Fitch Affirms Enable's IDR at 'BBB'; Outlook Stable

Fitch Ratings has affirmed the following ratings for Enable Midstream Partners LP (Enable):

--Long-term Issuer Default Rating (IDR) at 'BBB';

--Senior unsecured debt and revolver at 'BBB';

--Short-term IDR and commercial paper (CP) rating at 'F3'.

Fitch also has affirmed the rating of Enable Oklahoma Intrastate Transmission LLC (Enable Oklahoma, formerly known as Enogex LLC) as follows:

--IDR at 'BBB';

--Senior unsecured debt at 'BBB'.

Debt outstanding at Enable Oklahoma is guaranteed by Enable. The Rating Outlook for both entities is Stable.

KEY RATINGS DRIVERS

Enable's ratings are supported by its strategy to operate with low leverage and to generate significant earnings from fee-based assets which provide somewhat stable cash flows. The rating is also supported by its size, scope, and diversity of assets and customers. While the commodity price environment provides headwinds for gathering and processing, Fitch expects Enable to prudently manage its balance sheet.

The ratings are driven by Enable's strong financial metrics which may slightly weaken over the near term. However, the metrics are expected to remain appropriate for the 'BBB' rating. Fitch expects leverage to remain in the range of 3.5x-4.0x over the next 12-18 months. Fitch also forecast a distribution coverage ratio above 1.0x over the same time period.

Fitch's credit concerns are primarily focused on commodity and volume exposure particularly in Enable's gathering and processing segment which accounted for 61% of gross margins in the third quarter of 2014. Other concerns include the potential for strategic spending or acquisition activity to accelerate to support increased growth for distributions.

Liquidity: Enable appears to have sufficient liquidity to meet its spending needs. As of Sept. 30, 2014, total liquidity was approximately $1.3 billion. Enable had $18 million of cash on the balance sheet. The partnership's $1.4 billion revolver extends until 2018 and there were no borrowings and $95 million of CP was outstanding. The CP is backed by the revolver and CP borrowings reduce availability to draw on the bank facility. There are no near term debt maturities until $363 million of notes payable to an affiliate, CenterPoint Energy Resources Corp. (CERC; IDR 'BBB'/Stable Outlook), become due in 2017.

Leverage: During Enable's short history as a public MLP, the partnership has operated with low leverage. On a pro forma basis, leverage for the latest 12 months (LTM) ending on Sept. 30, 2014 was 3.3x. Furthermore, Fitch forecasts that despite low commodity prices Enable should be able to keep leverage under 4.0x in 2015. While the environment for gathering and processing has become less favorable for midstream players, Fitch believes Enable should be able to maintain low leverage.

Capital Expenditures: As a limited partnership, Fitch expects Enable to spend significantly to grow distributable cash flows and to support distribution increases. In late 2014, the partnership forecasted 2015 contracted growth capex of in the range of $800 million to $1 billion. Another $225 million to $425 million of spending was for identified opportunities. Since the decline in commodity prices began and upstream operators have significantly cut capex budgets, Fitch assumes the 2015 growth capex budget will be significantly reduced particularly outside of contracted growth capex.

Contract Mix: For the first nine months of 2014, 72% of gross margins were from fee-based contracts while 28% were commodity based gross margins. Commodity based gross margins are primarily from the partnership's gathering and processing segment. On average, Fitch expects this segment to account for approximately 60% of gross margins. Overall, hedges remain fairly insignificant for Enable.

PARTNERSHIP DETAILS

On May 1, 2013, Enable was formed as a midstream joint venture between CenterPoint Energy Inc. (CenterPoint; IDR 'BBB'/Outlook Stable) and OGE Energy Corp. (OGE; IDR 'A-'/Outlook Stable). CenterPoint contributed its pipelines and field services businesses to Enable and OGE contributed 100% of Enable Oklahoma (previously known as Enogex). Prior to the closing, Enable Oklahoma was approximately 80% owned by OGE and 20% owned by ArcLight Capital Partners, LLC.

Enable is a master limited partnership which is owned 55.4% by CenterPoint, 26.3% by OGE and 18.3% by the public. CenterPoint and OGE each have a 50% management interest in the general partner. Incentive distribution rights are to be split 40% to CenterPoint and 60% to OGE.

Midstream assets from CenterPoint are located in Oklahoma and eight other states. Assets from OGE and ArcLight are primarily located in Oklahoma. Enable is an entity with assets in both dry gas and liquids rich basins.

RATING SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

--Positive rating action is not expected but could occur if leverage dropped below 2.0x on a sustained basis.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

--Material changes in Enable's strategy and/or inability to maintain low leverage while funding significant capex;

--Leverage (defined as debt to adjusted EBITDA) in excess of 4.0x on a sustained basis;

--Significant increases in commodity-based gathering and processing contracts which would increase volatility of cash flows.

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

Applicable Criteria and Related Research:

--'2015 Outlook: Midstream Services (Midstream Insulated from Falling Prices)' (December 2014);

--'Pipelines, Midstream and MLP Stats Quarterly - Third Quarter 2014' (December 2014);

--'MLP End Game (Common Goals - Divergent Strategies) (November 2014);

--'Bakken Shale Report (Prolific Production Prompts New Pipelines) (October 2014);

--'What Investors Want to Know: Pipelines, Midstream and MLPs' (October 2014);

--'Midstream Spending Significantly Rising for MLPs and C-Corps' (August 2014);

--'Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage' (May 2014)';

--'Rating Pipelines, Midstream and MLPs - Sector Credit Factors' (January 2014).

Applicable Criteria and Related Research:

2015 Outlook: Midstream Services (Midstream Insulated from Falling Prices)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=839188

Pipelines, Midstream and MLP Stats Quarterly - Third-Quarter 2014 (Third-Quarter Review)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=834968

MLP End Game (Common Goals - Divergent Strategies)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=802308

Bakken Shale Report (Prolific Oil Production Prompts New Pipelines)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=783488

What Investors Want to Know: Pipelines, Midstream and MLPs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=785149

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Rating Pipelines, Midstream and MLPs - Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=722082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978681

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