CenterPoint Energy (CNP) 10-K risk factor changes: FY2020 vs FY2019

[removed: For other factors that may cause actual] results to differ from those indicated in any forward-looking statement or projection contained in this combined report on Form 10-K, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Factors Affecting Future Earnings” in Item 7, which should be read in conjunction with the risk factors contained in this Item 1A.

As a result, CenterPoint Energy depends on [added: the performance of and] distributions from its subsidiaries and Enable to meet its payment obligations and to pay dividends on its common and preferred stock.

[added: While current] ring-fencing measures [removed: at] [added: have not impacted] Houston [added: Electric’s ability to pay dividends to CenterPoint Energy, the imposition of any additional ring-fencing measures impacting CenterPoint Energy’s ability to receive dividends from Houston] Electric could [added: materially] adversely affect CenterPoint Energy’s cash flows, credit quality, financial condition and results of [removed: operations.”][added: operations.]

For example, we depend on (i) long-term debt, (ii) borrowings through our revolving credit facilities and, for CenterPoint Energy and CERC, commercial paper programs, (iii) distributions from CenterPoint Energy’s interests in Enable and (iv) if market conditions permit, issuances of additional shares of common [removed: and/or] [added: or] preferred stock by CenterPoint Energy.

As of December 31, [removed: 2019,] [added: 2020,] CenterPoint Energy had [removed: $15.1] [added: $13.4] billion of outstanding indebtedness on a consolidated basis, which includes [removed: $977] [added: $747] million of non-recourse Securitization Bonds.

For information [removed: on maturities through 2024,] [added: related to our weather hedges,] see Note [removed: 14] [added: 9(a)] to the consolidated financial statements.

[removed: | • |] [added: -] general economic and capital market conditions; [removed: |]

[removed: | • |] [added: -] credit availability from financial institutions and other lenders; [removed: |]

[removed: | • |] [added: -] volatility or fluctuations in distributions from Enable’s units or volatility in Enable’s unit price; [removed: |]

[removed: | • |] [added: -] investor confidence in us and the markets in which we operate; [removed: |]

[removed: | • |] [added: -] the future performance of our and Enable’s businesses; [removed: |]

[removed: | • |] [added: -] integration of Vectren’s businesses into CenterPoint [removed: Energy; |][added: Energy, including technology systems;]

[removed: | • |] [added: -] maintenance of acceptable credit ratings; [removed: |]

[removed: | • |] [added: -] market expectations regarding our future earnings and cash flows; [removed: |]

[removed: | • |] [added: -] our ability to access capital markets on reasonable terms; [removed: |]

[removed: | • |] [added: -] incremental collateral that may be required due to regulation of derivatives; and [removed: |]

[removed: | • |] [added: -] provisions of relevant [removed: tax and] securities laws. [removed: |]

The Registrants’ current credit ratings and any changes in credit ratings in [removed: 2019] [added: 2020] and to date in [removed: 2020] [added: 2021] are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Other Matters — Impact on Liquidity of a Downgrade in Credit Ratings” in Item 7 of Part II of this report.

[removed: As part of its most recent base rate proceeding,] [added: Further,] Houston Electric has [removed: agreed, as part of a settlement,] [added: agreed] to certain “ring-fencing” measures to increase its financial separateness from CenterPoint Energy.

For further information [removed: about] [added: on] the [removed: Stipulation and Settlement Agreement, please] [added: IRP,] see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Regulatory Matters” in Item 7 of Part II of this report.

[removed: Additionally, further] [added: Further] ring-fencing measures could be imposed on Houston Electric in the future through legislation or PUCT rules or orders.

Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may adversely affect the cost of capital related to outstanding debt and other financial [removed: instruments.][added: instruments and may adversely affect the cash distributions received from the Enable Series A Preferred Units.]

[removed: The] LIBOR is the basic rate of interest widely used as a global reference for setting interest rates on variable rate loans and other securities.

It is unclear whether [added: other] new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Uncertainty as to the nature of such potential phase-out and alternative [removed: reference] [added: benchmark] rates or disruption in the financial markets could [removed: have a material adverse effect on] [added: materially and adversely affect] our financial condition, results of operations and cash flows.

A sustained [removed: low Enable] [added: or severe decline in Enable’s] common unit price could result in CenterPoint Energy [removed: again] recording impairment charges [added: again] in the future.

Should the annual [added: goodwill] impairment test or another periodic impairment test or an observable transaction, [removed: as described above,] [added: including for the Series A Preferred Unit investment,] indicate the fair value of our assets is less than the carrying value, we would be required to take a non-cash charge to earnings with a correlative effect on equity and balance sheet leverage as measured by debt to total capitalization.

In addition to affecting CenterPoint Energy’s funding requirements, [removed: each of] these factors could adversely affect our results of operations, liquidity and financial position.

This could [added: materially and] adversely affect our results of operations, [removed: liquidity] [added: cash flow] and [removed: financial position.][added: liquidity.]

CenterPoint Energy has approximately $828 million principal amount of ZENS outstanding as of December 31, [removed: 2019.][added: 2020.]

CenterPoint Energy may redeem all of the ZENS at any time at a redemption amount per ZENS equal to the higher of the contingent principal amount per ZENS [removed: ($75] [added: ($56] million in the aggregate, or [removed: $5.28] [added: $3.97] per ZENS, as of December 31, [removed: 2019)] [added: 2020)] or the sum of the current market value of the reference shares attributable to one ZENS at the time of redemption.

CenterPoint Energy’s ultimate tax liability related to the ZENS [added: and ZENS-Related Securities] continues to increase by the amount of the tax benefit realized each year.

If the ZENS had been redeemed on December 31, [removed: 2019,] [added: 2020,] deferred taxes of approximately [removed: $429] [added: $471] million would have been payable in [removed: 2019,] [added: 2020,] based on [removed: 2019] [added: 2020] tax rates in effect.

In addition, if all the shares of ZENS-Related Securities had been sold on December 31, [removed: 2019] [added: 2020] to fund the aggregate redemption amount, capital gains taxes of approximately [removed: $149] [added: $159] million would have been payable in [removed: 2019.][added: 2020.]

While funds for the payment of cash upon exchange of ZENS could be obtained from the sale of the shares of ZENS-Related Securities that CenterPoint Energy owns [added: or from other sources, ZENS exchanges result in a cash outflow]

[removed: or from other sources, ZENS exchanges result in a cash outflow] because tax deferrals related to the ZENS and ZENS-Related Securities shares would typically cease when ZENS are exchanged and ZENS-Related Securities shares are sold.

Dividend requirements associated with [removed: the] [added: CenterPoint Energy’s] Series A Preferred [added: Stock, Series B Preferred] Stock and [removed: the] Series [removed: B] [added: C] Preferred Stock [removed: that CenterPoint Energy issued to fund a portion of the Merger] subject it to certain risks.

CenterPoint Energy has issued 800,000 shares of Series A Preferred Stock and 19,550,000 depositary shares, each representing a 1/20th interest in a share of CenterPoint Energy’s Series B Preferred [removed: Stock.][added: Stock, which is expected to convert into Common Stock on September 1, 2021.]

Any future payments of cash dividends, and the amount of any cash dividends CenterPoint Energy pays, on [removed: the] [added: its] Series A Preferred [added: Stock, Series B Preferred] Stock and [removed: the] Series [removed: B] [added: C] Preferred Stock will depend on, among other things, its financial condition, capital requirements and results of operations and the ability of our subsidiaries and Enable to distribute cash to CenterPoint Energy, as well as other factors that CenterPoint Energy’s Board of Directors (or an authorized committee thereof) may consider relevant.

Any failure to pay scheduled dividends on the Series A Preferred [added: Stock, Series B Preferred] Stock and [removed: the] Series [removed: B] [added: C] Preferred Stock when due [added: could materially adversely impact our ability to access capital on acceptable terms and] would likely have a material adverse impact on the market price of the Series A Preferred Stock, the Series B Preferred Stock, Common Stock and CenterPoint Energy’s debt securities and would prohibit CenterPoint Energy, under the terms of the Series A Preferred Stock and Series B Preferred Stock, from paying cash dividends on or repurchasing shares of Common Stock (subject to limited exceptions) until such time as CenterPoint Energy has paid all accumulated and unpaid dividends on the Series A Preferred Stock and the Series B Preferred Stock.

For other factors that may cause actual

For information on outstanding indebtedness of Houston Electric and CERC as well as maturities through 2025, see Note 14 to the consolidated financial statements.

In addition, our future financing activities may also be impacted by our ability to consummate the proposed sale of our Natural Gas businesses in Arkansas and Oklahoma.

For further information on the proposed sale, see “— Our potential business strategies and strategic initiatives, including merger and acquisition activities and the disposition of assets or businesses, may not be completed or perform as expected, adversely affecting our financial condition, results of operations and cash flows” below.

With respect to impacts related to our investment in Enable, see Note 22 to the consolidated financial statements for further information on the recently announced Enable Merger.

During the year ended December 31, 2020, CenterPoint Energy identified and recorded a goodwill impairment charge of $185 million in the Indiana Electric reporting unit, reducing the carrying value of the reporting unit to its fair value as of March 31, 2020.

See Note 6 to the consolidated financial statements for further information.

CenterPoint Energy identified and recorded an impairment during the year ended December 31, 2020 based on the severity of the decline in Enable’s common unit price during the three months ended March 31, 2020 due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s announcement on April 1, 2020 to reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply of crude oil and natural gas and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry.

CenterPoint Energy has also issued 725,000 shares of Series C Preferred Stock of which 625,000 shares remain outstanding.

The Series C Preferred Stock are expected to convert to Common Stock on or around May 7, 2021.

Additionally, on and after February 18, 2021, Enable is expected to pay distributions on the Enable Series A Preferred Units with an annual rate equal to three-month LIBOR plus 8.5%.

On November 30, 2020, the Financial Conduct Authority announced its support for the extension of certain tenors of U.S. dollar LIBOR until June 2023, as well as the replacement of LIBOR by the SOFR.

While this announcement extends the transition period to June 2023, the Federal Reserve concurrently issued a statement advising banks to stop new U.S. dollar LIBOR issuances by the end of 2021.

However, because SOFR is a broad U.S. Treasury repo financing rate that represents overnight secured funding transactions, it differs fundamentally from LIBOR..

The future of LIBOR at this time remains uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

Changes in the method of calculating LIBOR, or the replacement of LIBOR with an alternative rate or benchmark, may adversely affect interest rates and result in higher borrowing costs.

Each of the Registrants’ credit facilities provide for a mechanism to replace LIBOR with possible alternative benchmarks upon certain benchmark replacement events.

However, we are still currently evaluating the impact of any such potential benchmark replacements or unavailability of LIBOR.

See also “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and could have a material adverse impact to our financial condition, results of operations, cash flows and liquidity” below for further information.

In February 2021, the Texas electric system experienced an unprecedented power shortage due to extreme winter weather conditions.

The state’s power generation fell short of demand, resulting in significant electricity outages across Texas, including in Houston Electric’s service territory.

See Note 22 to the consolidated financial statements for further information on the February 2021 Winter Storm Event.

See also “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and

With respect to its 2019/2020 IRP submitted to the IURC in June 2020, Indiana Electric identified a preferred generation resource that includes the replacement of 730 MW of coal-fired generation facilities with a significant portion composed of renewables, including solar and wind, supported by dispatchable natural gas combustion turbines, including a pipeline to serve such natural gas generation, as well as storage.

Currently, its coal supply is purchased largely from a

In connection with the February 2021 Winter Storm Event, there have been calls for reform of the Texas electric market, which, if implemented, could have material adverse impacts on Houston Electric.

Various governmental and regulatory agencies and other entities have called for or are conducting inquiries and investigations into the February 2021 Winter Storm Event and the efforts made by various entities to prepare for, and respond to, this event, including the electricity generation shortfall issues.

Agencies and entities that may conduct or are conducting such inquiries, investigations and other reviews include the United States Congress, FERC, NERC, Texas RE, ERCOT, Texas government entities and officials such as the Texas Governor’s office, the Texas Legislature, the Texas Attorney General, the PUCT, the City of Houston and other municipal and county entities in Houston Electric’s service area, among other entities.

In addition to questions around preparation and response, some federal and other officials, as well as members of the public and media, have called for reviews and reforms of the Texas electric market, including whether it should continue to be governed by ERCOT or instead be subject to FERC jurisdiction and regulation by joining an ISO such as MISO, as well as the division of the market between power generators, TDUs (such as Houston Electric) and REPs.

There are significant uncertainties around these discussions and whether any market structure or governance changes will result therefrom, but if any such reviews and reform efforts ultimately result in changes to how the Texas electric market is structured or regulated, such changes could have a material adverse impact on Houston Electric’s business, results of operations and financial condition.

See “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and could have a material adverse impact to our financial condition, results of operations, cash flows and liquidity” below and Note 22 to the consolidated financial statements for further information.

approved, and are subject to certain limitations that may reduce or otherwise impede Natural Gas’ ability to adjust its rates or result in rates below those requested by Natural Gas.

For further information on rate case proceedings and interim rate adjustment mechanisms, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Regulatory Matters” in Item 7 of Part II of this report.

