dividends thereon to, but excluding, the redemption date, whether or not declared.

Ranking. The Series A Preferred Stock, with respect to anticipated dividends and distributions upon CenterPoint Energy’s liquidation or dissolution, or winding-up of CenterPoint Energy’s affairs, ranks or will rank:


•	senior to Common Stock and to each other class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is expressly made subordinated to the Series A Preferred Stock;


•	on a parity with any class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is not expressly made senior or subordinated to the Series A Preferred Stock, including the Series B Preferred Stock;


•	junior to any class or series of capital stock established after the initial issue date of the Series A Preferred Stock that is expressly made senior to the Series A Preferred Stock;


•	junior to all existing and future indebtedness (including indebtedness outstanding under CenterPoint Energy’s credit facilities, senior notes and commercial paper) and other liabilities with respect to assets available to satisfy claims against CenterPoint Energy; and


•	structurally subordinated to any existing and future indebtedness and other liabilities of CenterPoint Energy’s subsidiaries and capital stock of CenterPoint Energy’s subsidiaries held by third parties.

Voting Rights. Holders of the Series A Preferred Stock generally will not have voting rights. Whenever dividends on shares of Series A Preferred Stock have not been declared and paid for the equivalent of three or more semi-annual or six or more quarterly dividend periods (including, for the avoidance of doubt, the dividend period beginning on, and including, the original issue date and ending on, but excluding, March 1, 2019), whether or not consecutive, the holders of such shares of Series A Preferred Stock, voting together as a single class with holders of any and all other series of voting preferred stock (as defined in the Statement of Resolution for the Series A Preferred Stock) then outstanding, will be entitled at CenterPoint Energy’s next annual or special meeting of shareholders to vote for the election of a total of two additional members of CenterPoint Energy’s Board of Directors, subject to certain limitations. This right will terminate if and when all accumulated dividends have been paid in full and, upon such termination, the term of office of each director so elected will terminate at such time and the number of directors on CenterPoint Energy’s Board of Directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.

Series B Preferred Stock

On October 1, 2018, CenterPoint Energy completed the issuance of 19,550,000 depositary shares, each representing a 1/20th interest in a share of its Series B Preferred Stock, at a price of $50 per depositary share, resulting in net proceeds of $950 million after issuance costs. The aggregate liquidation value of Series B Preferred Stock is $978 million with a per share liquidation value of $1,000. The amount issued included 2,550,000 depositary shares issued pursuant to the exercise in full of the option granted to the underwriters to purchase additional depositary shares.

CenterPoint Energy used the net proceeds from the offering of depositary shares, each representing a 1/20th interest in a share of its Series B Preferred Stock, to fund a portion of the Merger and to pay related fees and expenses.

Dividends. Dividends on the Series B Preferred Stock will be payable on a cumulative basis when, as and if declared at an annual rate of 7.00% on the liquidation value of $1,000 per share. CenterPoint Energy may pay declared dividends in cash or, subject to certain limitations, in shares of Common Stock, or in any combination of cash and shares of Common Stock on March 1, June 1, September 1 and December 1 of each year, commencing on December 1, 2018 and ending on, and including, September 1, 2021. Cumulative dividends earned during the applicable periods are presented on CenterPoint Energy’s Statements of Consolidated Income as Preferred stock dividend requirement.

Mandatory Conversion. Unless earlier converted or redeemed, each share of the Series B Preferred Stock will automatically convert on the mandatory conversion date, which is expected to be September 1, 2021, into not less than 30.5820 and not more than 36.6980 shares of Common Stock, subject to certain anti-dilution adjustments. Correspondingly, the conversion rate per depositary share will be not less than 1.5291 and not more than 1.8349 shares of Common Stock, subject to certain anti-dilution adjustments. The conversion rate will be determined based on a preceding 20-day volume-weighted-average-price of Common Stock.

The following table illustrates the conversion rate per share of the Series B Preferred Stock, subject to certain anti-dilution adjustments:



Applicable Market Value of the Common Stock		Conversion Rate per Share of Series B Preferred Stock
Greater than $32.6990 (threshold appreciation price)		30.5820 shares of Common Stock
Equal to or less than $32.6990 but greater than or equal to $27.2494		Between 30.5820 and 36.6980 shares of Common Stock, determined by dividing $1,000 by the applicable market value
Less than $27.2494 (initial price)		36.6980 shares of Common Stock

The following table illustrates the conversion rate per depositary share, subject to certain anti-dilution adjustments:



Applicable Market Value of the Common Stock		Conversion Rate per Depository Share
Greater than $32.6990 (threshold appreciation price)		1.5291 shares of Common Stock
Equal to or less than $32.6990 but greater than or equal to $27.2494		Between 1.5291 and 1.8349 shares of Common Stock, determined by dividing $50 by the applicable market value
Less than $27.2494 (initial price)		1.8349 shares of Common Stock

Optional Conversion of the Holder. Other than during a fundamental change conversion period, and unless CenterPoint Energy has redeemed the Series B Preferred Stock, a holder of the Series B Preferred Stock may, at any time prior to September 1, 2021, elect to convert such holder’s shares of the Series B Preferred Stock, in whole or in part, at the minimum conversion rate of 30.5820 shares of Common Stock per share of the Series B Preferred Stock (equivalent to 1.5291 shares of Common Stock per depositary share), subject to certain anti-dilution and other adjustments. Because each depositary share represents a 1/20th fractional interest in a share of the Series B Preferred Stock, a holder of depositary shares may convert its depositary shares only in lots of 20 depositary shares.

Fundamental Change Conversion. If a fundamental change occurs on or prior to September 1, 2021, holders of the Series B Preferred Stock will have the right to convert their shares of the Series B Preferred Stock, in whole or in part, into shares of Common Stock at the fundamental change conversion rate during the period beginning on, and including, the effective date of such fundamental change and ending on, and including, the date that is 20 calendar days after such effective date (or, if later, the date that is 20 calendar days after holders receive notice of such fundamental change, but in no event later than September 1, 2021). Holders who convert shares of the Series B Preferred Stock during that period will also receive a make-whole dividend amount comprised of a fundamental change dividend make-whole amount, and to the extent there is any, the accumulated dividend amount. Because each depositary share represents a 1/20th fractional interest in a share of the Series B Preferred Stock, a holder of depositary shares may convert its depositary shares upon a fundamental change only in lots of 20 depositary shares.

Ranking. The Series B Preferred Stock, with respect to anticipated dividends and distributions upon CenterPoint Energy’s liquidation or dissolution, or winding-up of CenterPoint Energy’s affairs, ranks or will rank:


•	senior to Common Stock and to each other class or series of capital stock established after the initial issue date of the Series B Preferred Stock that is expressly made subordinated to the Series B Preferred Stock;


•	on a parity with the Series A Preferred Stock and any class or series of capital stock established after the initial issue date that is not expressly made senior or subordinated to the Series B Preferred Stock;


•	junior to any class or series of capital stock established after the initial issue date that is expressly made senior to the Series B Preferred Stock;


•	junior to all existing and future indebtedness (including indebtedness outstanding under CenterPoint Energy’s credit facilities, senior notes and commercial paper) and other liabilities with respect to assets available to satisfy claims against CenterPoint Energy; and


•	structurally subordinated to any existing and future indebtedness and other liabilities of CenterPoint Energy’s subsidiaries and capital stock of CenterPoint Energy’s subsidiaries held by third parties.

Voting Rights. Holders of the Series B Preferred Stock generally will not have voting rights. Whenever dividends on shares of the Series B Preferred Stock have not been declared and paid for six or more dividend periods (including, for the avoidance of doubt, the dividend period beginning on, and including, the initial issue date and ending on, but excluding, December 1, 2018), whether or not consecutive, the holders of such shares of Series B Preferred Stock, voting together as a single class with holders of any and all other series of voting preferred stock then outstanding (as defined in the Statement of Resolution for the Series B Preferred Stock), will be entitled at CenterPoint Energy’s next annual or special meeting of shareholders to vote for the election of a total of two additional members of CenterPoint Energy’s Board of Directors, subject to certain limitations. This right will terminate if and when all accumulated and unpaid dividends have been paid in full and, upon such termination, the term of office of each director so elected will terminate at such time and the number of directors on CenterPoint Energy’s Board of Directors will automatically decrease by two, subject to the revesting of such rights in the event of each subsequent nonpayment.

Common Stock

On October 1, 2018, CenterPoint Energy completed the issuance of 69,633,027 shares of Common Stock at a price of $27.25 per share, for net proceeds of $1,844 million after issuance costs. The amount issued included 9,082,568 shares of Common Stock issued pursuant to the exercise in full of the option granted to the underwriters to purchase additional shares of Common Stock.

CenterPoint Energy used the net proceeds from the Common Stock offering to fund a portion of the Merger and to pay related fees and expenses.

Undistributed Retained Earnings

As of December 31, 2019 and 2018, CenterPoint Energy’s consolidated retained earnings balance includes undistributed earnings from Enable of $-0- and $31 million, respectively.

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated comprehensive income (loss) are as follows:



	Year Ended December 31,
	2019									2018
	CenterPoint Energy			Houston Electric			CERC			CenterPoint Energy			Houston Electric			CERC
	(in millions)
Beginning Balance	$	(108	)	$	(14	)	$	5		$	(68	)	$	—		$	6
Other comprehensive income (loss) before reclassifications:
Remeasurement of pension and other postretirement plans	7			—			7			(19		)	—			1
Deferred loss from interest rate derivatives (1)	(3		)	(1		)	—			(19		)	(18		)	(1		)
Reclassified to earnings	1			—			—			—			—			—
Other comprehensive loss from unconsolidated affiliates	(1		)	—			—			—			—			—
Amounts reclassified from accumulated other comprehensive loss:
Prior service cost (2)	1			—			—			1			—			1
Actuarial losses (2)	8			—			—			6			—			—
Tax benefit (expense)	(3		)	—			(2		)	6			4			(1		)
Net current period other comprehensive income (loss)	10			(1		)	5			(25		)	(14		)	—
Adoption of ASU 2018-02	—			—			—			(15		)	—			(1		)
Ending Balance	$	(98	)	$	(15	)	$	10		$	(108	)	$	(14	)	$	5

(1)

Gains and losses are reclassified from Accumulated other comprehensive income into income when the hedged transactions affect earnings. The reclassification amounts are included in Interest and other finance charges in each of the Registrant’s respective Statements of Consolidated Income. Amounts are $1 million and less than $1 million for the years ended December 31, 2019 and 2018, respectively.


