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 February 3, 2016 - 12:00 PM EST
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Fitch: CenterPoint's Ratings Unaffected by Investment in Enable; Strategic Initiatives Contemplated

CenterPoint Energy Inc.'s (CNP; 'BBB'/Stable Outlook) $363 million investment in Enable Midstream Partners' (Enable; 'BBB-'/Stable Outlook) perpetual preferred units does not affect CNP's ratings, according to Fitch Ratings. Separately, CNP's announcements regarding strategic alternatives for Enable and its electric utility subsidiary may have mixed credit implications.

On Jan. 29, 2016, CNP announced that it will invest proceeds from an early redemption of Enable's $363 million note due in 2017 to CenterPoint Energy Resources Corp (CERC; 'BBB'/Stable Outlook) in Enable's 10% Series A non-cumulative redeemable perpetual preferred units. This transaction will enhance Enable's financial flexibility by eliminating a near-term debt maturity. This is consistent with Fitch's expectations that CNP would support Enable during times of financial stress such as the current period of constrained capital markets access for all Master Limited Partnerships.

Fitch believes there is adequate headroom in CNP's credit metrics to absorb this level of investment in Enable. However, should Enable's credit profile further deteriorate, Fitch would evaluate further parental support against the need for CNP to maintain its own credit profile at current levels.

Enable will receive 100% equity credit for the non-cumulative Series A and 50% equity credit for the cumulative Series B upon conversion under Fitch's hybrid securities methodology. However, these preferred units, will alter Enable's distribution payment priority to some extent between CNP and its partner OGE Energy Corp (OGE; 'A-'/Stable Outlook), as they rank senior to Enable's common units with respect to the payment of distribution or distribution of assets upon liquidation. Additionally, if the non-cumulative Series A units are converted to the cumulative Series B, they will become more debt-like instruments. The credit implication of this transaction and Enable's financial performance on OGE will be addressed separately and in conjunction with the pending resolution of its environmental compliance plan.

On Feb. 1, 2016, CNP announced that it is evaluating strategic alternatives for its investment in Enable, including a tax free sale or spinoff. This announcement demonstrates CNP's recognition of investors' changing risk tolerance levels in light of the struggling midstream segment, which Fitch views favorably. Such a transaction would materially improve CNP's risk profile since its businesses would be comprised almost entirely of regulated electric transmission and distribution business through CenterPoint Houston Electric (CEHE; 'BBB+'/Stable Outlook) and natural gas distribution operations at CERC. CNP's ratings in such a scenario would be assessed based on a significantly improved risk profile and its ability to reduce parent holding debt commensurate with the loss of earnings and cash flows from Enable.

CNP also announced that it is exploring the possibility of a REIT structure for part or all of its electric utility business. Fitch would generally view the REIT structure as negative to the existing bondholders given the reduced financial flexibility as compared to other utility holding companies due to the requirement to distribute at least 90% of net income to shareholders to maintain the REIT status, continuous reliance on capital markets to finance growth capex and uncertainty regarding regulatory treatment of such entities.

Additional information is available at 'www.fitchratings.com'.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst
Julie Jiang
Director
+1-212-908-0708
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY, 10004
or
Secondary Analyst
Shalini Mahajan
Managing Director
+1-212-908-0351
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
Email: alyssa.castelli@fitchratings.com


Source: Business Wire (February 3, 2016 - 12:00 PM EST)

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