For additional risks related to the February 2021 Winter Storm Event, see “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and could have a material adverse impact to our financial condition, results of operations, cash flows and liquidity” below and Note 22 to the consolidated condensed financial statements for further information.

Natural Gas is subject to risk associated with changes in the notional price of natural gas.

For additional risks related to the February 2021 Winter Storm Event, see “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and could have a material adverse impact to our financial condition, results of operations, cash flows and liquidity” below and Note 22 to the consolidated condensed financial statements for further information.

For additional risks related to the February 2021 Winter Storm Event, see “—The February 2021 Winter Storm Event has caused severe disruptions to our customers and our markets in certain of our jurisdictions and could have a material adverse impact to our financial condition, results of operations, cash flows and liquidity” below and Note 22 to the consolidated condensed financial statements for further information.

Risk Factors Affecting ESG’s Business (CenterPoint Energy)

Risk Factors Affecting Our Businesses

We are subject to operational and financial risks and liabilities arising from environmental laws and regulations, including regulation of CCR and climate change legislation as well as other risks related to the implementation of our carbon emissions reduction targets.

For a description of these restrictions and further information on ring-fencing measures that may adversely affect CenterPoint Energy’s ability to receive dividends from Houston Electric as well as other financial impacts, please read “—The imposition of certain

Additionally, CenterPoint Energy’s results of operations, future growth and earnings and dividend goals depend on the performance of its utility and non-utility (such as CES, Infrastructure Services and ESG) subsidiaries which contribute to a portion of its consolidated earnings and which may not perform at expected or forecasted levels or do not achieve the projected growth in these businesses as anticipated.

As part of their non-utility businesses, CenterPoint Energy and CERC also offer home repair protection plans to natural gas customers in Texas and Louisiana (through a third-party provider) and provide home appliance maintenance and repair services to customers in Minnesota.

For a discussion of risks that may impact the amount of cash distributions CenterPoint Energy receives with respect to its interests in Enable, please read “— Additional Risk Factors Affecting CenterPoint Energy’s Interests in Enable Midstream Partners, LP — CenterPoint Energy’s cash flows will be adversely impacted if it receives less cash distributions from Enable than it currently expects.”

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As of December 31, 2019, Houston Electric had approximately $4.0 billion aggregate principal amount of general mortgage bonds outstanding under the General Mortgage, including approximately $68 million held in trust to secure pollution control bonds for which CenterPoint Energy is obligated.

Additionally, as of December 31, 2019, Houston Electric had approximately $102 million aggregate principal amount of first mortgage bonds outstanding under the Mortgage.

Houston Electric may issue additional general mortgage bonds on the basis of retired bonds, up to 70% of property additions or cash deposited with the trustee.

As of December 31, 2019, approximately $3.7 billion of additional first mortgage bonds and general mortgage bonds in the aggregate could be issued on the basis of retired bonds and 70% of property additions as of December 31, 2019.

However, Houston Electric

has contractually agreed that it will not issue additional first mortgage bonds, subject to certain exceptions.

As of December 31, 2019, SIGECO had approximately $293 million aggregate principal amount of first mortgage bonds outstanding.

SIGECO may issue additional bonds under its Mortgage Indenture up to 60% of currently unfunded property additions.

As of December 31, 2019, approximately $1.1 billion of additional first mortgage bonds could be issued on this basis.

However, under certain circumstances Indiana Electric is limited in its ability to issue additional bonds under the Mortgage Indenture due to a provision in its parent’s, VUHI, indentures.

The imposition of certain ring-fencing measures at Houston Electric could adversely affect CenterPoint Energy’s cash flows, credit quality, financial condition and results of operations.

As part of the Stipulation and Settlement Agreement, Houston Electric and CenterPoint Energy are subject to various ring-fencing measures.

As a result of such ring-fencing measures, CenterPoint Energy’s cash flows, credit quality, financial condition and results of operations could be materially adversely affected.

If LIBOR reference rates become unavailable, any LIBOR borrowings under the Registrants’ credit and term loan facilities would convert at the end of the applicable interest period to alternate base rate loans and any future borrowings thereunder would be made as alternate base rate loans.

Alternate base rate loans generally constitute a higher cost of capital.

Certain of CenterPoint Energy’s credit and term loan facilities provide for a mechanism to amend such facility to reflect the establishment of an alternative reference rate upon the inability to determine the LIBOR-based Eurodollar rate or occurrence of certain events related to the phase-out of LIBOR.

However, we have not yet pursued any technical amendment or other contractual alternative to address this matter and are currently evaluating the impact of the potential replacement or unavailability of the LIBOR interest rate.

Goodwill is recorded when the purchase price of a business exceeds the fair market value of the tangible and separately measurable intangible net assets.

Accounting principles generally accepted in the United States of America require CenterPoint Energy to test goodwill for impairment on an annual basis or when events or circumstances occur indicating that goodwill might be impaired.

As a result of the Merger, CenterPoint Energy has increased the amount of goodwill and other intangible assets on its consolidated financial statements that are subject to impairment based on future adverse changes to the acquired businesses or general market conditions.

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 their 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 carrying value of each reporting unit was more likely than not below the fair value.

As a result, CenterPoint Energy and CERC evaluated long-lived assets, including property, plant and equipment, and specifically identifiable intangibles subject to amortization, for recoverability and the goodwill within the reporting units was tested for impairment as of December 31, 2019.

The long-lived assets within the Infrastructure Services and Energy Services reporting units were determined to be recoverable based on undiscounted cash flows, considering the likelihood of possible outcomes existing as of December 31, 2019, including the assessment of the likelihood of a future sale of these assets.

CenterPoint Energy and CERC recognized an impairment loss of $48 million, the amount by which the carrying value (inclusive of deferred income tax liabilities of $25 million) of their respective Energy Services reporting unit exceeded fair value as of December 31, 2019.

Following the impairment, the carrying value of the goodwill remaining in the Energy Services reporting unit is $62 million as of December 31, 2019.

CenterPoint Energy did not recognize any impairments on its Infrastructure Services reporting unit in 2019.

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.

As a result, certain assets and liabilities representing a business within this reporting unit that will be transferred under the Securities Purchase Agreement (the “Disposal Group”) met the held for sale criteria during the first quarter of 2020.

Because the transaction is structured as an asset sale for income tax purposes, the Disposal Group will exclude the deferred tax liabilities.

CenterPoint Energy anticipates recording an impairment loss on assets held for sale of approximately $85 million, plus an additional loss for transaction costs, in the first quarter of 2020.

The actual amount of the impairment or loss may be materially different from the preliminary amount.

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 reporting unit.

Certain assets and liabilities representing a business within this reporting unit that will be transferred under the Equity Purchase Agreement (the “Disposal Group”) met the held for sale criteria during the first quarter of 2020.

CenterPoint Energy’s operating subsidiaries own and operate electric [removed: transmission] [added: transmission, distribution] and [removed: distribution, electric] generation and natural gas distribution facilities, [removed: supply natural gas to commercial] and [removed: industrial customers and electric and natural gas utilities and] provide [removed: underground pipeline][added: energy performance contracting and sustainable infrastructure services.]

For a detailed description of CenterPoint Energy’s operating [removed: subsidiaries,] [added: subsidiaries and discontinued operations,] please read Note 1 to the consolidated financial statements.

Houston Electric is an indirect, wholly-owned subsidiary of CenterPoint Energy that provides electric transmission [added: service to transmission service customers in the ERCOT region] and distribution [removed: services] [added: service] to REPs serving the Texas Gulf Coast area that includes the city of Houston.

CERC Corp. is an indirect, wholly-owned subsidiary of CenterPoint Energy [removed: with operating subsidiaries] that [removed: own] [added: owns] and [removed: operate] [added: operates] natural gas distribution facilities in six [removed: states] [added: states, with operating subsidiaries that own] and [removed: supply natural gas to commercial] [added: operate permanent pipeline connections through interconnects with various interstate] and [removed: industrial customers] [added: intrastate pipeline companies,] and [removed: electric] [added: provide temporary delivery of LNG] and [removed: natural gas utilities in over 30] [added: CNG throughout the contiguous 48] states.

| [removed: Houston Electric] [added: Houston Electric] | | [removed: X] | | | | | | | | | | | | | [added: | | | | | | | | | | | | | | | | | |]

| [removed: CERC] [added: CERC] | | | | | | [removed: X] | | [removed: X] | | | | | | [removed: X] | [added: | | | | | | | | | | | | | | | | | | | | |]

[removed: | • | Houston] [added: - The] Electric [removed: T&D] reportable segment includes electric transmission and distribution services [added: in Houston Electric’s transmission and distribution service territory] that are subject to rate regulation and impacts of generation-related stranded costs and other true-up balances recoverable by the regulated electric [removed: utility. For further information about the Houston Electric T&D reportable segment, see “Business — Our Business — Houston Electric T&D”] [added: utility and energy delivery services to electric customers and electric generation assets to serve its electric customers and optimize those assets] in [removed: Item 1 of Part I of this report. |][added: the]

[removed: | • | Indiana Electric Integrated reportable segment includes energy delivery services to electric customers and electric generation assets to serve its electric customers and optimize those assets in the wholesale power market.] For further information about the [removed: Indiana] Electric [removed: Integrated] reportable segment, see “Business — Our Business — [removed: Indiana Electric Integrated”] [added: Electric”] in Item 1 of Part I of this report. [removed: |]

[removed: | • |] [added: - The] Natural Gas [removed: Distribution] reportable segment includes natural gas distribution services that are subject to rate regulation in CenterPoint Energy’s and CERC’s service territories, as well as home appliance maintenance and repair services to customers in [removed: Minnesota. For further information about the Natural Gas Distribution reportable segment, see “Business — Our Business — Natural Gas Distribution”] [added: Minnesota and home repair protection plans to natural gas customers] in [removed: Item 1 of Part I of this report. |][added: Texas and Louisiana through a third party.]

[removed: | • | Energy Services reportable segment includes non-rate regulated natural gas sales to, and transportation and storage services, for commercial and industrial customers.] For further information about the [removed: Energy Services] [added: Natural Gas] reportable segment, see “Business — Our Business — [removed: Energy Services”] [added: Natural Gas”] in Item 1 of Part I of this report. [removed: |]

[removed: | • | Infrastructure Services reportable segment includes underground pipeline construction and repair services.] For further information about the [removed: Infrastructure Services] [added: Midstream Investments] reportable segment, see “Business — Our Business — [removed: Infrastructure Services”] [added: Midstream Investments”] in Item 1 of Part I of this report. [removed: |]

[removed: | • |] [added: - The] Midstream Investments reportable segment includes CenterPoint Energy’s equity investment in Enable and is dependent upon the results of Enable, which are driven primarily by the volume of natural gas, NGLs and crude oil that Enable gathers, processes and transports across its systems and other factors as discussed below under “— Factors Influencing Midstream Investments.” [removed: For further information about] [added: On February 16, 2021, Enable entered into] the [removed: Midstream Investments reportable segment, see “Business — Our Business — Midstream Investments” in Item 1 of Part I of this report. |][added: Enable Merger Agreement.]

[removed: | • |] CenterPoint Energy’s Corporate and Other [removed: reportable segment] includes office buildings and other real estate used for business operations, [removed: home repair protection plans to natural gas customers in Texas and Louisiana through a third party,] energy performance contracting and sustainable infrastructure services and other corporate support [removed: operations CERC’s Corporate and Other reportable segment includes unallocated corporate costs and inter-segment eliminations. |][added: operations.]

[removed: On] [added: (3)On] February 3, 2020, CenterPoint Energy, through its subsidiary VUSI, entered into the Securities Purchase Agreement to sell the businesses within [removed: its] [added: the] Infrastructure Services [removed: reportable segment.][added: Disposal Group.]

For further information, see Notes [removed: 6] [added: 11] and [removed: 23] [added: 22] to the consolidated financial statements.

[removed: Additionally, on] [added: (1)On] February 24, 2020, CenterPoint Energy, through its subsidiary CERC Corp., entered into the Equity Purchase Agreement to sell [removed: CES,] [added: the Energy Services Disposal Group,] which represents substantially all of the businesses within the [added: historically reported] Energy Services reportable segment.

The non-utility operations [removed: include Infrastructure Services] [added: included ESG] and [removed: ESG.][added: Infrastructure Services.]

Infrastructure Services, through its wholly-owned subsidiaries, [removed: provides] [added: provided] underground pipeline and repair services to many utilities, including our utilities, as well as other industries.

Concurrent with the completion of the [removed: Merger,] [added: Merger in 2019,] we added two new reportable segments, Indiana Electric Integrated and Infrastructure Services.

To assess our financial performance, our management primarily monitors [removed: operating] [added: net] income and cash flows, among other things, from our reportable segments.

In addition to these financial measures, we also monitor a number of variables that management considers important to our reportable segments, including the number of customers, throughput, use per customer, [removed: commodity prices and heating and cooling degree days.]

For example, Houston Electric is largely concentrated in Houston, Texas, [added: a diverse economy] where a higher percentage of employment is tied to the energy sector relative to other regions of the country.