(2)	Amounts are included in the computation of net periodic cost and are reflected in Other, net in each of the Registrants’ respective Statements of Consolidated Income.

(14) Short-term Borrowings and Long-term Debt



	December 31, 2019					December 31, 2018
	Long-Term			Current (1)		Long-Term			Current (1)
	(in millions)
CenterPoint Energy:
ZENS due 2029 (2)	$	—		$	19	$	—		$	24
Senior notes 2.50% to 7.08% due 2020 to 2049 (3)	3,728			100		2,000			—
Variable rate term loans 2.275% to 2.56% due 2020 to 2021	1,000			500		—			—
First mortgage bonds 2.19% to 6.72% due 2022 to 2055 (4)	293			—		—			—
Pollution control bonds 5.125% due 2028 (5)	68			—		68			—
Commercial paper (6) (7)	1,901			—		—			—
Unamortized debt issuance costs	(22		)	—		(13		)	—
Unamortized discount and premium, net	(7		)	—		(2		)	—
Houston Electric debt (see details below)	4,719			231		4,258			458
CERC debt (see details below)	2,546			—		2,371			—
Other debt	18			18		—			—
Total CenterPoint Energy debt	$	14,244		$	868	$	8,682		$	482



	December 31, 2019					December 31, 2018
	Long-Term			Current (1)		Long-Term			Current (1)
	(in millions)
Houston Electric:
First mortgage bonds 9.15% due 2021	$	102		$	—	$	102		$	—
General mortgage bonds 1.85% to 6.95% due 2021 to 2049	3,912			—		3,212			—
Restoration Bond Company:
System restoration bonds 4.243% due 2022	134			62		197			59
Bond Company II:
Transition bonds 5.302% due 2019	—			—		—			208
Bond Company III:
Transition bonds 5.234% due 2020	—			29		29			56
Bond Company IV:
Transition bonds 2.161% to 3.028% due 2020 to 2024	613			140		753			135
Unamortized debt issuance costs	(27		)	—		(24		)	—
Unamortized discount and premium, net	(15		)	—		(11		)	—
Total Houston Electric debt	$	4,719		$	231	$	4,258		$	458



	December 31, 2019					December 31, 2018
	Long-Term			Current (1)		Long-Term			Current (1)
	(in millions)
CERC (8):
Senior notes 3.55% to 6.625% due 2021 to 2047	$	2,193		$	—	$	2,193		$	—
Commercial paper (6)	377			—		210			—
Unamortized debt issuance costs	(13		)	—		(15		)	—
Unamortized discount and premium, net	(11		)	—		(17		)	—
Total CERC debt	$	2,546		$	—	$	2,371		$	—


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


(2)	CenterPoint Energy’s ZENS obligation is bifurcated into a debt component and an embedded derivative component. For additional information regarding ZENS, see Note 12(b). As ZENS are exchangeable for cash at any time at the option of the holders, these notes are classified as a current portion of long-term debt.

(3)

Includes $532 million of senior notes issued by VUHI and $96 million of senior notes issued by Indiana Gas. The senior notes have stated interest rates that range from 3.72% to 7.08%. The senior notes issued by VUHI are guaranteed by SIGECO, Indiana Gas and VEDO. In connection with the Merger, two of CenterPoint Energy’s acquired wholly-owned subsidiaries, VUHI and VCC, made offers to prepay certain outstanding guaranteed senior notes as required pursuant to certain note purchase agreements previously entered into by VUHI and VCC. In turn, VUHI and VCC borrowed $568 million and $191 million, respectively, from CenterPoint Energy to fund note redemptions of senior notes effected pursuant to these prepayment offers. To fund these prepayments and payments of approximately $5 million of accrued interest, CenterPoint Energy issued approximately $764 million of commercial paper.


(4)	The first mortgage bonds issued by SIGECO subject SIGECO’s properties to a lien under the related mortgage indenture.


(5)	$68 million and $68 million of these series of debt were secured by general mortgage bonds of Houston Electric as of December 31, 2019 and 2018, respectively. These general mortgage bonds are not reflected in Houston Electric’s consolidated financial statements because of the contingent nature of the obligations.


(6)	Classified as long-term debt because the termination date of the facility that backstops the commercial paper is more than one year from the date noted.


(7)	Commercial paper issued by VUHI has maturities up to 30 days.


(8)	Issued by CERC Corp.

Long-term Debt

Debt Retirements. During the year ended December 31, 2019, CenterPoint Energy retired the following debt instruments:



	Retirement Date	Debt Instrument	Aggregate Principal Amount		Interest Rate	Maturity Date
			(in millions)
CenterPoint Energy	December 2019	Guaranteed senior notes	$	3	3.33%	2022
CenterPoint Energy	December 2019	Guaranteed senior notes	6		4.53%	2025

In December 2019, VCC redeemed the aggregate principal amount of its guaranteed senior notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon to but excluding the redemption date, plus the make-whole premium. The make-whole premium associated with the two redemptions was approximately $1 million and was included in Other Income, net on CenterPoint Energy’s Statements of Consolidated Income.

Debt Transactions. During the year ended December 31, 2019, the following debt instruments were issued or incurred:



	Issuance Date	Debt Instrument	Aggregate Principal Amount		Interest Rate as of December 31, 2019	Maturity Date
			(in millions)
Houston Electric	January 2019	General mortgage bonds	$	700	4.25%	2049
CenterPoint Energy (1)	February 2019	Variable rate term loan	25		2.275%	2020
CenterPoint Energy	May 2019	Variable rate term loan	1,000		2.56%	2021
CenterPoint Energy	August 2019	Unsecured senior notes	500		2.50%	2024
CenterPoint Energy	August 2019	Unsecured senior notes	400		2.95%	2030
CenterPoint Energy	August 2019	Unsecured senior notes	300		3.70%	2049


(1)	Draw down by VCC on its variable rate term loan.

Securitization Bonds. As of December 31, 2019, CenterPoint Energy and Houston Electric had special purpose subsidiaries consisting of the Bond Companies, which they consolidate. 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. CenterPoint Energy and Houston Electric have no payment obligations in respect of the Securitization Bonds other than to remit the applicable transition or system restoration charges they collect as set forth in servicing agreements among Houston Electric, the Bond Companies and other parties. 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.

Credit Facilities. The Registrants had the following revolving credit facilities as of December 31, 2019:



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 December 31, 2019 (2)	Termination Date
		(in millions)
March 3, 2016	CenterPoint Energy	$	3,300	1.500%	65%	(3)	59.0%	March 3, 2022
July 14, 2017	CenterPoint Energy (4)	400		1.125%	65%		51.6%	July 14, 2022
July 14, 2017	CenterPoint Energy (5)	200		1.250%	65%		58.0%	July 14, 2022
March 3, 2016	Houston Electric	300		1.125%	65%	(3)	50.2%	March 3, 2022
March 3, 2016	CERC	900		1.250%	65%		46.4%	March 3, 2022
	Total	$	5,100


(1)	Based on credit ratings as of December 31, 2019.


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

(3)

For CenterPoint Energy and Houston Electric, 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 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.


(4)	This credit facility was issued by VUHI, is guaranteed by SIGECO, Indiana Gas and VEDO and includes a $10 million swing line sublimit and a $20 million letter of credit sublimit. This credit facility backstops VUHI’s commercial paper program.


(5)	This credit facility was issued by VCC, is guaranteed by Vectren and includes a $40 million swing line sublimit and an$80 million letter of credit sublimit.

The Registrants, as well as the subsidiaries of CenterPoint Energy discussed above, were in compliance with all financial debt covenants as of December 31, 2019.

As of December 31, 2019 and 2018, the Registrants had the following revolving credit facilities and utilization of such facilities:



	December 31, 2019								December 31, 2018
Registrant	Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate		Loans		Letters of Credit		Commercial Paper		Weighted Average Interest Rate
	(in millions, except weighted average interest rate)
CenterPoint Energy (1)	$	—	$	6	$	1,633	1.95	%	$	—	$	6	$	—	—	%
CenterPoint Energy (2)	—		—		268		2.08	%	—		—		—		—	%
CenterPoint Energy (3)	—		—		—		—	%	—		—		—		—	%
Houston Electric	—		—		—		—	%	—		4		—		—	%
CERC	—		1		377		1.94	%	—		1		210		2.93	%
Total	$	—	$	7	$	2,278			$	—	$	11	$	210


(1)	CenterPoint Energy’s outstanding commercial paper generally has maturities of 60 days or less.


(2)	This credit facility was issued by VUHI and is guaranteed by SIGECO, Indiana Gas and VEDO.


(3)	This credit facility was issued by VCC and is guaranteed by Vectren.

In January 2019, CenterPoint Energy issued the following commercial paper in connection with the closing of the Merger:



Registrant	Issuance Date	Debt Instrument	Aggregate Principal Amount		Weighted Average Interest Rate
			(in millions)
CenterPoint Energy (1) (2)	January 2019	Commercial paper	$	1,660	2.88%


(1)	Proceeds from these commercial paper issuances were used to fund a portion of the Merger and to pay related fees and expenses and were contributed to Vectren for its payment of its stub period cash dividend, long-term incentive payments and to fund the repayment of indebtedness of Vectren subsidiaries redeemed at the option of the holder as a result of the closing of the Merger.


