4 unchanged sentences
Most of the revenues and income from the Registrants’ business activities are affected by market risks.
−Removed: Categories of market risk include exposure to commodity prices through non-trading activities, interest rates and equity prices.
+Added: Categories of market risk include exposure to interest rates, equity prices and commodity prices through non-trading activities.
A description of each market risk is set forth below:
5 unchanged sentences
As of December 31, 2024, 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.
+Added: The Registrants seek to manage interest rate exposure by monitoring the effects of changes in market interest rates and using a combination of fixed and variable rate debt.
+Added: Additionally, interest rate swaps are used to mitigate interest rate exposure when deemed appropriate.
+Added: See Note 7 to the Interim Condensed Financial Statements.
CenterPoint Energy’s floating rate obligations aggregated $1.5 billion and $1.9 billion as of December 31, 2024 and 2023, respectively.
If the floating interest rates were to increase by 100 basis points from December 31, 2024 rates, CenterPoint Energy’s combined interest expense would increase by approximately $15 million annually.
−Removed: CenterPoint Energy has $350 million aggregate principal amount of floating rate notes maturing in 2024 that will be refinanced at current rates.
−Removed: Houston Electric did not have any floating rate obligations as of either December 31, 2023 or 2022.
−Removed: CERC’s floating rate obligations aggregated $484 million and $1.4 billion as of December 31, 2023 and 2022, respectively.
+Added: Houston Electric’s floating rate obligations aggregated $500 million as of December 31, 2024, which mature on December 24, 2025.
+Added: Houston Electric had no floating rate notes as of December 31, 2023.
+Added: CERC’s floating rate obligations aggregated $599 million and $484 million as of December 31, 2024 and 2023, respectively.
If the floating interest rates were to increase by 100 basis points from December 31, 2024 rates, CERC’s combined interest expense would increase by approximately $6 million annually.
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However, the fair value of these instruments would increase by approximately $792 million if interest rates were to decline by 10% from their levels as of December 31, 2024.
−Removed: CenterPoint Energy has $500 million of fixed-rate senior notes and $23 million of SIGECO first mortgage bonds maturing in 2024 that will be refinanced at current rates.
As of December 31, 2024 and 2023, Houston Electric had outstanding fixed-rate debt aggregating $8.4 billion and $7.7 billion, respectively, in principal amount and having a fair value of approximately $7.3 billion and $7 billion, respectively.
5 unchanged sentences
However, the fair value of these instruments would increase by approximately $160 million if interest rates were to decline by 10% from their levels at December 31, 2024.
−Removed: CERC has no fixed-rate senior notes maturing in 2024.
−Removed: In general, such an increase in fair value would impact earnings and cash flows only if the Registrants were to reacquire all or a portion of these instruments in the open market prior to their maturity.
−Removed: As discussed in Note 11 to the consolidated financial statements, the ZENS obligation is bifurcated into a debt component and a derivative component.
+Added: CERC has $10 million fixed-rate senior notes maturing in 2025.
+Added: In general, such an increase in fair value previously described would impact earnings and cash flows only if the Registrants were to reacquire all or a portion of these instruments in the open market prior to their maturity.
+Added: The ZENS obligation is bifurcated into a debt component and a derivative component.
The debt component of $2 million at December 31, 2024 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.
−Removed: the fair value of the debt component would increase by approximately $1 million if interest rates were to decline by 10% from levels at December 31, 2023.
+Added: However, the fair value of the debt component would increase by less than $1 million if interest rates were to decline by 10% from levels at December 31, 2024.
Changes in the fair value of the derivative component, a $619 million recorded liability at December 31, 2024, 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.
−Removed: If the risk-free interest rate were to increase by 10% from December 31, 2023 levels, the fair value of the derivative component liability would decrease by approximately $1 million, which would be recorded as an unrealized gain in CenterPoint Energy’s Statements of Consolidated Income.
+Added: If the risk-free interest rate were to increase by 10% from December 31, 2024 levels, the fair value of the derivative component liability would decrease by approximately $1 million, which would be recorded as a gain on indexed securities in CenterPoint Energy’s Statements of Consolidated Income.
Equity Market Value Risk (CenterPoint Energy)
2 unchanged sentences
Changes in the fair value of the ZENS-Related Securities held by CenterPoint Energy are expected to substantially offset changes in the fair value of the derivative component of the ZENS.
−Removed: A decrease of 10% from the December 31, 2023 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.
−Removed: Commodity Price Risk From Non-Trading Activities (CenterPoint Energy)
+Added: A decrease of 10% from the December 31, 2024 aggregate market value of these shares would result in a net loss of less than $1 million, which would be recorded on a gross basis as both a gain on indexed debt securities and as a loss on equity securities in CenterPoint Energy’s Statements of Consolidated Income.
+Added: Commodity Price Risk From Non-Trading Activities (CenterPoint Energy and CERC)
CenterPoint Energy’s regulated operations are exposed to commodity price risk during severe weather events, such as hurricanes, tornadoes and severe winter weather conditions.
1 unchanged sentence
Recovery of cost increases driven by rising commodity prices during severe weather events could be resisted by our regulators and our regulators might attempt to deny or defer timely recovery of those costs.
−Removed: However, CenterPoint Energy’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms.
−Removed: CenterPoint Energy’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years.
+Added: However, CenterPoint Energy’s and CERC’s regulated operations in Indiana have limited exposure to commodity price risk for transactions involving purchases and sales of natural gas, coal and purchased power for the benefit of retail customers due to current state regulations, which, subject to compliance with those regulations, allow for recovery of the cost of such purchases through natural gas and fuel cost adjustment mechanisms.
+Added: CenterPoint Energy’s and CERC’s utility natural gas operations in Indiana have regulatory authority to lock in pricing for up to 50% of annual natural gas purchases using arrangements with an original term of up to 10 years.
This authority has been utilized to secure fixed price natural gas using both physical purchases and financial derivatives.
−Removed: As of December 31, 2023, the recorded fair value of non-trading energy derivative liability was $12 million for CenterPoint Energy’s utility natural gas operations in Indiana, which is offset by a regulatory asset.
−Removed: Natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered.
+Added: Although CenterPoint Energy’s and CERC’s regulated operations are exposed to limited commodity price risk, natural gas and coal prices have other effects on working capital requirements, interest costs, and some level of price-sensitivity in volumes sold or delivered.
Constructive regulatory orders, such as those authorizing lost margin recovery, other innovative rate designs and recovery of unaccounted for natural gas and other natural gas-related expenses, also mitigate the effect natural gas costs may have on CenterPoint Energy’s financial condition.
−Removed: In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy.
+Added: In 2008, the PUCO approved an exit of the merchant function in CenterPoint Energy’s and CERC’s Ohio natural gas service territory, allowing Ohio customers to purchase substantially all natural gas directly from retail marketers rather than from CenterPoint Energy or CERC.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.