Although the Houston area represents a large part of our customer base, we have a diverse customer base throughout the eight states [removed: we] [added: our utility businesses] serve.

[removed: Further, the operations of Vectren’s utility businesses are concentrated in central and southern] Indiana and [removed: west-central] Ohio [removed: and] are [removed: therefore] impacted by changes in the Midwest economy in general and changes in particular industries concentrated in the [removed: Midwest.][added: Midwest such as automotive, feed and grain processing.]

[removed: However, due to more affordable energy prices and continued economic improvement in the areas we serve, the trend toward lower usage has slowed.To] [added: To] the extent population growth is affected by lower energy prices and there is financial pressure on some of our customers who operate within the energy industry, there may be an impact on the growth rate of our customer base and overall demand.

Beginning in [removed: 2019,] [added: 2019 and continuing through 2020,] a new construction cycle in Houston helped overall residential customer growth to [removed: return to] [added: surpass] the long-term trend of 2%.

Typical customer growth in the jurisdictions served by the Natural Gas [removed: Distribution] reportable segment is approximately 1%.

CERC’s [removed: NGD] [added: Natural Gas] customer growth was [removed: 1.3%] [added: 1.7%] for [removed: 2019,] [added: 2020,] which is slightly higher than in previous years.

Performance of the [removed: Houston] Electric [removed: T&D] reportable segment and the Natural Gas [removed: Distribution] reportable segment is significantly influenced by energy usage per customer, which is significantly impacted by weather conditions.

For CERC’s [removed: NGD,] [added: Natural Gas,] demand for natural gas for heating purposes is generally higher in the colder months.

In [removed: 2019,] [added: 2020,] the Houston area experienced weather that was [removed: closer to] [added: warmer than] normal compared to [removed: 2018.][added: 2019.]

Historically, both CenterPoint Energy’s TDU and CERC’s [removed: NGD] [added: Natural Gas] have utilized weather hedges to help reduce the impact of mild weather on their financial results.

CenterPoint Energy’s TDU and CERC’s [removed: NGD] [added: Natural Gas] entered into a weather hedge for the [removed: 2018–2019 and] 2019–2020 winter heating [removed: seasons] [added: season] in Texas where no weather normalization mechanisms exist.

[removed: In CERC’s non-Texas jurisdictions, weather] normalization mechanisms or decoupling in the Minnesota division help to mitigate the impact of abnormal weather on our financial results.

[removed: In] [added: For CERC’s Natural Gas in] Minnesota and [removed: Arkansas for CERC’s NGD, there are] [added: Arkansas,] rate adjustment mechanisms [removed: to] counter the impact of [removed: declining usage from energy efficiency improvements.][added: changes in customer usage.]

In addition, in many of our service areas, particularly in the Houston area and Minnesota, as applicable to each registrant, we have benefited from growth in the number of [removed: customers, which could mitigate the effects of reduced consumption.][added: customers.]

Sales of natural gas [removed: and electricity] to residential and commercial customers by Indiana Gas, SIGECO and VEDO are largely seasonal and are impacted by weather.

In our [removed: NGD] [added: Natural Gas] Indiana and Ohio service territories, normal temperature adjustment and decoupling mechanisms largely mitigate the effect that would otherwise be caused by variations in volumes sold to these customers due to weather and changing consumption patterns.

Our [removed: NGD] [added: Natural Gas] operations in Ohio has a straight fixed variable rate design for its residential customers.

This rate design mitigates approximately 90% of the Ohio service territory’s weather risk and risk of decreasing consumption specific to its small [added: customer classes.]

During the fourth quarter of 2020, CenterPoint Energy’s CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised of Houston Electric and Indiana Electric.

Also, the Natural Gas Distribution reportable segment was renamed Natural Gas.

Additionally, during the fourth quarter of 2020, CenterPoint Energy’s CODM requested that the CERC corporate functions be included within the financial results of CenterPoint Energy’s Natural Gas reportable segment for review purposes.

During the fourth quarter of 2020, CERC’s CODM requested that the CERC corporate functions be included within the financial results of CERC’s Natural Gas reportable segment for review purposes.

As a result of this change, and following the divestiture of the Energy Services Disposal Group, CERC now consists of a single reportable segment.

Houston Electric also consists of a single reportable segment.

As of December 31, 2020, CenterPoint Energy’s reportable segments were Electric, Natural Gas and Midstream Investments.

wholesale power market in Indiana Electric’s transmission and distribution service territory.

At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held by CenterPoint Energy, and in return CenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units.

For further information on the Enable Merger, see Note 22 to the consolidated financial statements.

The transaction closed on April 9, 2020.

During the fourth quarter of 2020, CenterPoint Energy’s CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised of Houston Electric and Indiana Electric.

See Note 18 for further changes on reportable segments during 2020.

commodity prices and heating and cooling degree days.

With respect to CERC, we intend to use proceeds from any potential asset sales, including the potential dispositions of our Natural Gas businesses in Arkansas and Oklahoma, to satisfy a portion of its capital needs.

For example, the economic impacts of COVID-19 have been felt nationwide, with every region of the country experiencing deep reductions in employment in the second quarter of 2020.

We believe that all of the states that we serve have improved economically since then and continue to recover, although at different rates.

However, due to more affordable energy prices and continued economic improvement in the areas we serve, the trend toward lower usage has slowed.

Despite the overall economic impact of the recession, housing growth has continued and accelerated in 2020.

Lower interest rates have helped single family housing starts in the Houston and Minneapolis to exceed growth in previous years.

Management expects residential meter growth for CERC to remain in line with long term trends at approximately 1%.

For Indiana Electric, a significant portion of its sales are for space heating and cooling.

Consequently, as in certain past years, Indiana Electric’s results of operations may be adversely affected by warmer-than-normal heating season weather or colder-than-normal cooling season weather.

Although the summer months were somewhat hotter than normal, the warmer than normal temperatures started early in the year with a mild winter.

Our Natural Gas service territories experienced warmer weather in 2020 than it has since 2017.

In CERC’s non-Texas jurisdictions, weather

on its systems can be negatively impacted if producers decrease drilling and production in those areas served.

A decrease in volumes on Enable’s systems due to a decrease in drilling or production by its producer customers could adversely affect Enable’s results.

Prior to the COVID-19 pandemic, the price of natural gas, NGLs and crude oil had begun to decline due to oversupply.

The price of, and global demand for, these commodities declined significantly during the first half of 2020 as a result of the ongoing economic effects of the COVID-19 pandemic and the significant governmental measures being implemented to control the spread of the virus, which was further exacerbated by the dispute in the first quarter of 2020 over crude oil production levels between Russia and members of OPEC led by Saudi Arabia.

For further information on the impact of these conditions on Enable, see “Significant Events—Enable Quarterly Distributions” below.

Subsequent to an agreement in April 2020 by a coalition of nations to reduce production of crude oil and the increase in global economic activity as governmental measures implemented to control the pandemic have eased, the price of crude oil has begun to rise relative to the 2020 production low.

In response to crude oil price increases, crude oil, associated natural gas and NGL production has begun to increase.

Enable’s long-term view is that natural gas and crude oil will continue to be a critical component of energy demand in the United States and worldwide because natural gas has lower emissions and is a practical fuel for a variety of applications.

As electric energy demand continues to grow, Enable’s management believes that natural gas will continue to replace coal.

As the global market for LNG continues to develop, Enable’s management believes that natural gas supply in the United States is well positioned to address demand in the United States, as well as in other areas of the world, including Western Europe and Asia.

As the desire to lower emissions continues, Enable’s management believes that natural gas will be seen as a practical alternative to higher-emissions liquids fuels, such as bunker fuels in international shipping.

Supplies of crude oil have risen primarily from the success of unconventional drilling in tight oil plays across the United States.

Liquid fuels derived from crude oil have remained a primary source of energy in the United States, and exports of crude oil and liquid fuels from the United States have risen dramatically over the last five years.

As the supply of crude oil has increased in the United States, Enable’s management believes that the United States will continue to be a source of supply to the global crude oil market.

construction and repair services, energy performance contracting and sustainable infrastructure services.

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 |

| | |

| --- | --- |

The transaction is expected to close in the second quarter of 2020.

Despite Houston, Texas having a diverse economy, employment

in the energy industry remains important with overall Houston employment growing at a moderate rate in 2019 among various sectors.

These industries include automotive assembly, parts and accessories; feed, flour and grain processing; metal castings; plastic products; gypsum products; electrical equipment; metal specialties; glass and steel finishing; pharmaceutical and nutritional products; gasoline and oil products; ethanol; and coal mining.

Although the summer months, particularly August and September, were hotter than normal, this was offset during the remaining months of the year due to milder than normal weather.

While overall rainfall was higher than normal in 2019 largely due to Tropical Storm Imelda, it did not rise to the record rainfall levels experienced in 2017 that occurred largely due to Hurricane Harvey.

After a return to more normal weather in 2018, our NGD service territories experienced warmer weather in 2019 in all areas except Minnesota.

customer classes.

A settlement has been reached and a final order from the PUCT is expected during the first quarter of 2020.

Factors Influencing Our Businesses Proposed for Divestiture

The Energy Services reportable segment contracts with customers for transportation, storage and sales of natural gas on an unregulated basis.

Its operations serve customers throughout the United States.

The segment is impacted by price differentials on both a regional and seasonal basis, as well as fluctuations in regional daily natural gas prices driven by weather and other market factors.

While this business utilizes financial derivatives to mitigate the effects of price movements, it does not enter into risk management contracts for speculative purposes and evaluates VaR daily to monitor significant financial exposures to realized income.

Energy Services experienced instances of decreased margin in 2019 due to fewer opportunities to optimize natural gas supply costs as compared to 2018.

Specifically, weather-facilitated market impacts in various regions of the continental United States during the three months ended March 31, 2018 allowed Energy Services to increase its margins in the first quarter of 2018.

Demand for Infrastructure Services remains high due to the aging infrastructure and evolving safety and reliability regulations across the United States.

The long-term focus for Infrastructure Services is recurring work in both the distribution and transmission businesses.

The timing and recurrence of large transmission projects is less predictable and may create volatility in its year-over-year results.

Enable’s long-term view is that natural gas and crude oil production in the U.S. will increase.

Advancements in technology have allowed producers to efficiently extract natural gas and crude oil from tight gas formations and shale plays.

As a result, the proven reserves of natural gas and crude oil in the United States have significantly increased.

As proven reserves of natural gas and crude oil have continued to increase, the supply growth has outpaced demand growth, resulting in oversupply.

The oversupply of natural gas and crude oil has resulted in price declines over the last year.

Natural gas continues to be a critical component of energy demand in the U.S. Enable’s management believes that, although oversupply will continue in the near term, the prospects for continued natural gas demand are favorable over the long term and will be driven by population and economic growth, the continued displacement of coal-fired power plants by natural gas-fired power plants due to the price of natural gas and stricter government environmental regulations on the mining and burning of coal and the continued development of a global export market for LNG.

Enable’s management believes that increasing consumption of natural gas over the long term, both within the United States and in the global export market for LNG, will continue to drive demand for Enable’s natural gas gathering, processing, transportation and storage services.

Regulatory Proceedings. 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 to change its rates.

A settlement has been reached and a final order from the PUCT in the proceeding is expected during the first quarter of 2020.

Merger with Vectren. On February 1, 2019, pursuant to the Merger Agreement, CenterPoint Energy consummated the previously announced Merger and acquired Vectren for approximately $6 billion in cash.

Debt Transactions. In January 2019, Houston Electric issued $700 million aggregate principal amount of general mortgage bonds, in May 2019, CenterPoint Energy entered into a $1.0 billion variable rate term loan and in August 2019, CenterPoint Energy issued $1.2 billion aggregate principal amount of senior notes.

| • | the recording of impairment charges, including any impairment associated with Infrastructure Services and CES; |

| • | the outcome of the pending Houston Electric rate case; |

| • | the timing and extent of changes in commodity prices, particularly natural gas and coal, and the effects of geographic and seasonal commodity price differentials on CERC and Enable; |

| • | the ability of CenterPoint Energy’s and CERC’s non-utility business operating in the Energy Services reportable segment to effectively optimize opportunities related to natural gas price volatility and storage activities, including weather-related impacts; |

[removed: | • |] [added: -] Interest rate risk primarily results from exposures to changes in the level of borrowings and changes in interest rates. [removed: |]

[removed: | • |] [added: -] Equity price risk results from exposures to changes in prices of individual equity securities (CenterPoint Energy). [removed: |]

[removed: | • |] [added: -] Commodity price risk results from exposures to [removed: changes in spot prices, forward prices and] price volatilities of commodities, such as natural gas, NGLs and other energy commodities (CenterPoint [removed: Energy and CERC). |][added: Energy).]

As of December 31, [removed: 2019,] [added: 2020,] the Registrants had outstanding long-term debt and lease obligations and CenterPoint Energy had obligations under its ZENS that subject them to the risk of loss associated with movements in market interest rates.

CenterPoint Energy’s floating rate obligations aggregated [removed: $3.9] [added: $2.4] billion and [removed: $210 million] [added: $3.9 billion] as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

If the floating interest rates were to increase by 10% from December 31, [removed: 2019] [added: 2020] rates, CenterPoint Energy’s combined interest expense would increase by approximately [removed: $9] [added: $1] million annually.