(2)	The commercial paper notes were issued at various times in January 2019 with maturities up to and including 90 days as of the time of issuance, and, prior to their use as described in connection with the closing of the Merger, the net proceeds of such issuances were invested in short-term investments.

Maturities. As of December 31, 2019, maturities of long-term debt, capital leases and sinking fund requirements, excluding the ZENS obligation, are as follows:



	CenterPoint Energy (1)		Houston Electric (1)		CERC		Securitization Bonds
	(in millions)
2020	$	831	$	231	$	—	$	231
2021	2,761		613		593		211
2022	3,302		519		376		219
2023	713		356		300		156
2024	1,184		162		—		162


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

Liens. As of December 31, 2019, 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 2019, 2018 and 2017 have been satisfied by certification of property additions. The replacement fund requirement to be satisfied in 2020 is approximately $295 million, and the sinking fund requirement to be satisfied in 2020 is approximately $1.6 million. CenterPoint Energy expects Houston Electric to meet these 2020 obligations by certification of property additions.

As of December 31, 2019, Houston Electric’s assets were also subject to liens securing approximately $4.0 billion of general mortgage bonds, including approximately $68 million held in trust to secure pollution control bonds for which CenterPoint Energy is obligated. The lien of the general mortgage indenture is junior to that of the mortgage pursuant to which the first mortgage bonds are issued. Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, 70% of property additions or cash deposited with the trustee. Approximately $3.7 billion of additional first mortgage bonds and general mortgage bonds could be issued on the basis of retired bonds and 70% of property additions as of December 31, 2019. Houston Electric has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions.

Other. As of December 31, 2019, certain financial institutions agreed to issue, from time to time, up to $50 million of letters of credit on behalf of Vectren and certain of its subsidiaries in exchange for customary fees. These agreements to issue letters of credit expire on December 31, 2020. As of December 31, 2019, such financial institutions had issued $21 million of letters of credit on behalf of Vectren and certain of its subsidiaries.

(15) Income Taxes

The components of the Registrant’ income tax expense (benefit) were as follows:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
CenterPoint Energy
Current income tax expense:
Federal	$	48		$	89		$	32
State	21			9			9
Total current expense	69			98			41
Deferred income tax expense (benefit):
Federal	74			(25		)	(806		)
State	(5		)	73			36
Total deferred expense (benefit)	69			48			(770		)
Total income tax expense (benefit)	$	138		$	146		$	(729	)
Houston Electric
Current income tax expense:
Federal	$	84		$	109		$	70
State	20			18			19
Total current expense	104			127			89
Deferred income tax benefit:
Federal	(24		)	(38		)	(98		)
Total deferred benefit	(24		)	(38		)	(98		)
Total income tax expense (benefit)	$	80		$	89		$	(9	)
CERC - Continuing Operations
Current income tax expense (benefit):
Federal	$	—		$	(9	)	$	(31	)
State	7			—			(10		)
Total current expense (benefit)	7			(9		)	(41		)
Deferred income tax expense (benefit):
Federal	39			10			(249		)
State	(32		)	21			25
Total deferred expense (benefit)	7			31			(224		)
Total income tax expense (benefit)	$	14		$	22		$	(265	)
CERC - Discontinued Operations
Current income tax expense (benefit):
Federal	$	—		$	9		$	31
State	—			4			11
Total current expense (benefit)	—			13			42
Deferred income tax expense:
Federal	—			29			56
State	—			4			6
Total deferred expense	—			33			62
Total income tax expense	$	—		$	46		$	104

A reconciliation of income tax expense (benefit) using the federal statutory income tax rate to the actual income tax expense and resulting effective income tax rate is as follows:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
CenterPoint Energy (1) (2) (3)
Income before income taxes	$	929		$	514		$	1,063
Federal statutory income tax rate	21		%	21		%	35		%
Expected federal income tax expense	195			108			372
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	36			22			26
State valuation allowance, net of federal income tax	(4		)	11			3
State law change, net of federal income tax	(21		)	32			—
Federal income tax rate reduction	—			—			(1,113		)
Excess deferred income tax amortization	(55		)	(24		)	—
Other, net	(13		)	(3		)	(17		)
Total	(57		)	38			(1,101		)
Total income tax expense (benefit)	$	138		$	146		$	(729	)
Effective tax rate	15		%	28		%	(69		)%
Houston Electric (4) (5) (6)
Income before income taxes	$	436		$	425		$	424
Federal statutory income tax rate	21		%	21		%	35		%
Expected federal income tax expense	92			89			148
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	16			14			12
Federal income tax rate reduction	—			—			(158		)
Excess deferred income tax amortization	(21		)	(9		)	—
Other, net	(7		)	(5		)	(11		)
Total	(12		)	—			(157		)
Total income tax expense (benefit)	$	80		$	89		$	(9	)
Effective tax rate	18		%	21		%	(2		)%
CERC - Continuing Operations (7) (8) (9)
Income before income taxes	$	226		$	92		$	319
Federal statutory income tax rate	21		%	21		%	35		%
Expected federal income tax expense	47			19			112
Increase (decrease) in tax expense resulting from:
State income tax expense, net of federal income tax	(12		)	5			6
State law change, net of federal income tax	(4		)	—			—
State valuation allowance, net of federal income tax	(4		)	11			3
Federal income tax rate reduction	—			—			(396		)
Goodwill impairment	8			—			—
Excess deferred income tax amortization	(18		)	(15		)	—
Tax basis balance sheet adjustment	—			—			11
Other, net	(3		)	2			(1		)
Total	(33		)	3			(377		)
Total income tax expense (benefit)	$	14		$	22		$	(265	)
Effective tax rate	6		%	24		%	(83		)%



	Year Ended December 31,
	2019			2018			2017
	(in millions)
CERC - Discontinued Operations (9)
Income before income taxes	$	—		$	184		$	265
Federal statutory income tax rate	—		%	21		%	35		%
Expected federal income tax expense	—			39			93
Increase in tax expense resulting from:
State income tax expense, net of federal income tax	—			7			11
Total	—			7			11
Total income tax expense	$	—		$	46		$	104
Effective tax rate	—		%	25		%	39		%

(1)

Recognized a $55 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, a $21 million net benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions, and $4 million net benefit for the reduction in valuation allowances on certain state net operating losses that are now expected to be realized.

(2)

Recognized a $32 million deferred tax expense due to state law changes that resulted in remeasurement of state deferred taxes in those jurisdictions. Also recorded an additional $11 million valuation allowance on certain state net operating loss deferred tax assets that are no longer expected to be utilized prior to expiration after the Internal Spin. These items are partially offset by $24 million of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions beginning in 2018.


(3)	Recognized a $1.1 billion deferred tax benefit from the remeasurement of CenterPoint Energy’s ADFIT liability as a result of the enactment of the TCJA on December 22, 2017, which reduced the U.S. corporate income tax rate from 35% to 21%.


(4)	Recognized $21 million of amortization of the net regulatory EDIT liability as decreed by regulators.


(5)	Recognized $9 million of amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions beginning in 2018.


(6)	Recognized a $158 million deferred tax benefit from the remeasurement of Houston Electric’s ADFIT liability as a result of the enactment of the TCJA on December 22, 2017, which reduced the U.S. corporate income tax rate from 35% to 21%.

(7)

Recognized $18 million benefit for the amortization of the net regulatory EDIT liability as decreed by regulators in certain jurisdictions, $4 million net benefit for the impact of state law changes that resulted in the remeasurement of state deferred taxes in those jurisdictions and $4 million net benefit for the reduction in valuation allowances on certain state net operating losses that are now expected to be realized.


(8)	Recorded an additional $11 million valuation allowance on certain state net operating loss deferred tax assets that are no longer expected to be utilized prior to expiration after the Internal Spin. This item is partially offset by $15 million of amortization of the net regulatory EDIT liability in certain jurisdictions as decreed by regulators beginning in 2018.

(9)

Recognized a $396 million deferred tax benefit from the remeasurement of CERC’s ADFIT liability as a result of the enactment of the TCJA on December 22, 2017, which reduced the U.S. corporate income tax rate from 35% to 21%. ASC 740 requires tax impacts of changes in tax laws or rates be reported in continuing operations. Therefore, CERC’s federal income tax benefit generated by the remeasurement of the ADFIT liability for Enable during 2017 and state law changes during 2016 associated with its investment in Enable are reported in continuing operations on CERC’s Statements of Consolidated Income. The ADFIT liability associated with CERC’s investment in Enable is reported as discontinued operations on CERC’s Consolidated Balance Sheets.

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities were as follows:



	December 31,
	2019			2018
	(in millions)
CenterPoint Energy
Deferred tax assets:
Benefits and compensation	$	152		$	160
Regulatory liabilities	447			356
Loss and credit carryforwards	111			84
Asset retirement obligations	89			62
Indexed debt securities derivative	34			—
Other	40			29
Valuation allowance	(25		)	(18		)
Total deferred tax assets	848			673
Deferred tax liabilities:
Property, plant and equipment	2,656			1,894
Investment in unconsolidated affiliates	1,010			987
Regulatory assets	344			395
Investment in marketable securities and indexed debt	586			478
Indexed debt securities derivative	—			27
Other	180			131
Total deferred tax liabilities	4,776			3,912
Net deferred tax liabilities	$	3,928		$	3,239
Houston Electric
Deferred tax assets:
Regulatory liabilities	$	195		$	205
Benefits and compensation	14			17
Asset retirement obligations	9			7
Other	7			12
Total deferred tax assets	225			241
Deferred tax liabilities:
Property, plant and equipment	1,129			1,087
Regulatory assets	126			177
Total deferred tax liabilities	1,255			1,264
Net deferred tax liabilities	$	1,030		$	1,023
CERC - Continuing Operations
Deferred tax assets:
Benefits and compensation	$	24		$	27
Regulatory liabilities	144			150
Loss and credit carryforwards	183			259
Asset retirement obligations	80			54
Other	23			20
Valuation allowance	(15		)	(18		)
Total deferred tax assets	439			492
Deferred tax liabilities:
Property, plant and equipment	821			773
Regulatory assets	45			41
Other	43			84
Total deferred tax liabilities	909			898
Net deferred tax liabilities	$	470		$	406

Merger with Vectren. On Merger Date, pursuant to the Merger Agreement, CenterPoint Energy consummated the Merger and acquired Vectren for approximately $6 billion in cash. On the Merger Date, Vectren became a wholly-owned subsidiary of CenterPoint Energy which triggered an ownership change under Section 382 of the Code. Under this Code section, future utilization of acquired net operating loss carry forwards and other tax attributes can be limited. On the Merger Date, Vectren estimated $177 million and $60 million of federal net operating loss and of charitable contribution carryforwards, respectively, the utilization of which is not expected to be limited under Section 382.

