Variable Interest Entities

9 Months Ended

Sep. 30, 2014

Note N — Variable Interest Entities

In March 2014, Con Edison Development purchased a 50 percent membership interest in Copper Mountain Solar 3 Holdings, LLC (CMS 3). As a result, Con Edison has a variable interest in CMS 3, which is a non-consolidated entity. CMS 3 owns a project company that is developing a 250 MW (AC) solar energy project in Nevada. Electricity generated by the project is to be sold to the Southern California Public Power Authority pursuant to a long-term power purchase agreement. Con Edison is not the primary beneficiary since the power to direct the activities that most significantly impact the economics of CMS 3 is shared equally between Con Edison Development and a third party. At September 30, 2014, Con Edison’s consolidated balance sheet includes $155 million in investments (including earnings) related to CMS 3, which assessed in accordance with the accounting rules for variable interest entities (VIE), is Con Edison’s current maximum exposure to loss in the entity. In addition, Con Edison and Con Edison Development have issued certain guarantees to third parties in connection with CMS 3. See “Guarantees” in Note H.

In May 2014, Con Edison Development sold 50 percent of its membership interest in CED California Holdings Financing I, LLC (CCH), which was previously a wholly owned subsidiary. As a result, Con Edison has a variable interest in CCH, which is no longer a consolidated entity. CCH owns project companies that operate 110 MW (AC) of solar energy projects in California. Electricity generated by the projects is sold to Pacific Gas and Electric Company pursuant to long-term power purchase agreements. Con Edison is not the primary beneficiary since the power to direct the activities that most significantly impact the economics of CCH is shared equally between Con Edison Development and a third party. Con Edison Development’s remaining 50 percent interest in CCH is now accounted for under the equity method.

As a result of the sale, Con Edison Development received net proceeds of $108 million and recognized a pre-tax gain on the sale of $45 million ($26 million, net of tax). The following table summarizes the sale and resultant deconsolidation on the transaction date:


*(Millions of Dollars)*
Proceeds from sale, net of transaction costs of $1	$	108
Non-utility property, less accumulated depreciation		(341	)
Other assets, including working capital		(31	)
Long-term debt, including current portion		217
Other liabilities		9
Gain on sale of solar energy projects		(45	)
Equity method investment upon deconsolidation	$	(83	)

At September 30, 2014, Con Edison’s consolidated balance sheet includes $82 million in investments (including earnings) related to CCH, which assessed in accordance with the accounting rules for variable interest entities, is Con Edison’s current maximum exposure to loss in the entity.

In August 2014, Con Edison Development purchased an 80 percent membership interest in OCI Solar San Antonio 4 LLC (Texas Solar) for $49 million. As a result, Con Edison has a variable interest in Texas Solar, which is a consolidated entity. Texas Solar owns a project company that developed a 40 MW (AC) solar energy project in Texas. Electricity generated by the project is sold to the City of San Antonio pursuant to a long-term power purchase agreement. Con Edison is the primary beneficiary since the power to direct the activities that most significantly impact the economics of Texas Solar is held by Con Edison Development. At September 30, 2014, Con Edison’s consolidated balance sheet includes $58 million in net assets (as detailed in the table below) and the non-controlling interest of the third party of $9 million related to Texas Solar. Earnings for the nine months ended September 30, 2014 were immaterial.


*(Millions of Dollars)*
Restricted cash			$13
Non-utility property, less accumulated depreciation			111
Other assets			12
Total assets (a)			$136
Long-term debt due within one year			$66
Other liabilities			12
Total liabilities (b)			$78

(a)	The assets of Texas Solar represent assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE.

(b)	The liabilities of Texas Solar represent liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary.

CECONY [Member]

Variable Interest Entities

Note N — Variable Interest Entities


*(Millions of Dollars)*
Proceeds from sale, net of transaction costs of $1	$	108
Non-utility property, less accumulated depreciation		(341	)
Other assets, including working capital		(31	)
Long-term debt, including current portion		217
Other liabilities		9
Gain on sale of solar energy projects		(45	)
Equity method investment upon deconsolidation	$	(83	)


*(Millions of Dollars)*
Restricted cash			$13
Non-utility property, less accumulated depreciation			111
Other assets			12
Total assets (a)			$136
Long-term debt due within one year			$66
Other liabilities			12
Total liabilities (b)			$78

(a)	The assets of Texas Solar represent assets of a consolidated VIE that can be used only to settle obligations of the consolidated VIE.

(b)	The liabilities of Texas Solar represent liabilities of a consolidated VIE for which creditors do not have recourse to the general credit of the primary beneficiary.