Houston Electric did not have any floating rate obligations as of either December 31, [removed: 2019] [added: 2020] or [removed: 2018.][added: 2019.]

CERC’s floating rate obligations aggregated [removed: $376] [added: $347] million and [removed: $210] [added: $376] million as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

If the floating interest rates were to increase by 10% from December 31, [removed: 2019] [added: 2020] rates, CERC’s combined interest expense would increase by approximately $1 million annually.

As of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] CenterPoint Energy had outstanding fixed-rate debt (excluding indexed debt securities) aggregating [removed: $11.2] [added: $11.1] billion and [removed: $9.0] [added: $11.2] billion, respectively, in principal amount and having a fair value of [removed: $12.2] [added: $12.9] billion and [removed: $9.2] [added: $12.2] billion, [added: respectively.]

However, the fair value of these instruments would increase by approximately [removed: $344] [added: $288] million if interest rates were to decline by 10% from their levels as of December 31, [removed: 2019.][added: 2020.]

As of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] Houston Electric had outstanding fixed-rate debt aggregating [removed: $5.0] [added: $5.1] billion and [removed: $4.8] [added: $5.0] billion, respectively, in principal amount and having a fair value of approximately [removed: $5.5] [added: $6.0] billion and [removed: $4.8] [added: $5.5] billion, respectively.

However, the fair value of these instruments would increase by approximately [removed: $179] [added: $161] million if interest rates were to decline by 10% from their levels as of December 31, [removed: 2019.][added: 2020.]

As of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] CERC had outstanding fixed-rate debt aggregating [removed: $2.2] [added: $2.1] billion and $2.2 billion, respectively, in principal amount and having a fair value of $2.5 billion and [removed: $2.3] [added: $2.5] billion, respectively.

However, the fair value of these instruments would increase by approximately [removed: $77] [added: $69] million if interest rates were to decline by 10% from their levels at December 31, [removed: 2019.][added: 2020.]

The debt component of [removed: $19] [added: $15] million at December 31, [removed: 2019] [added: 2020] was a fixed-rate obligation and, therefore, did not expose CenterPoint Energy to the risk of loss in earnings due to changes in market interest rates.

However, the fair value of the debt component would increase by approximately $2 million if interest rates were to decline by 10% from levels at December 31, [removed: 2019.][added: 2020.]

Changes in the fair value of the derivative component, a [removed: $893] [added: $953] million recorded liability at December 31, [removed: 2019,] [added: 2020,] are recorded in CenterPoint Energy’s Statements of Consolidated Income and, therefore, it is exposed to changes in the fair value of the derivative component as a result of changes in the underlying risk-free interest rate.

If the risk-free interest rate were to increase by 10% from December 31, [removed: 2019] [added: 2020] levels, the fair value of the derivative component liability would decrease by [removed: approximately] [added: less than] $1 million, which would be recorded as an unrealized gain in CenterPoint Energy’s Statements of Consolidated Income.

A decrease of 10% from the December 31, [removed: 2019] [added: 2020] aggregate market value of these shares would result in a net loss of less than $1 million, which would be recorded as a loss on debt securities in CenterPoint Energy’s Statements of Consolidated Income.

Commodity Price Risk From Non-Trading Activities (CenterPoint [removed: Energy and CERC)][added: Energy)]

As of December 31, [removed: 2019,] [added: 2020,] the recorded fair value of non-trading energy derivative liabilities was [removed: $22] [added: $10] million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.

As of December 31, 2020, the Enable Series A Preferred Units annual distribution rate was 10%.

On February 18, 2021, five years after the issue date, the Enable Series A Preferred Units annual distribution rate changed to a percentage of the Stated Series A Liquidation Preference per Series A Preferred unit equal to the sum of (a) Three-Month LIBOR, as calculated on each applicable date of determination, and (b) 8.50%.

| | |

| --- | --- |

respectively.

CenterPoint Energy and CERC use derivative instruments as economic hedges to offset the commodity price exposure inherent in their businesses.

The commodity risk created by these instruments, including the offsetting impact on the market value of natural gas inventory, is described below.

CenterPoint Energy and CERC measure this commodity risk using a sensitivity analysis.

For purposes of this analysis, CenterPoint Energy and CERC estimate commodity price risk by applying a $0.50 change in the forward NYMEX price to their net open fixed price position (including forward fixed price physical contracts, natural gas inventory and fixed price financial contracts) at the end of each period.

As of December 31, 2019, the recorded fair value of CenterPoint Energy’s and CERC’s non-trading energy derivatives was a net asset of $73 million (before collateral), all of which is related to CenterPoint Energy’s and CERC’s Energy Services reportable segment.

A $0.50 change in the forward NYMEX price would have had a combined impact of $13 million on CenterPoint Energy’s and CERC’s non-trading energy derivatives net asset and the market value of natural gas inventory.

Commodity price risk is not limited to changes in forward NYMEX prices.

Variation of commodity pricing between the different indices used to mark to market portions of CenterPoint Energy’s and CERC’s natural gas inventory (Gas Daily) and the related fair value hedge (NYMEX) can result in volatility to CenterPoint Energy’s and CERC’s net income.

Over time, any gains or losses on the sale of storage gas inventory would be offset by gains or losses on the fair value hedges.

CenterPoint Energy is a public utility holding company and owns interests in [removed: Enable.][added: Enable, a publicly traded MLP.]

CenterPoint Energy’s operating subsidiaries own and operate electric [removed: transmission] [added: transmission, distribution] and [removed: distribution, electric] generation [added: facilities] and natural gas distribution [removed: facilities, supply natural gas to commercial and industrial customers and electric and natural gas utilities] [added: facilities] and provide [removed: underground pipeline construction and repair services,] energy performance contracting and sustainable infrastructure services.

Houston Electric is an indirect, wholly-owned subsidiary of CenterPoint Energy that provides electric transmission [added: service to transmission service customers in the ERCOT region] and distribution [removed: services] [added: service] to REPs serving the Texas Gulf Coast area that includes the city of Houston.

CERC Corp. is an indirect, wholly-owned subsidiary of CenterPoint Energy [removed: with operating subsidiaries] that [removed: own] [added: owns] and [removed: operate] [added: operates] natural gas distribution facilities in six [removed: states] [added: states, with operating subsidiaries that own] and [removed: supply natural gas to commercial] [added: operate permanent pipeline connections through interconnects with various interstate] and [removed: industrial customers] [added: intrastate pipeline companies,] and [removed: electric] [added: provide temporary delivery of LNG] and [removed: natural gas utilities in over 30] [added: CNG throughout the contiguous 48] states.

[removed: | (2) |] Bond Companies are wholly-owned, bankruptcy remote entities formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of Securitization Bonds. [removed: |]

[removed: | (5) |] As of December 31, [removed: 2019,] [added: 2020,] CNP Midstream owned approximately 53.7% of the common units representing limited partner interests in Enable, which owns, operates and develops natural gas and crude oil infrastructure assets; CNP Midstream also owned 50% of the management rights and 40% of the incentive distribution rights in Enable GP. [removed: For additional information regarding CenterPoint Energy’s interest in Enable, including the 14,520,000 Enable Series A Preferred Units directly owned by CenterPoint Energy, see Note 11 to the consolidated financial statements. |]

[removed: | (6) |] Vectren [added: is an indirect, wholly-owned subsidiary of CenterPoint Energy that] engages in regulated operations through three public utilities: [removed: |]

[removed: | • |] [added: -] Indiana Gas provides energy delivery services to natural gas customers located in central and southern Indiana; [removed: |]

[removed: | • |] [added: -] SIGECO provides energy delivery services to electric and natural gas customers [added: located in] and [added: 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 [removed: |]

[removed: | • |] [added: -] VEDO provides energy delivery services to natural gas customers in [added: and near Dayton in] west-central Ohio. [removed: |]

Vectren performs non-utility activities through [removed: Infrastructure Services, which provides underground pipeline construction and repair services, and through] ESG, which provides energy performance contracting and sustainable infrastructure services.

For further information, see [removed: Notes 6 and 23] [added: Note 4] to the consolidated financial statements.

This transaction does not include CEIP and its [removed: assets.][added: assets or MES.]

| [removed: CenterPoint Energy] [added: CenterPoint Energy] | | [removed: X] | | [removed: X] | | [removed: X] | | [removed: X] | | [removed: X] | | [removed: X] | | [removed: X] | [added: | | | | | | | | |]

[removed: | Houston] [added: Houston] Electric [removed: | | X | | | | | | | | | | | | |][added: (CenterPoint Energy and Houston Electric)]

| [removed: CERC] [added: CERC] | | | | | | [removed: X] | | [removed: X] | | | | | | [removed: X] | [added: | | | | | | | | |]

For a discussion of [removed: operating] [added: net] income by segment, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations by Reportable Segment” in Item 7 of Part II of this report.

For additional information about the segments, see Note [removed: 19] [added: 18] to the consolidated financial statements.

[removed: | • |] [added: -] our Code of Ethics for our Chief Executive Officer and Senior Financial Officers; [removed: |]

[removed: | • |] [added: -] our Ethics and Compliance Code; [removed: |]

[removed: | • |] [added: -] our Corporate Governance Guidelines; and [removed: |]

[removed: | • |] [added: -] the charters of the audit, compensation, finance and governance committees of our Board of Directors. [removed: |]

[removed: Houston Electric T&D] [added: Electric] (CenterPoint [removed: Energy and Houston Electric)][added: Energy)]

Rates for these [removed: existing] services are established pursuant to rate proceedings conducted before municipalities that have original jurisdiction and the PUCT.

For further discussion of the Securitization Bonds and the outstanding balances as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] see Note 14 to the consolidated financial statements.

Houston Electric serves nearly all of the Houston/Galveston metropolitan [removed: area.][added: area near the Texas Gulf Coast.]

As of December 31, [removed: 2019,] [added: 2020,] Houston Electric’s customers consisted of approximately [removed: 68] [added: 64] REPs, which sell electricity to approximately [removed: 2.5] [added: 2.6] million metered customers in Houston Electric’s certificated service area, and municipalities, electric cooperatives and other distribution companies located outside Houston Electric’s certificated service area.

For information regarding Houston Electric’s major customers, see Note [removed: 19] [added: 18] to the consolidated financial statements.

The table below reflects the number of metered customers in Houston Electric’s service area as of December 31, [removed: 2019:][added: 2020:]

| | [added: | |] Residential | | | [removed: Commercial/ Industrial] | | | [added: Commercial/ Industrial | | | | | |] Total Customers | | [added: |]

For [removed: information related to debt outstanding under the Mortgage and General Mortgage,] [added: further information,] see Note [removed: 14] [added: 4] to the consolidated financial statements.

In exchange for the payment of fees, these franchises give Houston Electric the right to use the streets and public rights-of-way of these municipalities to construct, operate and maintain its transmission and distribution system and to use that system to conduct its [added: electric delivery business and for other purposes that the franchises permit.]

The terms of the franchises, with various expiration dates, typically range from [removed: 20] [added: 30] to 40 years.

Indiana Electric [removed: Integrated] (CenterPoint Energy)

Indiana Electric [removed: Integrated] consists of SIGECO’s electric transmission and distribution services, including its power generating and wholesale power operations.

As of December 31, [removed: 2019,] [added: 2020,] Indiana Electric supplied electric service to the following:

| | [added: | |] Residential | | | [added: | | |] Commercial/Industrial | | | [added: | | |] Total Customers | | [added: |]

Total load and the related reserve margin at the time of the system summer peak on [removed: September 12, 2019,] [added: August 10, 2020,] is presented below in MW, except for [removed: reserved] [added: reserve] margin at peak.

| Total load at peak | [removed: 1,055] | | [added: 984 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

| Generating capability | [added: | |] 1,167 | | [added: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |]

On February 16, 2021, Enable entered into the Enable Merger Agreement.

At the closing of the transactions contemplated by the Enable Merger Agreement, if and when it occurs, Energy Transfer will acquire all of Enable’s outstanding equity interests, including all Enable common units and Enable Series A Preferred Units held by CenterPoint Energy, and in return CenterPoint Energy will receive Energy Transfer common units and Energy Transfer Series G Preferred Units.

For additional information regarding CenterPoint Energy’s interest in Enable, including the 14,520,000 Enable Series A Preferred Units directly owned by CenterPoint Energy and the Enable Merger, see Notes 11 and 22 to the consolidated financial statements.

The transaction closed on April 9, 2020 for $854 million in cash, inclusive of cash received after closing for the working capital adjustment.

The transaction closed on June 1, 2020 for approximately $365 million in cash, inclusive of cash received after closing for the working capital adjustment.

As of December 31, 2020, CenterPoint Energy’s reportable segments were Electric, Natural Gas and Midstream Investments.

Houston Electric and CERC each consist of one reportable segment.

During the fourth quarter of 2020, CenterPoint Energy’s CODM requested that the financial information for the electric businesses be presented on an aggregated basis for review, resulting in one Electric reportable segment, comprised of Houston Electric and Indiana Electric.

