Long-term Debt



	December 31, 2016					December 31, 2015
	Long-Term			Current (1)		Long-Term (2)			Current (1)
	(in millions)
Long-term debt:
Bank Loans	$	—		$	—	$	200		$	—
First mortgage bonds 9.15% due 2021	102			—		102			—
General mortgage bonds 1.85% to 6.95% due 2021 to 2044 (3)	2,512			—		1,912			—
System restoration bonds 3.46% to 4.243% due 2018 to 2022	312			53		365			50
Transition bonds 0.901% to 5.302% due 2017 to 2024	1,560			358		1,918			341
Unamortized debt issuance costs	(23		)	—		(21		)	—
Unamortized discount and premium, net	(9		)	—		(8		)	—
Total long-term debt	$	4,454		$	411	$	4,468		$	391


(1)	Includes amounts due or scheduled to be paid within one year of the date noted.


(2)	Includes $21 million of unamortized debt issuance costs to reflect adoption of ASU 2015-03.


(3)	Debt issued as collateral is excluded from the financial statements because of the contingent nature of the obligation.

Retirement of Bonds. In December 2016, Houston Electric retired $56 million of collateralized pollution control bonds that had been held for remarketing. These bonds were not reflected on the consolidated financial statements because Houston Electric was both the obligor on the bonds and the current owner of the bonds.

Debt Issuances. Houston Electric issued the following general mortgage bonds during 2016 and as of February 10, 2017:



Issuance Date	Aggregate Principal Amount		Interest Rate	Maturity Date
	(in millions)
May 2016	$	300	1.85%	2021
August 2016	300		2.40%	2026
January 2017	300		3.00%	2027

The proceeds from the issuance of these bonds were used to repay short-term debt and for limited liability company purposes.

Hedging of Interest Expense for Future Debt Issuances. In April 2016, Houston Electric entered into forward interest rate agreements with several counterparties, having an aggregate notional amount of $150 million. These agreements were executed to hedge, in part, volatility in the 5-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments of Houston Electric’s $300 million issuance of fixed rate debt in May 2016. These forward interest rate agreements were designated as cash flow hedges. The realized gains and losses associated with the agreements were immaterial.

In June and July 2016, Houston Electric entered into forward interest rate agreements with several counterparties, having an aggregate notional amount of $300 million. These agreements were executed to hedge, in part, volatility in the 10-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments of Houston Electric’s $300 million issuance of fixed rate debt in August 2016. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of realized gains associated with the agreements, which totaled $1.1 million, is a component of accumulated other comprehensive income and will be amortized over the life of the bonds. The ineffective portion of the gains and losses was recorded in income and was immaterial.

In January 2017, Houston Electric entered into forward interest rate agreements with several counterparties, having an aggregate notional amount of $150 million. These agreements were executed to hedge, in part, volatility in the 10-year U.S. treasury rate by reducing Houston Electric’s exposure to variability in cash flows related to interest payments of Houston Electric’s $300 million issuance of fixed rate debt in January 2017. These forward interest rate agreements were designated as cash flow hedges. Accordingly, the effective portion of unrealized losses associated with the agreements, which totaled approximately $0.5 million, will be a component of accumulated other comprehensive income in 2017 and will be amortized over the life of the bonds.

Securitization Bonds. As of December 31, 2016, Houston Electric had special purpose subsidiaries consisting of the Bond Companies, which it consolidates. The consolidated special purpose subsidiaries are wholly-owned, bankruptcy remote entities that were formed solely for the purpose of purchasing and owning transition or system restoration property through the issuance of transition bonds or system restoration bonds and activities incidental thereto. These Securitization Bonds are payable only through the imposition and collection of “transition” or “system restoration” charges, as defined in the Texas Public Utility Regulatory Act, which are irrevocable, non-bypassable charges to provide recovery of authorized qualified costs. Houston Electric has no payment obligations in respect of the Securitization Bonds other than to remit the applicable transition or system restoration charges it collects. Each special purpose entity is the sole owner of the right to impose, collect and receive the applicable transition or system restoration charges securing the bonds issued by that entity. Creditors of CenterPoint Energy or Houston Electric have no recourse to any assets or revenues of the Bond Companies (including the transition and system restoration charges), and the holders of Securitization Bonds have no recourse to the assets or revenues of CenterPoint Energy or Houston Electric.

Revolving Credit Facility.



December 31, 2016						December 31, 2015
Size of Facility		Loans		Letters of Credit		Size of Facility		Loans (1)		Letters of Credit
(in millions)
$	300	$	—	$	4	$	300	$	200	$	4


(1)	Weighted average interest rate was 1.64% as of December 31, 2015.

Execution Date

Size of

Facility

Draw Rate of LIBOR plus (1)

Financial Covenant Limit on Debt to Capital Ratio (3)

Debt to Capital

Ratio as of

December 31, 2016 (2)

Termination Date

(in millions)

March 3, 2016

300

1.125%

65%

47.4%

March 3, 2021


(1)	Based on current credit ratings.


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

(3)

The financial covenant limit will temporarily increase from 65% to 70% if Houston Electric experiences damage from a natural disaster in its service territory and Houston Electric certifies to the administrative agent that Houston Electric has incurred system restoration costs reasonably likely to exceed $100 million in a consecutive twelve-month period, all or part of which Houston Electric intends to seek to recover through securitization financing. Such temporary increase in the financial covenant would be in effect from the date Houston Electric delivers its certification until the earliest to occur of (i) the completion of the securitization financing, (ii) the first anniversary of Houston Electric’s certification or (iii) the revocation of such certification.

Houston Electric was in compliance with all financial debt covenants as of December 31, 2016.

Maturities. Maturities of long-term debt, capital leases and sinking fund requirements are as follows:



	Houston Electric		Securitization Bonds
	(in millions)
2017	$	—	$	411
2018	—		434
2019	—		458
2020	—		231
2021	402		211

Liens. As of December 31, 2016, Houston Electric’s assets were subject to liens securing approximately $102 million of first mortgage bonds. Sinking or improvement fund and replacement fund requirements on the first mortgage bonds may be satisfied by certification of property additions. Sinking fund and replacement fund requirements for 2016, 2015 and 2014 have been satisfied by certification of property additions. The replacement fund requirement to be satisfied in 2017 is approximately $240 million, and the sinking fund requirement to be satisfied in 2017 is approximately $1.6 million. Houston Electric expects to meet these 2017 obligations by certification of property additions. As of December 31, 2016, Houston Electric’s assets were also subject to liens securing approximately $2.6 billion of general mortgage bonds, which are junior to the liens of the first mortgage bonds.