Tax Attribute Carryforwards and Valuation Allowance. CenterPoint Energy has no federal net operating loss carryforwards as of December 31, 2019. Also, CenterPoint Energy has $26 million of federal charitable contribution carryforwards, which have a five-year carryover period. As of December 31, 2019, CenterPoint Energy had $699 million of state net operating loss carryforwards that expire between 2020 and 2039 and $21 million of state tax credits that do not expire. CenterPoint Energy reported a valuation allowance of $25 million because it is more likely than not that the benefit from certain state net operating loss carryforwards will not be realized.

CERC has $618 million of federal net operating loss carryforwards which have an indefinite carryforward period. CERC has $691 million of state net operating loss carryforwards which expire between 2020 and 2039 and $17 million of state tax credits which do not expire. CERC reported a valuation allowance of $15 million since it is more likely than not that the benefit from certain state net operating loss carryforwards will not be realized.

A reconciliation of CenterPoint Energy’s beginning and ending balance of unrecognized tax benefits, excluding interest and penalties, for 2019 is as follows:



	Year Ended December 31, 2019
	(in millions)
Balance, beginning of year	$	—
Unrecognized tax benefits assumed through the Merger	9
Decreases related to tax positions of prior years	(1		)
Balance, end of year	$	8

CenterPoint Energy had no unrecognized tax benefits for 2018 and 2017.

During the year ended December 31, 2019, CenterPoint Energy acquired $9 million of unrecognized tax benefits in connection with the Merger. Included in the balance of uncertain tax positions as of December 31, 2019 are $3 million of tax benefits that, if recognized, would affect the effective tax rate. The above table does not include an immaterial amount of accrued interest as of December 31, 2019. The Registrants recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. The Registrants believe that it is reasonably possible that a decrease of up to $5 million in unrecognized tax benefits may occur by the end of 2020 as a result of a lapse of statutes on older exposures and/or the filing of applications for accounting method changes. CenterPoint Energy’s net unrecognized tax benefits, including penalties and interest, were $9 million as of December 31, 2019 and are included in other non-current liabilities in the Consolidated Financial Statements.

Tax Audits and Settlements. Tax years through 2017 have been audited and settled with the IRS for CenterPoint Energy. For the 2018 and 2019 tax years, the Registrants are participants in the IRS’s Compliance Assurance Process. Legacy Vectren is not currently under audit with the IRS, and the 2017-2019 tax years are still open.

(16) Commitments and Contingencies

(a) Purchase Obligations (CenterPoint Energy and CERC)

Commitments include minimum purchase obligations related to CenterPoint Energy’s and CERC’s Natural Gas Distribution and Energy Services reportable segments and CenterPoint Energy’s Indiana Electric Integrated reportable segment. Contracts with minimum payment provisions have various quantity requirements and durations and are not classified as non-trading derivative assets and liabilities in CenterPoint Energy’s and CERC’s Consolidated Balance Sheets as of December 31, 2019 and 2018. These contracts meet an exception as “normal purchases contracts” or do not meet the definition of a derivative. Natural gas and coal supply commitments also include transportation contracts that do not meet the definition of a derivative.

As of December 31, 2019, minimum purchase obligations are approximately:



	CenterPoint Energy		CERC
	(in millions)
2020	$	750	$	533
2021	617		432
2022	418		242
2023	335		182
2024	271		174
2025 and beyond	1,888		1,526

Indiana Electric also has other purchased power agreements that do not have minimum thresholds but do require payment when energy is generated by the provider. Costs arising from certain of these commitments are pass-through costs, generally collected dollar-for-dollar from retail customers through regulator-approved cost recovery mechanisms.

(b) AMAs (CenterPoint Energy and CERC)

CenterPoint Energy’s and CERC’s NGD has AMAs associated with their utility distribution service in Arkansas, Indiana, Louisiana, Mississippi, Oklahoma and Texas. The AMAs have varying terms, the longest of which expires in 2023. Pursuant to the provisions of the agreements, CenterPoint Energy’s and CERC’s NGD 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. Generally, AMAs are contracts between CenterPoint Energy’s and CERC’s NGD and an asset manager that are intended to transfer the working capital obligation and maximize the utilization of the assets. In these agreements, CenterPoint Energy’s and CERC’s NGD agrees to release transportation and storage capacity to other parties to manage natural gas storage, supply and delivery arrangements for CenterPoint Energy’s and CERC’s NGD and to use the released capacity for other purposes when it is not needed for CenterPoint Energy’s and CERC’s NGD. CenterPoint Energy’s and CERC’s NGD may receive compensation from the asset manager through payments made over the life of the AMAs. CenterPoint Energy’s and CERC’s NGD has an obligation to purchase their winter storage requirements that have been released to the asset manager under these AMAs.

(c) Guarantees and Product Warranties (CenterPoint Energy)

In the normal course of business, ESG enters into contracts requiring it to timely install infrastructure, operate facilities, pay vendors and subcontractors and support warranty obligations and, at times, issue payment and performance bonds and other forms of assurance in connection with these contracts.

Specific to ESG’s role as a general contractor in the performance contracting industry, as of December 31, 2019, there were 62 open surety bonds supporting future performance with an aggregate face amount of approximately $565 million. ESG’s exposure is less than the face amount of the surety bonds and is limited to the level of uncompleted work under the contracts. As of December 31, 2019, approximately 36% of the work was yet to be completed on projects with open surety bonds. Further, various subcontractors issue surety bonds to ESG. In addition to these performance obligations, ESG also warrants the functionality of certain installed infrastructure generally for one year and the associated energy savings over a specified number of years. Since ESG’s inception in 1994, CenterPoint Energy believes ESG has had a history of generally meeting its performance obligations and energy savings guarantees and its installed products operating effectively. CenterPoint Energy assessed the fair value of its obligation for such guarantees as of December 31, 2019 and no amounts were recorded on CenterPoint Energy’s Consolidated Balance Sheets.

CenterPoint Energy issues parent company level guarantees to certain vendors, customers and other commercial counterparties of ESG. These guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of subsidiary obligations to allow those subsidiaries to conduct business without posting other forms of assurance. As of December 31, 2019, CenterPoint Energy, primarily through Vectren, has issued parent company level guarantees supporting ESG’s obligations. For those obligations where potential exposure can be estimated, management estimates the maximum exposure under these guarantees to be approximately $499 million as of December 31, 2019. This exposure primarily relates to energy savings guarantees on federal energy savings performance contracts. Other parent company level guarantees, certain of which do not contain a cap on potential liability, have been issued in support of federal operations and maintenance projects for which a maximum exposure cannot be estimated based on the nature of the projects. While there can be no assurance that performance under any of these parent company

guarantees will not be required in the future, CenterPoint Energy considers the likelihood of a material amount being incurred as remote.

(d) Guarantees and Product Warranties (CenterPoint Energy and CERC)

In the normal course of business, CES trades natural gas under supply contracts and enters into natural gas related transactions under transportation, storage and other contracts. In connection with these CES business activities, CERC Corp. has issued guarantees to CES counterparties to guarantee the payment of CES obligations. While CES remains wholly-owned by CERC Corp., these guarantees do not represent incremental consolidated obligations, but rather, represent guarantees of CES’s obligations to allow CES to conduct business without posting other forms of assurance. As of December 31, 2019, the face amount of CERC Corp.’s guarantees of CES obligations was approximately $1.8 billion.

A CERC Corp. guarantee primarily has a one- or two-year term, although CERC Corp. would generally not be released from obligations incurred by CES prior to the termination of such guarantee unless the beneficiary of the guarantee affirmatively released CERC Corp. from its obligations under the guarantee. Since CERC Corp. has owned CES, CERC Corp. has not paid any amounts under any guarantees of CES obligations. While there can be no assurance that performance under any of these parent company guarantees will not be required in the future, CenterPoint Energy and CERC consider the likelihood of a material amount being incurred as remote.

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment. Under the terms of the Equity Purchase Agreement, Athena Energy Services must generally use reasonable best efforts to replace existing CERC Corp. guarantees with credit support provided by a party other than CERC Corp. as of and after closing of the sale. Additionally, to the extent that CERC Corp. retains any exposure relating to the guarantees of CES obligations 90 days after closing, Athena Energy Services will pay a 3% annualized fee on such exposure, increasing by 1% on an annualized basis every three months.

CenterPoint Energy and CERC recorded no amounts on their respective Consolidated Balance Sheets as of December 31, 2019 and 2018 related to these guarantees.

(e) Legal, Environmental and Other Matters

Legal Matters

Gas Market Manipulation Cases (CenterPoint Energy and CERC). CenterPoint Energy, its predecessor, Reliant Energy, and certain of their former subsidiaries were named as defendants in a large number of lawsuits filed against numerous gas market participants in a number of federal and western state courts in connection with the operation of the natural gas markets in 2000-2002. CenterPoint Energy and its affiliates were released or dismissed from all such cases, except for one case in federal court in Nevada in which CES, a subsidiary of CERC, was a defendant. Plaintiffs in that case alleged a conspiracy to inflate Wisconsin natural gas prices in 2000-2002. In October 2018, CES reached an agreement to settle all claims against CES and CES’s claims for indemnity. During the third quarter of 2019, the federal district court issued final approval of the settlement and dismissed the case, and CES completed the required settlement payments; the settlement agreement has now become final. This settlement did not have a material adverse effect on CenterPoint Energy’s or CERC’s financial condition, results of operations or cash flows.