For information regarding the properties of the Electric reportable segment, please read “Properties — Electric (CenterPoint Energy and Houston Electric)” in Item 2 of this report, which information is incorporated herein by reference.

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Texas Gulf Coast | | | 2,303,315 | | | | | | 296,512 | | | | | | 2,599,827 | | |

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Indiana | | | 130,159 | | | | | | 19,130 | | | | | | 149,289 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

Indiana Electric’s newest solar array, which was approved by the IURC in 2018, consists of approximately 150,000 solar panels distributed across 300 acres along Indiana State Road 545 between Troy and New Boston, Indiana.

Construction of the 50 MW universal solar array was nearing completion at the end of 2020, and the project was placed in service for southwestern Indiana electric customers in early 2021.

Another 173,000 tons are stored off-site to be shipped when plant inventory is reduced.

Moody’s rates OVEC one notch below investment grade with a positive outlook.

Fitch continues to rate OVEC as investment grade with a stable outlook.

S&P withdrew its ratings on January 9, 2020 at OVEC’s request.

In July 2020, an investigation led by the U.S. Attorney’s Office resulted in a federal grand jury indictment of the Speaker of the Ohio House of Representatives, among other individuals, in connection with a racketeering conspiracy involving the adoption of House Bill 6.

In light of the allegations in the indictment, proposed legislation has been introduced that would repeal House Bill 6.

The outcome of the U.S. Attorney’s Office investigation and its impact on House Bill 6 is unknown at this time.

If the provisions of House Bill 6 are ultimately eliminated, it is unclear whether, and in what form, the Ohio General Assembly would pass new legislation addressing similar issues, which could repeal subsidies associated with House Bill 6.

There are no other electric transmission and distribution utilities in Indiana Electric’s service area.

Indiana Electric is a vertically integrated utility that owns the generation, transmission, and distribution components of a utility.

For another provider of transmission and distribution services to provide such services in Indiana Electric’s territory, it would be required to obtain a certificate of convenience and necessity from the IURC and, depending on the location of the facilities, may also be required to obtain franchises from one or more municipalities.

Indiana Electric is not aware of any other party intending to enter this business in its service area at this time.

Distributed generation (i.e., power generation located at or near the point of consumption) could result in reduced demand for Indiana Electric’s distribution services but has not been a significant factor to date.

Indiana Electric’s revenues are primarily derived from rates that it collects from customers in its service territory based on the amount of electricity it delivers.

Indiana Electric’s revenues and results of operations are subject to seasonality, weather conditions and other changes in electricity usage, with revenues generally being higher during the warmer months when more electricity is used for cooling purposes, and during the cooler months when more electricity is used for heating purposes.

During the fourth quarter of 2020, CenterPoint Energy and CERC’s CODM requested that the CERC corporate functions be included within the financial results of CenterPoint Energy’s Natural Gas reportable segment for review purposes.

See Note 18 to the consolidated financial statements for further information.

For information regarding the properties of the Natural Gas reportable segment, please read “Properties — Natural Gas (CenterPoint Energy and CERC) in Item 2 of this report, which information is incorporated herein by reference.

| | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

CenterPoint Energy’s simplified corporate structure as of December 31, 2019 is shown below:


| | |

| --- | --- |

| (1) | Houston Electric engages in the electric transmission and distribution business in the Texas Gulf Coast area that includes the city of Houston. |

| (3) | CERC’s NGD operates natural gas distribution systems in six states. |

| (4) | CES 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. |

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.

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.

CenterPoint Energy’s service territories as of December 31, 2019 are depicted below:


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 |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Texas Gulf Coast | 2,243,188 | | | 291,098 | | | 2,534,286 | |

*Utility Technology*

Houston Electric’s Smart Grid is comprised of the AMS, IG, ADMS and private telecommunications network.

Houston Electric has deployed fully operational advanced meters to virtually all of its approximately 2.5 million metered customers, automated 95 substations, installed 1,603 IG Switching Devices and other automation devices on more than 450 circuits, built a wireless radio frequency mesh telecommunications network across Houston Electric’s 5,000-square mile footprint, and enabled real-time grid monitoring and control, which leverages information from smart meters and field sensors to manage system events through the ADMS.

The Smart Grid continues to improve electric distribution service reliability and restoration, enhance the consumer experience, support the growth of renewable energy and help the environment by reducing carbon emissions.

In addition, Houston Electric has implemented leading capabilities with customer service applications and mobile data applications including the PAS.

The PAS notification tool alerts over 1.2 million registered customers of power delivery events at or near their home or facility via text, email or phone call.

*Properties*

All of Houston Electric’s properties are located in Texas.

Its properties consist primarily of high-voltage electric transmission lines and poles, distribution lines, substations, service centers, service wires, telecommunications network and meters.

Most of Houston Electric’s transmission and distribution lines have been constructed over lands of others pursuant to easements or along public highways and streets under franchise agreements and as permitted by law.

All real and tangible properties of Houston Electric, subject to certain exclusions, are currently subject to:

| • | the lien of a Mortgage and Deed of Trust (the Mortgage) dated November 1, 1944, as supplemented; and |

| • | the lien of a General Mortgage (the General Mortgage) dated October 10, 2002, as supplemented, which is junior to the lien of the Mortgage. |

*Electric Lines - Transmission and Distribution.* As of December 31, 2019, Houston Electric owned and operated the following electric transmission and distribution lines:

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | Circuit Miles | | | | |

| Description | | Overhead Lines | | | Underground Lines | |

| Transmission lines - 69 kV | | 259 | | | 2 | |

| Transmission lines - 138 kV | | 2,215 | | | 24 | |

| Transmission lines - 345 kV | | 1,337 | | | — | |

| Total transmission lines | | 3,811 | | | 26 | |

For a discussion of material legal and regulatory proceedings affecting the Registrants as of December 31, [removed: 2019,] [added: 2020,] please read “Business — Regulation” and “Business — Environmental Matters” in Item 1 of this report, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Regulatory Matters” in Item 7 of this report and Note 16(e) to the consolidated financial statements, which information is incorporated herein by reference.

| | |

| --- | --- |

[removed: Form 10-K][added: Form 10-K]

| (Mark One) | | [added: | | | |]

| ☑ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

| | [added: | |] FOR THE FISCAL YEAR ENDED DECEMBER 31, [removed: 2019] [added: 2020] | [added: | |]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

| | [added: | |] FOR THE TRANSITION PERIOD FROM TO | [added: | |]

| | [added: | |] Registrant, State or Other [removed: Jurisdiction of] [added: Jurisdiction of] Incorporation or Organization | | | | [added: | | | | | | | |]

| Commission file number | [added: | |] Address of Principal Executive Offices, Zip [removed: Code and] [added: Code and] Telephone Number | | | [added: | | | | | |] I.R.S. Employer Identification No. | [added: | |]

| 1-31447 | [added: | |] CenterPoint Energy, Inc. | | | [added: | | | | | |] 74-0694415 | [added: | |]

| | [added: | |] (a Texas corporation) | | | | [added: | | | | | | | |]

| | [added: | |] 1111 Louisiana | | | | [added: | | | | | | | |]

| | [added: | |] Houston, | [added: | |] Texas | [added: | |] 77002 | | [added: | | | |]

| | [added: | |] (713) | [added: | |] 207-1111 | | | [added: | | | | | |]

| 1-3187 | [added: | |] CenterPoint Energy Houston Electric, LLC | | | [added: | | | | | |] 22-3865106 | [added: | |]

| | [added: | |] (a Texas limited liability company) | | | | [added: | | | | | | | |]

| 1-13265 | [added: | |] CenterPoint Energy Resources Corp. | | | [added: | | | | | |] 76-0511406 | [added: | |]

| | [added: | |] (a Delaware corporation) | | | | [added: | | | | | | | |]

| Securities registered pursuant to Section 12(b) of the Act: | | | | [added: | | | | | | | |]

| Registrant | [added: | |] Title of each class | [added: | |] Trading symbol(s) | [added: | |] Name of each exchange on which registered | [added: | |]

| CenterPoint Energy, Inc. | [added: | |] Common Stock, $0.01 par value | [added: | |] CNP | [added: | |] New York Stock Exchange | [added: | |]

| | | | [added: | | | | | |] Chicago Stock Exchange | [added: | |]

| CenterPoint Energy, Inc. | [added: | |] Depositary shares, each representing a 1/20th interest in a share of 7.00% Series B Mandatory Convertible Preferred Stock, $0.01 par value | [added: | |] CNP/PB | [added: | |] New York Stock Exchange | [added: | |]

| CenterPoint Energy Houston Electric, LLC | [added: | |] 9.15% First Mortgage Bonds due 2021 | [added: | |] n/a | [added: | |] New York Stock Exchange | [added: | |]

| CenterPoint Energy Houston Electric, LLC | [added: | |] 6.95% General Mortgage Bonds due 2033 | [added: | |] n/a | [added: | |] New York Stock Exchange | [added: | |]

| CenterPoint Energy Resources Corp. | [added: | |] 6.625% Senior Notes due 2037 | [added: | |] n/a | [added: | |] New York Stock Exchange | [added: | |]

| Securities registered pursuant to Section 12(g) of the Act: | | | | [added: | | | | | | | |]

| None | | | | [added: | | | | | | | |]

| CenterPoint Energy, Inc. | [added: | |] Yes | [added: | |] þ | [added: | |] No o | [added: | | | | |]

| CenterPoint Energy Houston Electric, LLC | [added: | |] Yes | [added: | |] þ | [added: | |] No o | [added: | | | | |]

| CenterPoint Energy Resources Corp. | [added: | |] Yes | [added: | |] þ | [added: | |] No o | [added: | | | | |]

| CenterPoint Energy, Inc. | | [added: | | | |] Yes o | [added: | |] No | [added: | |] þ | [added: | |]

| CenterPoint Energy Houston Electric, LLC | | [added: | | | |] Yes o | [added: | |] No | [added: | |] þ | [added: | |]

| CenterPoint Energy Resources Corp. | | [added: | | | |] Yes o | [added: | |] No | [added: | |] þ | [added: | |]

| | [added: | |] Large accelerated filer | [added: | |] Accelerated filer | [added: | |] Non-accelerated filer | [added: | |] Smaller reporting company | [added: | |] Emerging growth company | [added: | |]

| CenterPoint Energy, Inc. | [added: | |] þ | [added: | |] o | [added: | |] o | [added: | |] ☐ | [added: | |] ☐ | [added: | |]

| CenterPoint Energy Houston Electric, LLC | [added: | |] o | [added: | |] o | [added: | |] þ | [added: | |] ☐ | [added: | |] ☐ | [added: | |]

| CenterPoint Energy Resources Corp. | [added: | |] o | [added: | |] o | [added: | |] þ | [added: | |] ☐ | [added: | |] ☐ | [added: | |]

| CenterPoint Energy, Inc. | [added: | |] Yes | [removed: ☐] | [removed: No] [added: |] þ | [added: | | No o | | | | | |]

| CenterPoint Energy Houston Electric, LLC | [added: | |] Yes | [removed: ☐] | [removed: No] [added: |] þ | [added: | | No o | | | | | |]

| CenterPoint Energy Resources Corp. | [added: | |] Yes | [removed: ☐] | [removed: No] [added: |] þ | [added: | | No o | | | | | |]

| OR | | | | | |

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| | | | 1111 Louisiana | | | | | | | | | | | |

| | | | Houston, | | | Texas | | | 77002 | | | | | |

| | | | (713) | | | 207-1111 | | | | | | | | |

| | | | | | | | | | | | | | | |

| | | | 1111 Louisiana | | | | | | | | | | | |

| | | | Houston, | | | Texas | | | 77002 | | | | | |

| | | | (713) | | | 207-1111 | | | | | | | | |

| | | | | | | | | | | | | | | |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| CenterPoint Energy Houston Electric, LLC | | | | | | Yes | | | þ | | | No o | | |

| CenterPoint Energy Resources Corp. | | | | | | Yes | | | þ | | | No o | | |

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

| | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| CenterPoint Energy, Inc. | | | Yes | | | ☐ | | | No þ | | | | | |

| CenterPoint Energy Houston Electric, LLC | | | Yes | | | ☐ | | | No þ | | | | | |

| CenterPoint Energy Resources Corp. | | | Yes | | | ☐ | | | No þ | | | | | |

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

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| --- | --- |

| OR | |

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| --- | --- | --- | --- | --- |

| | | | |

| --- | --- | --- | --- |

| | | |

| --- | --- | --- |

| ADMS | | Advanced Distribution Management System |

| AEM | | Atmos Energy Marketing, LLC, previously a wholly-owned subsidiary of Atmos Energy Holdings, Inc., a wholly-owned subsidiary of Atmos Energy Corporation |

| Brazos Valley Connection | | A portion of the Houston region transmission project between Houston Electric’s Zenith substation and the Gibbons Creek substation owned by the Texas Municipal Power Agency |

| Bridge Facility | | A $5 billion 364-day senior unsecured bridge term loan facility |

| BTA | | Best technology available |

| CEA | | Commodities Exchange Act of 1936 |

| CFTC | | Commodity Futures Trading Commission |

| CME | | Chicago Mercantile Exchange |

| Continuum | | The retail energy services business of Continuum Retail Energy Services, LLC, including its wholly-owned subsidiary Lakeshore Energy Services, LLC and the natural gas wholesale assets of Continuum Energy Services, LLC |

| DCA | | Distribution Contractors Association |

| Gas Daily | | Platts gas daily indices |

| Hart-Scott-Rodino Act | | Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended |

| IG | | Intelligent Grid |

| MATS | | Mercury and Air Toxics |

| Meredith | | Meredith Corporation |

| MES | | Mobile Energy Solutions |

| MMBtu | | One million British thermal units |

| NESHAPS | | National Emission Standards for Hazardous Air Pollutants |

| NGD | | Natural gas distribution business |

| NOPR | | Notice of Proposed Rulemaking |

| NYSE | | New York Stock Exchange |

| PAS | | Power Alert Service |

| PFD | | Proposal for decision |

| PLCA | | Pipeline Contractors Association |

| Revised Policy Statement | | Revised Policy Statement on Treatment of Income Taxes |

| RICE MACT | | Reciprocating Internal Combustion Engines Maximum Achievable Control Technology |

| RP | | Rehabilitation Plan |

| RRI | | Reliant Resources, Inc. |

| Time | | Time Inc. |

| Transition Agreements | | Services Agreement, Employee Transition Agreement, Transitional Seconding Agreement and other agreements entered into in connection with the formation of Enable |

| TW | | Time Warner Inc. |

| | |

| --- | --- |

The following discussion is based on the Registrants’ businesses [removed: and equity method investment] as of December 31, [removed: 2019.][added: 2020.]

[removed: Houston Electric T&D] [added: Electric] (CenterPoint Energy and Houston Electric)

Natural Gas [removed: Distribution] (CenterPoint Energy and CERC)

*Properties*

All of Houston Electric’s properties are located in Texas.

Its properties consist primarily of high-voltage electric transmission lines and poles, distribution lines, substations, service centers, service wires, telecommunications network and meters.

Most of Houston Electric’s transmission and distribution lines have been constructed over lands of others pursuant to easements or along public highways and streets under franchise agreements and as permitted by law.

All real and tangible properties of Houston Electric, subject to certain exclusions, are currently subject to:

- the lien of a Mortgage and Deed of Trust (the Mortgage) dated November 1, 1944, as supplemented; and

- the lien of a General Mortgage (the General Mortgage) dated October 10, 2002, as supplemented, which is junior to the lien of the Mortgage.

For information related to debt outstanding under the Mortgage and General Mortgage, see Note 14 to the consolidated financial statements.

Indiana Electric’s properties are primarily located in Indiana.

They consist of transmission lines in Indiana and Kentucky, distribution lines, substations, service centers, coal-fired generating facilities, gas-fired turbine peaking units, a landfill gas electric generation project and solar generation facilities.

All real and tangible properties of Indiana Electric, subject to certain exclusions, are currently subject to:

- the lien of the First Mortgage Indenture dated as of April 1, 1932, between SIGECO (Indiana Electric) and Bankers Trust Company, as Trustee, and Deutsche Bank, as successor Trustee, as supplemented by various supplemental indentures.

*Electric Lines - Transmission and Distribution.* As of December 31, 2020, Houston Electric and Indiana Electric owned and operated the following electric transmission and distribution lines:

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | Houston Electric | | | | | | | | | | | | Indiana Electric | | | | | | | | |

| Description | | | | | | Overhead Lines | | | | | | Underground Lines | | | | | | Indiana | | | | | | Kentucky (1) | | |

| Transmission lines: | | | | | | (in Circuit Miles) | | | | | | | | | | | | | | | | | | | | |

| 69 kV | | | | | | 213 | | | | | | 2 | | | | | | 552 | | | | | | — | | |

| 138 kV | | | | | | 2,254 | | | | | | 24 | | | | | | 408 | | | | | | 9 | | |

| 345 kV | | | | | | 1,338 | | | | | | — | | | | | | 48 | | | | | | 15 | | |

| Total | | | | | | 3,805 | | | | | | 26 | | | | | | 1,008 | | | | | | 24 | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | Houston Electric | | | | | | | | | | | | Indiana Electric | | | | | | | | |

| | | | | | | Overhead Lines | | | | | | Underground Lines | | | | | | Overhead Lines | | | | | | Underground Lines | | |

| | | | | | | (in Circuit Miles) | | | | | | | | | | | | | | | | | | | | |

| Distribution lines | | | | | | 29,525 | | | | | | 26,520 | | | | | | 4,580 | | | | | | 2,505 | | |

(1)These assets interconnect with Louisville Gas and Electric Company’s transmission system at Cloverport, Kentucky and with Big Rivers Electric Cooperative at Sebree, Kentucky.

*Generating Capacity.* As of December 31, 2020, Indiana Electric had 1,167 MW of installed generating capacity, as set forth in the following table.

| | | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Generation Source | | | | | | Unit No. | | | | | | Location | | | | | | Date in Service | | | | | | Capacity (MW) | | |

| Coal | | | | | | | | | | | | | | | | | | | | | | | | | | |

| A.B. Brown | | | | | | 1 | | | | | | Posey County | | | | | | 1979 | | | | | | 245 | | |

| A.B. Brown | | | | | | 2 | | | | | | Posey County | | | | | | 1986 | | | | | | 245 | | |

| F.B. Culley | | | | | | 2 | | | | | | Warrick County | | | | | | 1966 | | | | | | 90 | | |

| F.B. Culley | | | | | | 3 | | | | | | Warrick County | | | | | | 1973 | | | | | | 270 | | |

| Warrick (1) | | | | | | 4 | | | | | | Warrick County | | | | | | 1970 | | | | | | 150 | | |

| Total Coal Capacity | | | | | | | | | | | | | | | | | | | | | | | | 1,000 | | |

| Gas | | | | | | | | | | | | | | | | | | | | | | | | | | |

For information regarding the properties of the Houston Electric T & D reportable segment, please read “Business — Our Business — Houston Electric Transmission & Distribution — Properties” in Item 1 of this report, which information is incorporated herein by reference.

Indiana Electric Integrated (CenterPoint Energy)

For information regarding the properties of the Indiana Electric Integrated reportable segment, please read “Business — Our Business — Indiana Electric Integrated — Properties” in Item 1 of this report, which information is incorporated herein by reference.

For information regarding the properties of the Natural Gas Distribution reportable segment, please read “Business — Our Business — Natural Gas Distribution — Assets” in Item 1 of this report, which information is incorporated herein by reference.

Energy Services (CenterPoint Energy and CERC)

For information regarding the properties of the Energy Services reportable segment, please read “Business — Our Business — Energy Services — Assets” in Item 1 of this report, which information is incorporated herein by reference.

Infrastructure Services (CenterPoint Energy)

For information regarding the properties of the Infrastructure Services reportable segment, please read “Business — Our Business — Infrastructure Services” in Item 1 of this report, which information is incorporated herein by reference.

Midstream Investments (CenterPoint Energy)

For information regarding the properties of the Midstream Investments reportable segment, please read “Business — Our Business — Midstream Investments” in Item 1 of this report, which information is incorporated herein by reference.

Corporate and Other (CenterPoint Energy and CERC)

For information regarding the properties of the CenterPoint Energy Corporate and Other reportable segment, please read “Business — Our Business — Corporate and Other Operations” in Item 1 of this report, which information is incorporated herein by reference.

| | |

| --- | --- |

| | |

| --- | --- |

As of February [removed: 19, 2020,] [added: 22, 2021,] CenterPoint Energy’s common stock was held by approximately [removed: 27,524] [added: 26,409] shareholders of record.

During the quarter ended December 31, [removed: 2019,] [added: 2020,] none of CenterPoint Energy’s equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 were purchased by or on behalf of CenterPoint Energy or any “affiliated purchasers,” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934.

As of February [removed: 19, 2020,] [added: 22, 2021,] all of Houston Electric’s 1,000 outstanding common shares were held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy.

As of February [removed: 19, 2020,] [added: 22, 2021,] all of CERC Corp.’s 1,000 outstanding shares of common stock were held by Utility Holding, LLC, a wholly-owned subsidiary of CenterPoint Energy.

Not applicable.

The following table presents selected financial data with respect to CenterPoint Energy’s consolidated financial condition and consolidated results of operations and should be read in conjunction with CenterPoint Energy’s consolidated financial statements and the related notes in Item 8 of this report.

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Year Ended December 31, | | | | | | | | | | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | |

| | (in millions, except per share amounts) | | | | | | | | | | | | | | | | | | | |

| Revenues | $ | 12,301 | | | $ | 10,589 | | | $ | 9,614 | | | $ | 7,528 | | | $ | 7,386 | | |

| Equity in earnings (losses) of unconsolidated affiliates, net | 230 | | | | 307 | | | | 265 | | | | 208 | | | | (1,663 | | ) | (2) |

| Income (loss) available to common shareholders | 674 | | | | 333 | | | | 1,792 | | | (1) | 432 | | | | (692 | | ) | |

| Basic earnings (loss) per common share | 1.34 | | | | 0.74 | | | | 4.16 | | | | 1.00 | | | | (1.61 | | ) | |

| Diluted earnings (loss) per common share | 1.33 | | | | 0.74 | | | | 4.13 | | | | 1.00 | | | | (1.61 | | ) | |

| Cash dividends paid per common share | $ | 1.15 | | | $ | 1.11 | | | $ | 1.07 | | | $ | 1.03 | | | $ | 0.99 | | |

| Dividend payout ratio | 86 | | % | | 150 | | % | | 26 | | % | | 103 | | % | | n/a | | | |

| Return on average common equity | 8 | | % | | 5 | | % | | 44 | | % | | 12 | | % | | (17 | | )% | |

| At year-end: | | | | | | | | | | | | | | | | | | | | |

| Book value per common share | $ | 16.64 | | | $ | 16.08 | | | $ | 10.88 | | | $ | 8.04 | | | $ | 8.05 | | |

| Market price per common share | 27.27 | | | | 28.23 | | | | 28.36 | | | | 24.64 | | | | 18.36 | | | |

| Market price as a percent of book value | 164 | | % | | 176 | | % | | 261 | | % | | 306 | | % | | 228 | | % | |

| Percentage of common units owned representing limited partner interests in Enable | 53.7 | | % | | 54.0 | | % | | 54.1 | | % | | 54.1 | | % | | 55.4 | | % | |

| Total assets (3) (4) | $ | 35,439 | | | $ | 27,009 | | | $ | 22,736 | | | $ | 21,829 | | | $ | 21,290 | | |

| Short-term borrowings | — | | | | — | | | | 39 | | | | 35 | | | | 40 | | | |

| Securitization Bonds, including current maturities | 977 | | | | 1,435 | | | | 1,868 | | | | 2,278 | | | | 2,667 | | | |

| Other long-term debt, including current maturities (5) | 14,135 | | | | 7,729 | | | | 6,933 | | | | 6,279 | | | | 6,063 | | | |

| Capitalization: | | | | | | | | | | | | | | | | | | | | |

| Common stock equity | 36 | | % | | 47 | | % | | 35 | | % | | 29 | | % | | 28 | | % | |

| Long-term debt, including current maturities | 64 | | % | | 53 | | % | | 65 | | % | | 71 | | % | | 72 | | % | |

| Capitalization, excluding Securitization Bonds: | | | | | | | | | | | | | | | | | | | | |

| Common stock equity | 37 | | % | | 51 | | % | | 40 | | % | | 36 | | % | | 36 | | % | |

| Long-term debt, excluding Securitization Bonds, and including current maturities | 63 | | % | | 49 | | % | | 60 | | % | | 64 | | % | | 64 | | % | |

| Capital expenditures | $ | 2,587 | | | $ | 1,720 | | | $ | 1,494 | | | $ | 1,406 | | | $ | 1,575 | | |

| | |

| --- | --- |

| (1) | Income (loss) 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 to the consolidated financial statements for further discussion of the impacts of the TCJA implementation. |

| (2) | This amount includes $1,846 million of non-cash impairment charges related to Enable. |

| (3) | The increase in Total assets as of December 31, 2019, as compared to December 31, 2018, was primarily driven by the assets acquired in the Merger. |

| (4) | Total assets as of December 31, 2018 include cash and cash equivalents of $4.2 billion. |

| (5) | The increase in Other long-term debt, including current maturities as of December 31, 2019, as compared to December 31, 2018, was primarily driven by debt incurred to finance the Merger and debt acquired in the Merger. |

We have audited the accompanying consolidated balance sheets of CenterPoint Energy, Inc. and subsidiaries (the [removed: “Company”)] [added: "Company")] as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] 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, [removed: 2019,] [added: 2020,] and the related notes (collectively referred to as the [removed: “financial statements”).][added: "financial statements").]

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] 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 [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in Internal Control [removed: -] [added: —] Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 27, 2020] [added: 25, 2021] expressed an unqualified opinion on the Company's internal control over financial reporting.