Minnehaha Academy (CenterPoint Energy and CERC). On August 2, 2017, a natural gas explosion occurred at the Minnehaha Academy in Minneapolis, Minnesota, resulting in the deaths of two school employees, serious injuries to others and significant property damage to the school. CenterPoint Energy, certain of its subsidiaries, including CERC, and the contractor company working in the school have been named in litigation arising out of this incident. CenterPoint Energy and CERC have reached confidential settlement agreements on all wrongful death and property damage claims and with some personal injury claimants. Additionally, CenterPoint Energy and CERC cooperated with the investigation conducted by the National Transportation Safety Board, which concluded its investigation in December 2019 and issued a report without making any recommendations. Further, CenterPoint Energy and CERC contested and reached a settlement regarding approximately $200,000 in fines imposed by the Minnesota Office of Pipeline Safety. In early 2018, the Minnesota Occupational Safety and Health Administration concluded its investigation without any adverse findings against CenterPoint Energy or CERC. CenterPoint Energy’s and CERC’s general and excess liability insurance policies provide coverage for third party bodily injury and property damage claims.

Litigation Related to the Merger (CenterPoint Energy). With respect to the Merger, in July 2018, seven separate lawsuits were filed against Vectren and the individual directors of Vectren’s Board of Directors in the U.S. District Court for the Southern District of Indiana. These lawsuits alleged violations of Sections 14(a) of the Exchange Act and SEC Rule 14a-9 on the grounds that the Vectren Proxy Statement filed on June 18, 2018 was materially incomplete because it omitted material information concerning the Merger. In August 2018, the seven lawsuits were consolidated, and the Court denied the plaintiffs’ request for a preliminary

injunction. In October 2018, the plaintiffs filed their Consolidated Amended Class Action Complaint. In December 2018, two plaintiffs voluntarily dismissed their lawsuits. In September 2019, the court granted the defendants’ motion to dismiss and dismissed the remaining plaintiffs’ claims with prejudice, which the plaintiffs appealed in October 2019. The defendants believe that the allegations asserted are without merit and intend to vigorously defend themselves against the claims raised. CenterPoint Energy does not expect the ultimate outcome of this matter to have a material adverse effect on its financial condition, results of operations or cash flows.

Environmental Matters

MGP Sites. CenterPoint Energy, CERC and their predecessors operated MGPs in the past. In addition, certain of CenterPoint Energy’s subsidiaries acquired through the Merger operated MGPs in the past. The costs CenterPoint Energy or CERC, as applicable, expect to incur to fulfill their respective obligations are estimated by management using assumptions based on actual costs incurred, the timing of expected future payments and inflation factors, among others. While CenterPoint Energy and CERC have recorded all costs which they presently are obligated to incur in connection with activities at these sites, it is possible that future events may require remedial activities which are not presently foreseen, and those costs may not be subject to PRP or insurance recovery.


(i)	Minnesota MGPs (CenterPoint Energy and CERC). With respect to certain Minnesota MGP sites, CenterPoint Energy and CERC have completed state-ordered remediation and continue state-ordered monitoring and water treatment. CenterPoint Energy and CERC recorded a liability as reflected in the table below for continued monitoring and any future remediation required by regulators in Minnesota.

(ii)

Indiana MGPs (CenterPoint Energy). In the Indiana Gas service territory, the existence, location and certain general characteristics of 26 gas manufacturing and storage sites have been identified for which CenterPoint Energy may have some remedial responsibility. A remedial investigation/feasibility study was completed at one of the sites under an agreed upon order between Indiana Gas and the IDEM, and a Record of Decision was issued by the IDEM in January 2000. The remaining sites have been submitted to the IDEM’s VRP. CenterPoint Energy has also identified its involvement in five manufactured gas plant sites in SIGECO’s service territory, all of which are currently enrolled in the IDEM’s VRP. CenterPoint Energy is currently conducting some level of remedial activities, including groundwater monitoring at certain sites.


(iii)	Other MGPs (CenterPoint Energy and CERC). In addition to the Minnesota and Indiana sites, the EPA and other regulators have investigated MGP sites that were owned or operated by CenterPoint Energy or CERC or may have been owned by one of their former affiliates.

Total costs that may be incurred in connection with addressing these sites cannot be determined at this time. The estimated accrued costs are limited to CenterPoint Energy’s and CERC’s share of the remediation efforts and are therefore net of exposures of other PRPs. The estimated range of possible remediation costs for the sites for which CenterPoint Energy and CERC believe they may have responsibility was based on remediation continuing for the minimum time frame given in the table below.



	December 31, 2019
	CenterPoint Energy		CERC
	(in millions, except years)
Amount accrued for remediation	$	12	$	7
Minimum estimated remediation costs	7		4
Maximum estimated remediation costs	51		32
Minimum years of remediation	5		30
Maximum years of remediation	50		50

The cost estimates are based on studies of a site or industry average costs for remediation of sites of similar size. The actual remediation costs will depend on the number of sites to be remediated, the participation of other PRPs, if any, and the remediation methods used.

CenterPoint Energy and CERC do not expect the ultimate outcome of these matters to have a material adverse effect on the financial condition, results of operations or cash flows of either CenterPoint Energy or CERC.

Asbestos. Some facilities owned by the Registrants or their predecessors contain or have contained asbestos insulation and other asbestos-containing materials. The Registrants are from time to time named, along with numerous others, as defendants in

lawsuits filed by a number of individuals who claim injury due to exposure to asbestos, and the Registrants anticipate that additional claims may be asserted in the future. Although their ultimate outcome cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.

CCR Rule (CenterPoint Energy). In April 2015, the EPA finalized its CCR Rule, which regulates ash as non-hazardous material under the RCRA. The final rule allows beneficial reuse of ash, and the majority of the ash generated by Indiana Electric’s generating plants will continue to be reused. In July 2018, the EPA released its final CCR Rule Phase I Reconsideration which extended the deadline to October 31, 2020 for ceasing placement of ash in ponds that exceed groundwater protections standards or that fail to meet location restrictions. While the EPA Phase I Reconsideration moves forward, the existing CCR compliance obligations remain in effect. In August 2019, the EPA proposed additional amendments to its CCR Rule with respect to beneficial reuse of ash and other materials. The proposed revisions would not restrict Indiana Electric’s current beneficial reuse of its fly ash.

Indiana Electric has three ash ponds, two at the F.B. Culley facility (Culley East and Culley West) and one at the A.B. Brown facility. Under the existing CCR Rule, Indiana Electric is required to perform integrity assessments, including ground water monitoring, at its F.B. Culley and A.B. Brown generating stations. The ground water studies are necessary to determine the remaining service life of the ponds and whether a pond must be retrofitted with liners or closed in place, with bottom ash handling conversions completed. Indiana Electric’s Warrick generating unit is not included in the scope of the CCR Rule as this unit has historically been part of a larger generating station that predominantly serves an adjacent industrial facility. In March 2018, Indiana Electric began posting ground water data monitoring reports annually to its public website in accordance with the requirements of the CCR Rule. This data preliminarily indicates potential groundwater impacts very close to Indiana Electric’s ash impoundments, and further analysis is ongoing. The CCR Rule required companies to complete location restriction determinations by October 18, 2018. Indiana Electric completed its evaluation and determined that one F.B. Culley pond (Culley East) and the A.B. Brown pond fail the aquifer placement location restriction. As a result of this failure, Indiana Electric is required to cease disposal of new ash in the ponds and commence closure of the ponds by October 31, 2020. CenterPoint Energy plans to seek extensions available under the CCR Rule that would allow Indiana Electric to continue to use the ponds through December 31, 2023. The inability to take these extensions may result in increased and potentially significant operational costs in connection with the accelerated implementation of an alternative ash disposal system or adversely impact Indiana Electric’s future operations. Failure to comply with these requirements could also result in an enforcement proceeding including the imposition of fines and penalties. On April 24, 2019, Indiana Electric received an order from the IURC approving recovery in rates of costs associated with the closure of the Culley West pond, which has already commenced closure activities. CenterPoint Energy believes the language in the IURC order is favorable for future recovery of closure costs for Indiana Electric’s remaining ponds.

Indiana Electric continues to refine site specific estimates of closure costs. In July 2018, Indiana Electric filed a Complaint for Damages and Declaratory Relief against its insurers seeking reimbursement of defense, investigation and pond closure costs incurred to comply with the CCR Rule, and has since reached confidential settlement agreements with its insurers. The proceeds of these settlements will offset costs that have been and will be incurred to close the ponds. In March 2019, Indiana Electric entered into agreements with third parties for the excavation and beneficial reuse of the ash at the A.B. Brown ash pond. On August 14, 2019, Indiana Electric filed its petition with the IURC for recovery of costs associated with the closure of the A.B. Brown ash pond, which would include costs associated with the excavation and recycling of the ponded ash. On November 4, 2019, the EPA released a pre-publication copy of proposed revisions to the CCR Rule. CenterPoint Energy will evaluate the proposals to determine potential impacts to current compliance plans for its A.B. Brown and F.B. Culley generating stations.

As of December 31, 2019, CenterPoint Energy has recorded an approximate $68 million ARO, which represents the discounted value of future cash flow estimates to close the ponds at A.B. Brown and F.B. Culley. This estimate is subject to change due to the contractual arrangements; continued assessments of the ash, closure methods, and the timing of closure; implications of Indiana Electric’s generation transition plan; changing environmental regulations; and proceeds received from the settlements in the aforementioned insurance proceeding. In addition to these removal costs, Indiana Electric also anticipates equipment purchases of between $60 million and $80 million to complete the A.B. Brown closure project.