[removed: Acquisitions - Vectren Corporation - Intangible Assets -] [added: Goodwill —] Refer to Note [removed: 4] [added: 6] to the financial statements

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

Given the [removed: fair value determination of intangible assets acquired required management to make] significant [removed: estimates and] assumptions [removed: related] [added: used by management as noted above] to [removed: the forecasts of future cash flows and the company specific risk premium affecting the discount rate,] [added: estimate fair value,] performing audit procedures to evaluate the reasonableness of these estimates and assumptions [added: related to forecasts of future revenue and operating margin] required a high degree of auditor [removed: judgment and an increased extent of effort.][added: judgment.]

[removed: | • |] [added: -] We [removed: assessed] [added: evaluated] the reasonableness of management’s forecasts by comparing the forecasts to: [removed: |]

[removed: | ◦ | Internal] [added: ◦Internal] communications to management and the Board of Directors. [removed: |]

[removed: | ◦ | Forecasted] [added: ◦Forecasted] information included in Company press releases as well as in analyst and industry reports for the Company and certain of its peer companies. [removed: |]

[removed: | • |] [added: -] We involved our fair value specialists who assisted in: [removed: |]

[removed: | ◦ | Assessing] [added: ◦Assessing] the appropriateness of the valuation methodology used to determine the [removed: customer relationship intangible assets and the] company specific risk [removed: premiums. |][added: premiums in calculating the discount rates.]

[removed: | ◦ | Testing] [added: ◦Testing] the determined discount rates by independently estimating a discount rate for each business using a process consistent with generally accepted valuation practices. [removed: |]

[removed: Goodwill -] [added: Impact of Rate Regulation on the Financial Statements —] Refer to Note [removed: 6] [added: 2 and 7] to the financial statements

In its annual goodwill impairment test on July 1, [removed: 2019] [added: 2020] (“measurement date”) and as triggering events are identified, the Company used the [removed: discounted cash flow model] [added: income approach] 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.

[removed: 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.

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

[removed: | • |] [added: -] 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 [removed: capital expenditures, future rate base growth, estimated future rate changes,] [added: cash flows and planned growth initiatives, the regulatory environment,] discount rates, and long-term growth rates. [removed: |]

[removed: | ◦ | Historical] [added: ◦Historical] revenues, operating margins, capital expenditures, rate base growth, and rate changes. [removed: |]

[removed: | • |] [added: -] 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. [removed: |]

[removed: | • |] [added: -] We evaluated the impact of changes in management’s forecasts from the measurement date to December 31, [removed: 2019. |][added: 2020.]

[removed: | ◦ | Evaluating] [added: ◦Evaluating] the reasonableness of the long-term growth rate through a comparison to industry reports and peer companies. [removed: |]

Impact of Rate Regulation on the Financial Statements [removed: -] [added: —] Refer to Notes 2 and 7 to the financial statements

The Company, through its regulated electric and gas subsidiaries is subject to rate regulation by the relevant state public utility [removed: commissions and,] [added: commissions,] in Texas by the Railroad Commission, and the Federal Energy Regulatory Commission (collectively, “the Commissions”), and [removed: those] [added: in certain] municipalities [removed: (in] [added: in] Texas [removed: only)] served by the Company.

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; [removed: and] depreciation and amortization expense; and income tax expense.

Given that [added: certain of] 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 [removed: process due its inherent complexities.][added: process.]

[removed: | • |] We [removed: 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. [removed: |]

[removed: | • |] [added: -] We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments. [removed: |]

[removed: | • | For matters with a high degree of subjectivity, we] [added: - 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 [removed: interveners,] [added: intervenors,] and other publicly available information to assess the likelihood of recovery in future rates or of a future reduction in rates based on [removed: precedence] [added: precedents] of the Commissions’ treatment of similar costs under similar circumstances. [removed: We evaluated the external information and compared to management’s recorded regulatory asset and liability balances for completeness. |]

[removed: | • |] [added: -] 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. [removed: |]

[removed: | • |] We [removed: evaluated management’s plans regarding property, plant, and equipment for indications of potential impairment. We] inspected [removed: 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. [removed: |]

[removed: | • |] [added: -] 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. [removed: |]

[removed: | • |] [added: -] We obtained an analysis from management [added: and letters from internal and external legal counsel, as appropriate,] 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. [removed: |]

[added: |] February [removed: 27,] [added: 3,] 2020 [added: | | | | | | February 14, 2020 | | | | | | March 2, 2020 | | | | | | 30.6250 | | | | | | 25 | | |]

| | [added: | |] Year Ended December 31, | | | | | | | | | | | [added: | | | |]

| | [added: | | | | |] 2019 | | | | [removed: 2018] | | [added: 2018] | | [removed: 2017] | | | [added: |]

| | [added: | |] (in millions, except per share amounts) | | | | | | | | | | | [added: | | | |]

| Revenues: | | | | | | | | | | | | [added: | | | | | |]

| Non-utility revenues | [removed: 5,139] | | [added: 52] | | [removed: 4,426] | | | | [removed: 4,011] [added: 67] | | | [added: | | | 64 | | |]

| Expenses: | | | | | | | | | | | | [added: | | | | | |]

| Utility natural gas, fuel and purchased power | [removed: 1,683] | | [added: 1,488] | | [removed: 1,410] | | | | [removed: 1,109] [added: 1,762] | | | [added: | | | 1,464 | | |]

The Company’s goodwill is $4.7 billion as of December 31, 2020.

In connection with the preparation of quarterly financial statements for the period ended March 31, 2020, the Company identified triggering events and performed an interim goodwill impairment analysis for each of their reporting units due to the macroeconomic conditions related in part to the COVID-19 pandemic and the resulting decrease in CenterPoint Energy’s enterprise market capitalization below book value from the decline in CenterPoint Energy’s common stock price.

Pursuant to the analysis, the Company recorded a goodwill impairment of $185 million for a reporting unit, Indiana Electric, within the Electric reportable segment.

No further impairments on goodwill associated with these conditions were recognized during the year ended December 31, 2020.

Equity Method Investment Impairment — Refer to Notes 10 and 11 to the financial statements

The Company evaluates its equity method investment for impairment when factors indicate that a decrease in the value of its investment has occurred and the carrying amount of its investment may not be recoverable.

As of December 31, 2020, the Company holds an equity method investment, Enable Midstream Partners, LP (herein after referred to as “Enable”), with a recorded value of $782 million.

During the three months ended March 31, 2020, the Company recognized an impairment of $1,541 million based on the severity of decline in Enable’s common unit price due to the macroeconomic conditions related in part to the COVID-19 pandemic, combined with Enable’s

announcement on April 1, 2020 that it would reduce its quarterly distributions per common unit by 50%, and the market outlook indicating excess supply and continued depressed crude oil and natural gas prices impacting the midstream oil and gas industry.

No further impairment was recorded during the year ended December 31, 2020.

Given the significant assumptions used by management to estimate fair value including (i) recent market transactions of comparable companies and EBITDA to total enterprise multiples for comparable companies and the volume weighted average of the quoted price of Enable’s units, (ii) assumptions in the income approach including Enable’s forecasted cash distributions, forecasted growth rate of Enable’s cash distributions beyond 2020, and the determination of the cost of equity including market risk premiums, and (iii) the weighting of the different approaches, performing audit procedures to evaluate the reasonableness of these estimates and assumptions including the weighting percentages required a high degree of auditor judgment.

Our audit procedures related to the assumptions used to calculate the recent market transactions of comparable companies and EBITDA to total enterprise value multiples for comparable companies, and the volume weighted average of the quoted price of Enable’s units used in the market approach to approximate fair value at the measurement date included the following, among others:

- We tested the effectiveness of controls over management’s equity method investment impairment evaluation, including those over the determination of fair value, such as controls related to identifying comparable transactions, volume weighted average prices, and EBITDA multiples.

- We involved our fair value specialists who assisted in:

◦Assessing the appropriateness of fair value calculated based on the volume weighted average price model through independently recalculating the value and assessing the time period for which the common unit trading price data was pulled.

◦Assessing the appropriateness of the valuation multiples used in market approach valuation methods through independent recalculation and comparison to selected guideline comparable companies and independently obtained EBITDA multiples.

Our audit procedures related to the assumptions used in the income approach including Enable’s forecasted cash distributions, forecasted growth rate of Enable’s cash distributions beyond 2020, and the determination of the cost of equity including market risk premiums included the following, among others:

- We tested the effectiveness of controls over management’s equity method investment impairment evaluation, including controls related to assumptions utilized in the income approach for the determination of fair value.

- We agreed the forecasted distributions and historical cash flows used in the income approach to publicly available information from Enable.

- We involved our fair value specialists who assisted in:

◦Performing an analysis of the inflation, economic, and industry growth statistics to determine a range of acceptable forecasted growth rates of Enable’s cash distributions.

◦Independently calculating a cost of equity including market risk premiums using a process consistent with generally accepted valuation practices.

Our audit procedures related to the weighting of the different approaches included the following, among others:

- We tested the effectiveness of controls over management’s equity method investment impairment evaluation, including those over the determination of the weighting of the income approach and market approach used to calculate the fair value of Enable.

- We performed an inquiry with management to understand the rationale behind the weightings of the different approaches and compared the weightings to those utilized in previous fair value calculations for Enable.

- We involved our fair value specialists who assisted in evaluating the weighting based on the type of investment and availability of market data used in the valuation.

Management has determined its regulated operations meet 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 and expenses; operation and maintenance expense; depreciation and amortization expense; and income tax expense.

- 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 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 Commissions and the filings with the Commissions by intervenors that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.

- We evaluated management’s assertion that no indicators of impairment were identified in connection with the Company's property, plant, and equipment.

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.

| Utility revenues | | | $ | 7,049 | | | | | $ | 7,202 | | | | | $ | 6,199 | |

| Non-utility revenues | | | 369 | | | | | | 362 | | | | | | 78 | | |

| Total | | | 7,418 | | | | | | 7,564 | | | | | | 6,277 | | |

| Depreciation and amortization | | | 1,189 | | | | | | 1,225 | | | | | | 1,230 | | |

| Taxes other than income taxes | | | 516 | | | | | | 474 | | | | | | 404 | | |

| Goodwill impairment | | | 185 | | | | | | — | | | | | | — | | |

| Total | | | 6,379 | | | | | | 6,493 | | | | | | 5,409 | | |

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.

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. |

| ◦ | Historical revenues and operating margins. |

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

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.

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

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

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

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Utility revenues | $ | 7,162 | | | $ | 6,163 | | | $ | 5,603 | |

| Total | 12,301 | | | | 10,589 | | | | 9,614 | | |

| Total | 11,075 | | | | 9,758 | | | | 8,478 | | |

| Operating Income | 1,226 | | | | 831 | | | | 1,136 | | |

| Income Before Income Taxes | 929 | | | | 514 | | | | 1,063 | | |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| Accounts receivable ($26 and $56 related to VIEs, respectively), less bad debt reserve of $21 and $18, respectively | 1,249 | | | | 1,190 | | |

| Goodwill | 5,164 | | | | 867 | | |

| Intangible assets, net | 321 | | | | 65 | | |

| Other | 216 | | | | 158 | | |

| Other | 414 | | | | 255 | | |

| Other | 763 | | | | 402 | | |

| 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 | | ) | | | | | — | | |

| Taxes receivable | 5 | | | | (5 | | ) | | 6 | | |

| | |

| --- | --- |

Based on those evaluations, the principal executive officer and principal financial officer, in each case, concluded that the disclosure controls and procedures were effective as of December 31, [removed: 2019] [added: 2020] to provide assurance that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure.

[removed: With the exception of the implementation of the Vectren acquisition into CenterPoint Energy’s control structure, there] [added: There] has been no change in the Registrants’ internal controls over financial reporting that occurred during the three months ended December 31, [removed: 2019] [added: 2020] that has materially affected, or is reasonably likely to materially affect, the Registrants’ internal controls over financial reporting.

[removed: | • |] [added: -] Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; [removed: |]

[removed: | • |] [added: -] Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and [removed: |]

[removed: | • |] [added: -] Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. [removed: |]

Based on the Registrants’ evaluation under the framework in *Internal Control — Integrated Framework* (2013), the Registrants’ management has concluded, in each case, that their internal control over financial reporting was effective as of December 31, [removed: 2019.][added: 2020.]

Deloitte & Touche LLP, CenterPoint Energy’s independent registered public accounting firm, has issued an attestation report on the effectiveness of CenterPoint Energy’s internal control over financial reporting as of December 31, [removed: 2019] [added: 2020] which is set forth below.

We have audited the internal control over financial reporting of CenterPoint Energy, Inc. and subsidiaries (the “Company”) as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework (2013)* issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, [removed: 2019,] [added: 2020,] of the Company and our report dated February [removed: 27, 2020,] [added: 25, 2021,] expressed an unqualified opinion on those financial statements.

February 25, 2021

On the Merger Date, CenterPoint Energy completed the acquisition of Vectren.

CenterPoint Energy evaluated the control environment and implemented CenterPoint Energy’s internal control structure over the acquired operations.

| | |

| --- | --- |

February 27, 2020

Compensatory Arrangements of Certain [removed: Officers][added: Officers (CenterPoint Energy)]

*Amendments to Forms of Award [removed: Agreements] [added: Agreement] under Long-Term Incentive Plan*

On February [removed: 18, 2020,] [added: 19, 2021 and February 24, 2021,] the Compensation Committee [removed: (“Compensation Committee”) of the Board of Directors of CenterPoint Energy] approved new forms of award [removed: agreements] [added: agreement] under CenterPoint Energy’s LTIP for [removed: performance awards and] restricted stock unit [removed: awards.][added: awards, including a new form of award agreement for restricted stock unit awards for the Chief Executive Officer.]

The description of the forms of award [removed: agreements,] [added: agreement,] as amended, [removed: is] [added: are] qualified in [removed: its] [added: their] entirety by reference to the full text of the [removed: forms] [added: respective form] of [removed: performance award and] restricted stock unit award [removed: agreements, as applicable,] [added: agreement,] which are included as Exhibits [removed: 10(q)(2), 10(q)(5)] [added: 10(q)(12)] and [removed: 10(q)(6)] [added: 10(q)(13)] hereto and incorporated [added: herein] by [removed: reference herein.][added: reference.]

*Amendment to Change in Control Plan*

On February 19, 2021, the Board of Directors of CenterPoint Energy approved the First Amendment to the previously adopted Change in Control Plan.

The Change in Control Plan continues to cover officers of CenterPoint Energy, including the Chief Executive Officer, the Chief Financial Officer and CenterPoint Energy’s other named executive officers, and provides for severance payments and other benefits in the event a “Covered Termination” (as defined in the Change in Control Plan) occurs three months prior to or within two years after the completion of a transaction that effects a “Change in Control” (as defined in the Change in Control Plan).

One such benefit provided under the Change in Control Plan is an enhanced retirement benefit equal to the pay credits that would have otherwise accrued under the cash balance formula of the CenterPoint Energy Retirement Plan if the officer had remained employed through the severance period.

However, participation in the CenterPoint Energy Retirement Plan was closed for all non-union employees hired or rehired on or after January 1, 2020.

Because officers hired or rehired on or after the such date are not eligible for the CenterPoint Energy Retirement Plan, the First Amendment provides that the enhanced retirement benefit under the Change in Control Plan for such officers will instead be an amount equal to the employer non-matching contributions that the officers would otherwise have received under the CenterPoint Energy Savings Plan if the officers had remained employed through the severance period.

Benefits under the Change in Control Plan, including the enhanced retirement benefit as amended by the First Amendment, continue to be subject to a “double trigger” because both a Change in Control and termination of the participant’s employment are required for the participant to qualify for benefits.

The foregoing summary is qualified in its entirety by the First Amendment, which is filed as Exhibit 10(t)(2) hereto and incorporated herein by reference.

The newly approved forms of award agreement condition the otherwise time-based grants under the LTIP upon CenterPoint Energy’s achievement of performance goals established by the Compensation Committee.

With respect to certain such grants beginning in 2021, the Compensation Committee has established a performance goal requiring positive operating income in the last full calendar year of the restricted period as a condition for vesting.

With respect to payouts related to retirement (age 55 or greater with at least five years of service or, for the Chief Executive Officer, at least three years of service), such retirement payouts will be subject to the performance goals established by the Compensation Committee and will occur after determination of achievement at the end of the three-year vesting cycle.

On February 19, 2021, the Compensation Committee determined that Milton Carroll, Executive Chairman of CenterPoint Energy, will be eligible to participate in CenterPoint Energy’s STIP.

His short-term incentive compensation target is 75% of base salary.

The Compensation Committee also approved a cash bonus of $881,475 for Mr. Carroll, payable in March 2021.

On February 19, 2021, the Compensation Committee approved an award under CenterPoint Energy’s STIP of $2,463,750 for David J.

Lesar, President and Chief Executive Officer of CenterPoint Energy, based on a full year of his base salary.

Among other things, the newly approved forms of award agreements for officers and director-level employees provide that a “retirement eligible” (age 55 or greater with at least five years of service) participant, who meets the requirements for enhanced retirement as specified under the agreement will fully vest in the award, subject, in the case of performance awards, to the achievement of the relevant performance metrics.

The requirements for enhanced retirement for employees who are not officers subject to Section 16 of the Exchange Act include having a sum of age and years of employment equal to 65 or greater, providing at least six months’ written notice of retirement, providing a transition plan, and retiring on or after the January 1 immediately following the grant (for restricted stock units) or the first anniversary of the beginning of the designated performance cycle (for performance awards).

For officers subject to Section 16 of the Exchange Act, the requirements for enhanced retirement include having a sum of age and years of employment equal to 65 or greater, providing a transition plan, providing reasonable advanced written notice of retirement (as determined by the Compensation Committee), and retiring on or after the January 1 immediately following the grant (for restricted stock units) or the first anniversary of the beginning of the designated performance cycle (for performance awards).

In addition, for officers subject to Section 16 of the Exchange Act, eligibility for enhanced retirement is subject to approval by the Compensation Committee.

The newly approved forms of award agreements also provide for pro-rata vesting upon the “sale of subsidiary,” defined as a change in the ownership of a subsidiary, or a substantial portion of the assets of a subsidiary, of CenterPoint Energy, Inc., if the participant is performing services for the subsidiary at the time and ceases employment with CenterPoint Energy upon and in connection with the sale.

Amounts vested upon a sale of subsidiary are paid no later than the 70th day after the sale.

As previously disclosed, on December 9, 2019, Tracy B.

Bridge, Executive Vice President and President, Electric Division of CenterPoint Energy, provided notice of his intent to retire from CenterPoint Energy.

On February 24, 2020, the Compensation Committee elected to pay Mr. Bridge pursuant to the enhanced retirement provisions under the applicable award agreements under CenterPoint Energy’s LTIP in connection with his retirement from CenterPoint Energy effective as of February 25, 2020, whereby his outstanding awards will fully vest, subject, in the case of performance awards, to the achievement of the relevant performance metrics.

On February 26, 2020, the Compensation Committee approved certain compensation arrangements for Milton Carroll, Executive Chairman of CenterPoint Energy, as a result of his increased responsibilities in connection with the previously disclosed resignation of CenterPoint Energy’s President and Chief Executive Officer.

Specifically, his increased responsibilities include facilitating the identification, selection and transition of a new President and Chief Executive Officer of CenterPoint Energy.

In addition to his base salary of $820,000, effective as of April 1, 2020, and long-term incentive compensation target of 325% of base salary, Mr. Carroll will receive (i) a fully-vested equity award with a value at grant equal to $1,500,000, to be granted upon the appointment of a new President and Chief Executive Officer of CenterPoint Energy, with one-third of the underlying shares to be paid upon the grant date, another one-third to be paid upon the first anniversary of the grant date, and the remaining one-third to be paid on the second anniversary of the grant date; provided, however, if Mr. Carroll earlier separates from CenterPoint Energy such that he is neither an employee nor director, any remaining unpaid shares under the award will be payable upon his separation, and (ii) a $500,000 bonus for services rendered in 2019 in connection with CenterPoint Energy’s strategic initiatives.

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For CenterPoint Energy, the information called for by Item 10, to the extent not set forth in [removed: “Executive] [added: “Information About Our Executive] Officers” in Item 1, will be set forth in the definitive proxy statement relating to CenterPoint Energy’s [removed: 2020] [added: 2021] annual meeting of shareholders pursuant [added: to SEC Regulation 14A.]

to SEC Regulation 14A.

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For CenterPoint Energy, the information called for by Item 11 will be set forth in the definitive proxy statement relating to CenterPoint Energy’s [removed: 2020] [added: 2021] annual meeting of shareholders pursuant to SEC Regulation 14A.

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For CenterPoint Energy, the information called for by Item 12 will be set forth in the definitive proxy statement relating to CenterPoint Energy’s [removed: 2020] [added: 2021] annual meeting of shareholders pursuant to SEC Regulation 14A.

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For CenterPoint Energy, the information called for by Item 13 will be set forth in the definitive proxy statement relating to CenterPoint Energy’s [removed: 2020] [added: 2021] annual meeting of shareholders pursuant to SEC Regulation 14A.

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For CenterPoint Energy, the information called for by Item 14 will be set forth in the definitive proxy statement relating to CenterPoint Energy’s [removed: 2020] [added: 2021] annual meeting of shareholders pursuant to SEC Regulation 14A.

Aggregate fees billed to Houston Electric and CERC during the year ended December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] by their principal accounting firm, Deloitte & Touche LLP, are set forth below.

| | [added: | |] Year Ended December 31, | | | | | | | | | | | | | | | [added: | | | | | |]

| | [added: | |] Houston Electric | | | | [added: | |] CERC | | | | [added: | |] Houston Electric | | | | [added: | |] CERC | | |

| Audit fees (1) | [added: | |] $ | [removed: 884,400] [added: 658,965] | | | [added: | |] $ | [removed: 1,419,000] [added: 907,560] | | | [added: | |] $ | [removed: 859,950] [added: 884,400] | | | [added: | |] $ | [removed: 1,360,800] [added: 1,419,000] | |

| Audit-related fees (2) | [removed: 371,500] | | [added: 343,000] | | [removed: 130,500] | | | | [removed: 529,000] [added: 172,500] | | | | [removed: 121,000] | | [added: 371,500] | [added: | | | | | 130,500 | | |]

| Total audit and audit-related fees | [removed: 1,255,900] | | [added: 1,001,965] | | [removed: 1,549,500] | | | | [removed: 1,388,950] [added: 1,080,060] | | | | [removed: 1,481,800] | | [added: 1,255,900] | [added: | | | | | 1,549,500 | | |]

| Tax fees | [added: | |] — | | | | [added: | |] — | | | | [added: | |] — | | | | [added: | |] — | | |

| All other fees | [added: | |] — | | | | [added: | |] — | | | | [added: | |] — | | | | [added: | |] — | | |

| Total fees | [added: | |] $ | [removed: 1,255,900] [added: 1,001,965] | | | [added: | |] $ | [removed: 1,549,500] [added: 1,080,060] | | | [added: | |] $ | [removed: 1,388,950] [added: 1,255,900] | | | [added: | |] $ | [removed: 1,481,800] [added: 1,549,500] | |

[removed: | (1) | For 2019] [added: (1)For 2020] and [removed: 2018,] [added: 2019,] amounts include fees for services provided by the principal accounting firm relating to the integrated audit of financial statements and internal control over financial reporting, statutory audits, attest services, and regulatory filings. [removed: |]

[removed: | (2) | For 2019] [added: (2)For 2020] and [removed: 2018,] [added: 2019,] includes fees for consultations concerning financial accounting and reporting standards and various agreed-upon or expanded procedures related to accounting records to comply with financial accounting or regulatory reporting matters. [removed: |]

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| | | | 2020 | | | | | | | | | | | | 2019 | | | | | | | | |

| | | | | | | | | | | | | | | | |

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| | 2019 | | | | | | | | 2018 | | | | | | |

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| --- | --- |

| CenterPoint Energy | | [added: | | | |]

| Report of Independent Registered Public Accounting Firm | [removed: [102](#s7A978D4BE96257AB8DD5E9C573DF460E)] | [added: | [88](#iad7ee2cb909d478c89e59a724ad5607a_103) | | |]

| Statements of Consolidated [added: Comprehensive] Income for the Three Years Ended December 31, 2019 | [removed: [106](#s8F6D27D31838550A8E6D279BC0735F2F)] | [added: | [102](#iad7ee2cb909d478c89e59a724ad5607a_139) | | |]

| Statements of Consolidated Comprehensive Income for the Three Years Ended December 31, [removed: 2019] [added: 2020] | [removed: [107](#s35C8EEC1428A52F1B0BCF01464E0CA05)] | [added: | [94](#iad7ee2cb909d478c89e59a724ad5607a_112) | | |]

| Consolidated Balance Sheets as of December 31, [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] | [removed: [108](#s6B0E347B09305D8EADA56736DF681744)] | [added: | [95](#iad7ee2cb909d478c89e59a724ad5607a_118) | | |]

| Statements of Consolidated Cash Flows for the Three Years Ended December 31, [removed: 2019] [added: 2020] | [removed: [110](#s43D90E28B952538F91F5519CB0B10EA4)] | [added: | [97](#iad7ee2cb909d478c89e59a724ad5607a_124) | | |]

| Statements of Consolidated Changes in Equity for the Three Years Ended December 31, [removed: 2019] [added: 2020] | [removed: [111](#s8E80F02DFBCE55BF93CE48CF338D82AE)] | [added: | [98](#iad7ee2cb909d478c89e59a724ad5607a_127) | | |]

| Houston Electric | | [added: | | | |]

| Report of Independent Registered Public Accounting Firm | [removed: [112](#s8FD735EDE12955B2BB03C5ED90634348)] | [added: | [99](#iad7ee2cb909d478c89e59a724ad5607a_133) | | |]

| Statements of Consolidated Income for the Three Years Ended December 31, [removed: 2019] [added: 2020] | [removed: [113](#s2AD375D876CC566B9FEAEFCEFE438FCB)] | [added: | [93](#iad7ee2cb909d478c89e59a724ad5607a_109) | | |]