Other Environmental. From time to time, the Registrants identify the presence of environmental contaminants during operations or on property where predecessors have conducted operations. Other such sites involving contaminants may be identified in the future. The Registrants have and expect to continue to remediate any identified sites consistent with state and federal legal obligations. From time to time, the Registrants have received notices, and may receive notices in the future, from regulatory authorities or others regarding status as a PRP in connection with sites found to require remediation due to the presence of environmental contaminants. In addition, the Registrants have been, or may be, named from time to time as defendants in litigation related to such sites. Although the ultimate outcome of such matters cannot be predicted at this time, the Registrants do not expect these matters, either individually or in the aggregate, to have a material adverse effect on their financial condition, results of operations or cash flows.

Other Proceedings

The Registrants are involved in other legal, environmental, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business. From time to time, the Registrants are also defendants in legal proceedings with respect to claims brought by various plaintiffs against broad groups of participants in the energy industry. Some of these proceedings involve substantial amounts. The Registrants regularly analyze current information and, as necessary, provide accruals for probable and reasonably estimable liabilities on the eventual disposition of these matters. The Registrants do not expect the disposition of these matters to have a material adverse effect on the Registrants’ financial condition, results of operations or cash flows.

(17) Earnings Per Share (CenterPoint Energy)

The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share. Basic earnings per common share is determined by dividing Income available to common shareholders - basic by the Weighted average common shares outstanding - basic for the applicable period. Diluted earnings per common share is determined by the inclusion of potentially dilutive common stock equivalent shares that may occur if securities to issue Common Stock were exercised or converted into Common Stock.



	For the Year Ended December 31,
	2019		2018		2017
	(in millions, except per share and share amounts)
Numerator:
Income available to common shareholders - basic (1)	$	674	$	333	$	1,792
Add back: Series B Preferred Stock dividend (2)	—		—		—
Income available to common shareholders - diluted (1)	$	674	$	333	$	1,792

Denominator:
Weighted average common shares outstanding - basic	502,050,000		448,829,000		430,964,000
Plus: Incremental shares from assumed conversions:
Restricted stock (3)	3,107,000		3,636,000		3,344,000
Series B Preferred Stock (2)	—		—		—
Weighted average common shares outstanding - diluted	505,157,000		452,465,000		434,308,000

Earnings per common share:
Basic earnings per common share	$	1.34	$	0.74	$	4.16
Diluted earnings per common share	$	1.33	$	0.74	$	4.13


(1)	Income available to common shareholders for the year ended December 31, 2019 includes net income from businesses acquired in the Merger of $190 million. See Note 4. Income available to common shareholders for the year ended December 31, 2017 includes a reduction in income tax expense of $1,113 million due to tax reform. See Note 15 for further discussion of the impacts of the TCJA.

(2)

The potentially dilutive impact from Series B Preferred Stock applies the if-converted method in calculating diluted earnings per common share. Under this method, diluted earnings per common share is adjusted for the more dilutive effect of the Series B Preferred Stock as a result of either its accumulated dividend for the period in the numerator or the assumed-converted common share equivalent in the denominator. The computation of diluted earnings per common share outstanding for the year ended December 31, 2019 and December 31, 2018 excludes Series B Stock Dividends of $68 million and $17 million, respectively, and 34,354,000 and 8,885,000 potentially dilutive shares, respectively, because to include them would be anti-dilutive. However, these shares could be potentially dilutive in the future.


(3)	The potentially dilutive impact from restricted stock awards applies the treasury stock method. Under this method, an increase in the average fair market value of Common Stock can result in a greater dilutive impact from these securities.

(18) Unaudited Quarterly Information

Summarized quarterly financial data is as follows:



	Year Ended December 31, 2019
	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
	(in millions, except per share amounts)
CenterPoint Energy
Revenues	$	3,531	$	2,798	$	2,742		$	3,230
Operating income	245		287		392			302
Income available to common shareholders	140		165		241			128
Basic earnings per common share (1)	0.28		0.33		0.48			0.25
Diluted earnings per common share (1)	0.28		0.33		0.47			0.25
Houston Electric
Revenues	686		765		859			680
Operating income	81		169		269			99
Net income	27		100		185			44
CERC
Revenues	2,368		1,342		1,126			1,734
Operating income	196		58		23			73
Net income (loss)	138		28		(7		)	53



	Year Ended December 31, 2018
	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
	(in millions, except per share amounts)
CenterPoint Energy
Revenues	$	3,155	$	2,186		$	2,212		$	3,036
Operating income	251		187			226			167
Income (loss) available to common shareholders	165		(75		)	153			90
Basic earnings (loss) per common share (1)	0.38		(0.17		)	0.35			0.18
Diluted earnings (loss) per common share (1)	0.38		(0.17		)	0.35			0.18
Houston Electric
Revenues	755		854			897			728
Operating income	119		181			227			98
Net income	52		101			143			40
CERC (2)
Revenues	2,400		1,328			1,312			2,303
Operating income (loss)	131		22			(7		)	76
Income (loss) from continuing operations	78		(8		)	(35		)	35
Income (loss) from discontinued operations	52		44			44			(2		)
Net income	130		36			9			33


(1)	Quarterly earnings (loss) per common share are based on the weighted average number of shares outstanding during the quarter, and the sum of the quarters may not equal annual earnings (loss) per common share.


(2)	Amounts have been recast to reflect discontinued operations in all periods presented.

(19) Reportable Segments

The Registrants’ determination of reportable segments considers the strategic operating units under which the Registrants manage sales, allocate resources and assess performance of various products and services to wholesale or retail customers in differing regulatory environments. The Registrants use operating income as the measure of profit or loss for the reportable segments other than Midstream Investments, where equity in earnings is used.

As of December 31, 2019, reportable segments by Registrant are as follows:



Registrants	Houston Electric T&D	Indiana Electric Integrated	Natural Gas Distribution	Energy Services	Infrastructure Services	Midstream Investments	Corporate and Other
CenterPoint Energy	X	X	X	X	X	X	X
Houston Electric	X
CERC			X	X			X


•	CenterPoint Energy’s and Houston Electric’s Houston Electric T&D reportable segment consists of electric transmission and distribution services in the Texas Gulf Coast area.


•	CenterPoint Energy’s Indiana Electric Integrated reportable segment consists of electric transmission and distribution services primarily to southwestern Indiana and includes power generation and wholesale power operations.


•	CenterPoint Energy’s Natural Gas Distribution reportable segment consists of intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas.


•	CERC’s Natural Gas Distribution reportable segment consists of intrastate natural gas sales to, and natural gas transportation and distribution for residential, commercial, industrial and institutional customers in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.


•	CenterPoint Energy’s and CERC’s Energy Services reportable segment consists of non-rate regulated natural gas sales and services operations.


•	CenterPoint Energy’s Infrastructure Services reportable segment consists of underground pipeline construction and repair services.


•	CenterPoint Energy’s Midstream Investments reportable segment consists of the equity investment in Enable (excluding the Enable Series A Preferred Units).


•	CenterPoint Energy’s Corporate and Other reportable segment consists of energy performance contracting and sustainable infrastructure services through ESG and other corporate operations which support all of the business operations of CenterPoint Energy.


•	CERC’s Corporate and Other reportable segment consists primarily of corporate operations which support all of the business operations of CERC.

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Purchase Agreement to sell its Infrastructure Services reportable segment. The transaction is expected to close in the second quarter of 2020. For further information, see Notes 6 and 23 to the consolidated financial statements.

Expenditures for long-lived assets include property, plant and equipment. Intersegment sales are eliminated in consolidation, except as described in Note 2(b).

Financial data for reportable segments and products and services are as follows:

CenterPoint Energy



	Revenues from External Customers			Net Intersegment Revenues			Depreciation and Amortization		Operating Income (Loss)			Total Assets				Expenditures for Long-Lived Assets
	(in millions)
As of and for the year ended December 31, 2019:
Houston Electric T&D	$	2,996	(1)	$	—		$	648	$	624		$	11,264			$	1,033
Indiana Electric Integrated	523			—			91		90			3,168				183
Natural Gas Distribution	3,643			40			417		408			13,903				1,098
Energy Services	3,653			129			16		32			1,301				12
Infrastructure Services	1,186		(2)	4			50		95			1,077				67
Midstream Investments (3)	—			—			—		—			2,473				—
Corporate and Other	300			—			65		(23		)	4,784			(4)	194
Eliminations	—			(173		)	—		—			(2,531		)		—
Consolidated	$	12,301		$	—		$	1,287	$	1,226		$	35,439			$	2,587
Reconciling items																(81		)
Capital expenditures per Statements of Consolidated Cash Flows																$	2,506

As of and for the year ended December 31, 2018:
Houston Electric T&D	$	3,232	(1)	$	—		$	917	$	623		$	10,509			$	952
Natural Gas Distribution	2,931			36			277		266			6,956				638
Energy Services	4,411			110			16		(47		)	1,558				20
Midstream Investments (3)	—			—			—		—			2,482				—
Corporate and Other	15			—			33		(11		)	6,156			(4)	110
Eliminations	—			(146		)	—		—			(652		)		—
Consolidated	$	10,589		$	—		$	1,243	$	831		$	27,009			$	1,720
Reconciling items																(69		)
Capital expenditures per Statements of Consolidated Cash Flows																$	1,651

As of and for the year ended December 31, 2017:
Houston Electric T&D	$	2,997	(1)	$	—		$	724	$	636		$	10,292			$	924
Natural Gas Distribution	2,606			33			260		348			6,608				523
Energy Services	3,997			52			19		126			1,521				11
Midstream Investments (3)	—			—			—		—			2,472				—
Corporate and Other	14			—			33		26			2,497			(4)	36
Eliminations	—			(85		)	—		—			(654		)		—
Consolidated	$	9,614		$	—		$	1,036	$	1,136		$	22,736			$	1,494
Reconciling items																(68		)
Capital expenditures per Statements of Consolidated Cash Flows																$	1,426


(1)	CenterPoint Energy’s Houston Electric T&D’s revenues from major customers are as follows:



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Affiliates of NRG	$	727	$	705	$	713
Affiliates of Vistra Energy Corp.	263		251		229


(2)	Includes revenues not eliminated in consolidation for pipeline construction and repair services of $162 million capitalized by CenterPoint Energy’s NGD for the 11 months ended December 31, 2019. See Note 2(b).


(3)	CenterPoint Energy’s Midstream Investments’ equity earnings, net are as follows:



	Year Ended December 31,
	2019		2018		2016
	(in millions)
Enable	$	229	$	307	$	265


(4)	Total assets included pension and other postemployment-related regulatory assets of $584 million, $665 million and $600 million as of December 31, 2019, 2018 and 2017, respectively. Additionally, total assets as of December 31, 2018 included $3.9 billion of temporary investments included in Cash and cash equivalents on CenterPoint Energy’s Consolidated Balance Sheets.

Houston Electric

Houston Electric consists of a single reportable segment; therefore, a tabular reportable segment presentation has not been

included.


(1)	Houston Electric’s revenues from major external customers are as follows:



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Affiliates of NRG	$	727	$	705	$	713
Affiliates of Vistra Energy Corp.	263		251		229

CERC



	Revenues from External Customers		Net Intersegment Revenues			Depreciation and Amortization		Operating Income (Loss)			Total Assets (1)			Expenditures for Long-Lived Assets
	(in millions)
As of and for the year ended December 31, 2019:
Natural Gas Distribution	$	2,911	$	40		$	289	$	316		$	7,497		$	773
Energy Services	3,654		128			16		32			1,301			12
Other Operations	5		—			—		2			149			—
Eliminations	—		(168		)	—		—			(508		)	—
Consolidated	$	6,570	$	—		$	305	$	350		$	8,439		$	785
Reconciling items														(9		)
Capital expenditures per Statements of Consolidated Cash Flows														$	776
As of and for the year ended December 31, 2018:
Natural Gas Distribution	$	2,931	$	36		$	277	$	266		$	6,956		$	638
Energy Services	4,411		110			16		(47		)	1,558			20
Other Operations	1		—			—		3			66			—
Eliminations	—		(146		)	—		—			(366		)	—
Consolidated	$	7,343	$	—		$	293	$	222		$	8,214		$	658
Reconciling items														(25		)
Capital expenditures per Statements of Consolidated Cash Flows														$	633



	Revenues from External Customers		Net Intersegment Revenues			Depreciation and Amortization		Operating Income (Loss)			Total Assets (1)				Expenditures for Long-Lived Assets
	(in millions)
As of and for the year ended December 31, 2017:
Natural Gas Distribution	$	2,606	$	33		$	260	$	348		$	6,608			$	523
Energy Services	3,997		52			19		126			1,521				11
Discontinued operations	—		—			—		—			2,472			(1)	—
Other Operations	—		—			—		(7		)	70				—
Eliminations	—		(85		)	—		—			(559		)		—
Consolidated	$	6,603	$	—		$	279	$	467		$	10,112			$	534
Reconciling items															(21		)
Capital expenditures per Statements of Consolidated Cash Flows															$	513


(1)	On September 4, 2018, CERC completed the Internal Spin. For further information regarding the Internal Spin, see Note 11.



	Year Ended December 31,
	2019						2018						2017
Revenues by Products and Services:	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Electric delivery	$	3,019	$	2,990	$	—	$	3,232	$	3,234	$	—	$	2,997	$	2,998	$	—
Retail electric sales	486		—		—		—		—		—		—		—		—
Wholesale electric sales	14		—		—		—		—		—		—		—		—
Retail gas sales	4,802		—		4,070		4,161		—		4,161		3,634		—		3,634
Wholesale gas sales	2,312		—		2,313		3,008		—		3,008		2,811		—		2,811
Gas transportation and processing	33		—		33		32		—		32		29		—		29
Infrastructure services	1,186		—		—		—		—		—		—		—		—
Energy products and services	449		—		154		156		—		142		143		—		129
Total	$	12,301	$	2,990	$	6,570	$	10,589	$	3,234	$	7,343	$	9,614	$	2,998	$	6,603

(20) Supplemental Disclosure of Cash Flow Information

The tables below provide supplemental disclosure of cash flow information:



	2019						2018						2017
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash Payments/Receipts:
Interest, net of capitalized interest	$	436	$	229	$	109	$	363	$	200	$	105	$	378	$	205	$	116
Income taxes (refunds), net	155		87		7		89		154		3		15		76		4
Non-cash transactions:
Accounts payable related to capital expenditures	236		117		86		201		124		80		144		104		56
Capital distribution associated with the Internal Spin (1)	—		—		28		—		—		1,473		—		—		—
ROU assets obtained in exchange for lease liabilities (2)	44		1		29		—		—		—		—		—		—


(1)	The capital distribution in 2019 associated with the Internal Spin is a result of the return to accrual for the periods of CERC’s ownership during 2018.


(2)	Includes the transition impact of adoption of ASU 2016-02 Leases as of January 1, 2019. The Registrants elected not to recast comparative periods in the year of adoption as permitted by the standard.

The table below provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the amount reported in the Statements of Consolidated Cash Flows:



	December 31, 2019						December 31, 2018
	CenterPoint Energy		Houston Electric		CERC		CenterPoint Energy		Houston Electric		CERC
	(in millions)
Cash and cash equivalents (1) (2)	$	241	$	216	$	2	$	4,231	$	335	$	14
Restricted cash included in Prepaid expenses and other current assets	30		19		—		46		34		11
Restricted cash included in Other	—		—		—		1		1		—
Total cash, cash equivalents and restricted cash shown in Statements of Consolidated Cash Flows	$	271	$	235	$	2	$	4,278	$	370	$	25

(1)

CenterPoint Energy’s Cash and cash equivalents as of December 31, 2018 included $3.9 billion of temporary investments resulting from the Merger financings. CenterPoint Energy recorded interest income of $22 million, $28 million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively, in Other, net on CenterPoint Energy’s Statements of Consolidated Income. See Notes 13 and 14 for further details related to the Merger financings.


(2)	Houston Electric’s Cash and cash equivalents as of December 31, 2019 and 2018 included $216 million and $335 million, respectively, of cash related to the Bond Companies. Houston Electric recorded interest income of $9 million, $4 million and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively, in Other, net on Houston Electric’s Statement of Consolidated Income.

(21) Related Party Transactions (Houston Electric and CERC)

Houston Electric and CERC participate in a money pool through which they can borrow or invest on a short-term basis. Funding needs are aggregated and external borrowing or investing is based on the net cash position. The net funding requirements of the money pool are expected to be met with borrowings under CenterPoint Energy’s revolving credit facility or the sale of CenterPoint Energy’s commercial paper.

The table below summarizes money pool activity:



	December 31, 2019						December 31, 2018
	Houston Electric			CERC			Houston Electric			CERC
	(in millions)
Money pool investments (borrowings) (1)	$	481		$	—		$	(1	)	$	114
Weighted average interest rate	1.98		%	1.98		%	2.42		%	2.42		%


(1)	Included in Accounts and notes receivable (payable)–affiliated companies in Houston Electric’s and CERC’s Consolidated Balance Sheets.

Houston Electric and CERC affiliate-related net interest income (expense) were as follows:



	Year Ended December 31,
	2019				2018				2017
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Interest income (expense), net (1)	$	18	$	4	$	1	$	—	$	2	$	—


(1)	Interest income is included in Other, net and interest expense is included in Interest and other finance charges on Houston Electric’s and CERC’s respective Statements of Consolidated Income.

CenterPoint Energy provides some corporate services to Houston Electric and CERC. The costs of services have been charged directly to Houston Electric and CERC using methods that management believes are reasonable. These methods include negotiated usage rates, dedicated asset assignment and proportionate corporate formulas based on operating expenses, assets, gross margin, employees and a composite of assets, gross margin and employees. Houston Electric provides certain services to CERC. These services are billed at actual cost, either directly or as an allocation and include fleet services, shop services, geographic services, surveying and right-of-way services, radio communications, data circuit management and field operations. Additionally, CERC provides certain services to Houston Electric. These services are billed at actual cost, either directly or as an allocation and include line locating and other miscellaneous services. These charges are not necessarily indicative of what would have been incurred had Houston Electric and CERC not been affiliates.

Infrastructure Services provides pipeline construction and repair services to CERC’s NGD. Additionally, CERC, through its subsidiary CES, sells natural gas to Indiana Electric for use in electric generation activities.

Amounts charged for these services are included primarily in Operation and maintenance expenses and amounts billed for natural gas sales are included in Non-utility revenues were as follows:



	Year Ended December 31,
	2019					2018					2017
	Houston Electric			CERC		Houston Electric			CERC		Houston Electric			CERC
	(in millions)
Corporate service charges	$	177		$	141	$	190		$	147	$	188		$	128
Net affiliate service charges (billings)	(8		)	8		(17		)	17		(9		)	9
Pipeline construction and repair service charges (1)	—			4		—			—		—			—
Natural gas sales (2)	—			1		—			—		—			—


(1)	Represents charges from Infrastructure Services to CERC’s NGD for the period February 1, 2019 through December 31, 2019.


(2)	Represents sales to Indiana Electric from CES for the period February 1, 2019 through December 31, 2019.

The table below presents transactions among Houston Electric, CERC and their parent, Utility Holding.



	Year Ended December 31,
	2019				2018				2017
	Houston Electric		CERC		Houston Electric		CERC		Houston Electric		CERC
	(in millions)
Cash dividends paid to parent	$	376	$	120	$	209	$	360	$	180	$	601
Cash contribution from parent	590		129		200		960		—		38
Capital distribution to parent associated with the Internal Spin (1)	—		28		—		1,473		—		—


(1)	The capital distribution in 2019 associated with the Internal Spin is a result of the return to accrual for the periods of CERC’s ownership during 2018.

(22) Leases

The Registrants adopted ASC 842, Leases, and all related amendments on January 1, 2019 using the modified retrospective transition method and elected not to recast comparative periods in the year of adoption as permitted by the standard. There was no adjustment to retained earnings as a result of transition. As a result, disclosures for periods prior to adoption will be presented in accordance with accounting standards in effect for those periods. The Registrants also elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed them to carry forward the historical lease classification. Additionally, the Registrants elected the practical expedient related to land easements, which allows the carry forward of the accounting treatment for land easements on existing agreements. The total ROU assets obtained in exchange for new operating lease liabilities upon adoption were $30 million, $1 million and $27 million for CenterPoint Energy, Houston Electric and CERC, respectively. The Merger was completed on February 1, 2019, and as such the amounts recorded upon adoption are exclusive of Vectren’s leases.

An arrangement is determined to be a lease at inception based on whether the Registrant has the right to control the use of an identified asset. ROU assets represent the Registrants’ right to use the underlying asset for the lease term and lease liabilities represent the Registrants’ obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term, including payments at commencement that depend on an index or rate. Most leases in which the Registrants are the lessee do not have a readily determinable implicit rate, so an incremental borrowing rate, based on the information available at the lease commencement date, is utilized to determine the present value of lease payments. When a secured borrowing rate is not readily available, unsecured borrowing rates are adjusted for the effects of collateral to determine the incremental borrowing rate. Each Registrant uses the implicit rate for agreements in which it is a lessor. Lease expense and lease income are recognized on a straight-line basis over the lease term for operating leases.

The Registrants have lease agreements with lease and non-lease components and have elected the practical expedient to combine lease and non-lease components for certain classes of leases, such as office buildings. For classes of leases in which lease and non-lease components are not combined, consideration is allocated between components based on the stand-alone prices. Sublease income is not significant to the Registrants.

The Registrants’ lease agreements do not contain any material residual value guarantees, material restrictions or material covenants. There are no material lease transactions with related parties. Agreements in which the Registrants are lessors do not include provisions for the lessee to purchase the assets. Because risk is minimal, the Registrants do not take any significant actions to manage risk associated with the residual value of their leased assets.

The Registrants’ lease agreements are primarily equipment and real property leases, including land and office facility leases. The Registrants’ lease terms may include options to extend or terminate a lease when it is reasonably certain that those options will be exercised. Operating lease payments exclude approximately $16 million of legally-binding undiscounted minimum lease payments for leases signed but not yet commenced. The Registrants have elected an accounting policy that exempts leases with terms of one year or less from the recognition requirements of ASC 842.

The components of lease cost, included in Operation and maintenance expense on the Registrants’ respective Statements of Consolidated Income, are as follows:



	Year Ended December 31, 2019
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease cost	$	25	$	—	$	5
Short-term lease cost	75		23		—
Variable lease cost	1		—		1
Total lease cost	$	101	$	23	$	6

The components of lease income were as follows:



	Year Ended December 31, 2019
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating lease income	$	4	$	2	$	1
Variable lease income	2		—		—
Total lease income	$	6	$	2	$	1

Supplemental balance sheet information related to leases was as follows:



	December 31, 2019
	CenterPoint Energy			Houston Electric			CERC
	(in millions, except lease term and discount rate)
Assets:
Operating ROU assets (1)	$	63		$	1		$	24
Total leased assets	$	63		$	1		$	24
Liabilities:
Current operating lease liability (2)	$	21		$	—		$	4
Non-current operating lease liability (3)	42			1			20
Total leased liabilities	$	63		$	1		$	24

Weighted-average remaining lease term (in years) - operating leases	5.1			5.2			7.7
Weighted-average discount rate - operating leases	3.42		%	3.52		%	3.67		%


(1)	Reported within Other assets in the Registrants’ respective Consolidated Balance Sheets.


(2)	Reported within Current other liabilities in the Registrants’ respective Consolidated Balance Sheets.


(3)	Reported within Other liabilities in the Registrants’ respective Consolidated Balance Sheets.

As of December 31, 2019, maturities of operating lease liabilities were as follows:



	CenterPoint Energy		Houston Electric		CERC
	(in millions)
2020	$	22	$	1	$	6
2021	16		—		4
2022	9		—		4
2023	7		—		3
2024	3		—		2
2025 and beyond	12		—		9
Total lease payments	69		1		28
Less: Interest	6		—		4
Present value of lease liabilities	$	63	$	1	$	24

The following table sets forth information concerning the Registrants’ obligations under non-cancelable long-term operating leases as of December 31, 2018:



	CenterPoint Energy		Houston Electric		CERC
	(in millions)
2019	$	6	$	1	$	5
2020	6		—		5
2021	5		—		4
2022	4		—		4
2023	3		—		3
2024 and beyond	12		—		11
Total (1)	$	36	$	1	$	32


(1)	The Merger was completed on February 1, 2019. As such, these amounts are exclusive of Vectren’s leases.

As of December 31, 2019, maturities of undiscounted operating lease payments to be received are as follows:



	CenterPoint Energy		Houston Electric		CERC
	(in millions)
2020	$	3	$	1	$	1
2021	2		—		—
2022	2		—		—
2023	2		—		—
2024	2		—		—
2025 and beyond	10		—		—
Total lease payments to be received	$	21	$	1	$	1

Other information related to leases is as follows. See Note 20 for information on ROU assets obtained in exchange for operating lease liabilities:



	Year Ended December 31, 2019
	CenterPoint Energy		Houston Electric		CERC
	(in millions)
Operating cash flows from operating leases included in the measurement of lease liabilities	$	25	$	1	$	6

(23) Subsequent Events (CenterPoint Energy)

Proposed Divestiture of Infrastructure Services (CenterPoint Energy)

On February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the businesses within its Infrastructure Services reportable segment to PowerTeam Services. Subject to the terms and conditions of the Securities Purchase Agreement, PowerTeam Services has agreed to purchase all of the outstanding equity interests of VISCO for approximately $850 million, subject to customary adjustments set forth in the Securities Purchase Agreement, including adjustments based on VISCO’s net working capital at closing, indebtedness, cash and cash equivalents and transaction expenses. Per the Securities Purchase Agreement, VISCO will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale for tax purposes requiring the net deferred tax liabilities of approximately $123 million as of December 31, 2019 to be recognized; therefore, any deferred tax assets and liabilities within the reporting unit are not included in the carrying amount of the assets and liabilities that will be transferred to PowerTeam Services.

The completion of the sale is subject to customary closing conditions, including, among others (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act and (ii) customary conditions regarding the accuracy of the representations and warranties and compliance by the parties in all material respects with their respective obligations under the Securities Purchase Agreement. The Securities Purchase Agreement also includes customary termination provisions, including if the closing of the sale has not occurred on or before June 3, 2020. The sale is not subject to a financing condition and is expected to close in the second quarter of 2020, subject to satisfaction of the foregoing conditions, among other things.

On February18, 2020, CenterPoint Energy received notice from the Federal Trade Commission granting early termination of the waiting period under the Hart-Scott-Rodino Act in connection with the proposed sale of Infrastructure Services.

Proposed Divestiture of Energy Services (CenterPoint Energy and CERC)

On February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell CES, which represents substantially all of the businesses within the Energy Services reportable segment, to Athena Energy Services. This transaction does not include CEIP and its assets. Subject to the terms and conditions of the Equity Purchase Agreement, Athena Energy Services has agreed to purchase all of the outstanding equity interests of CES for approximately $400 million, subject to customary adjustments set forth in the Equity Purchase Agreement, including adjustments based on CES’s net working capital at closing, indebtedness and transaction expenses. Per the Equity Purchase Agreement, CES will be converted from a wholly-owned corporation to a limited liability company that is disregarded for federal income tax purposes immediately prior to the closing of the transaction resulting in the sale of membership units at closing. The sale will be considered an asset sale

for tax purposes requiring the net deferred tax liabilities of approximately $25 million as of December 31, 2019 to be recognized; therefore, any deferred tax assets and liabilities within the reporting unit are not included in the carrying amount of the assets and liabilities that will be transferred to the buyer.

The completion of the sale is subject to customary closing conditions, including, among others (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Act and (ii) the conversion of CES to a Delaware limited liability company, (iii) the distribution of the equity interests in CenterPoint Energy Intrastate Pipelines, LLC held by CES to CERC Corp. or its affiliates and (iv) customary conditions regarding the accuracy of the representations and warranties and compliance by the parties in all material respects with their respective obligations under the Equity Purchase Agreement. The Equity Purchase Agreement includes customary termination provisions, including if the closing of the transaction has not occurred on or before June 24, 2020.The sale is not subject to a financing condition and is expected to close in the second quarter of 2020, subject to satisfaction of the foregoing conditions, among other things.

CenterPoint Energy Dividend Declarations (CenterPoint Energy)



Equity Instrument	Declaration Date	Record Date	Payment Date	Per Share
Common Stock	February 3, 2020	February 20, 2020	March 12, 2020	$	0.2900
Series A Preferred Stock	February 3, 2020	February 14, 2020	March 2, 2020	30.6250
Series B Preferred Stock	February 3, 2020	February 14, 2020	March 2, 2020	17.5000

Enable Distributions Declarations (CenterPoint Energy)



Equity Instrument	Declaration Date	Record Date	Payment Date	Per Unit Distribution		Expected Cash Distribution
						(in millions)
Enable common units	February 7, 2020	February 18, 2020	February 25, 2020	$	0.3305	$	77
Enable Series A Preferred Units	February 7, 2020	February 7, 2020	February 14, 2020	0.6250		9

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