NOTE 18. VARIABLE INTEREST ENTITIES

A VIE is an entity that has one of three characteristics: (1) it is controlled by someone other than its shareowners or partners, (2) its shareowners or partners are not economically exposed to the entity's earnings (for example, they are protected against losses), or (3) it was thinly capitalized when it was formed.

In the normal course of business we become involved with VIEs either because we help create them or we invest in them. Our VIEs either provide goods and services to customers or provide financing to third parties for the purchase of GE goods and services. If we control the VIE, we consolidate it and provide disclosure below. However, if the VIE is a business and use of its assets is not limited to settling its liabilities, ongoing disclosures are not required.

CONSOLIDATED VARIABLE INTEREST ENTITIES

Our most significant consolidated VIEs are four joint ventures used to complete acquisitions. The newest of these, BHGE LLC was formed as part of the Baker Hughes transaction. BHGE LLC owns the operating assets of GE Oil & Gas and Baker Hughes. BHGE LLC is a VIE as we hold an economic interest of approximately 62.5% in the partnership, but we hold no voting or participating rights through our direct economic ownership. BHGE LLC is a SEC Registrant with separate filing requirements with the SEC and its separate financial information can be obtained from www.sec.gov.

The remaining three joint ventures were formed as part of the Alstom acquisition. These joint ventures include grid technology, renewable energy, and global nuclear and French steam power and have combined assets, liabilities and redeemable non-controlling interest as of June 30, 2018 and December 31, 2017 of $15,200 million, $9,927 million and $3,019 million and $16,344 million, $11,463 million and $3,065 million, respectively. These joint ventures are considered VIEs because the equity held by Alstom does not participate fully in the earnings of the ventures due to contractual features allowing Alstom to sell their interests back to GE (see Note 14 for further information). We consolidate these joint ventures because we control all their significant activities. These joint ventures are in all other respects regular businesses and are therefore exempt from ongoing disclosure requirements for consolidated VIEs provided below.

The table below provides information about consolidated VIEs that are subject to ongoing disclosure requirements. Substantially all of these entities were created to help our customers finance the purchase of GE goods and services or to purchase GE customer notes receivable arising from sales of GE goods and services. These entities have no features that could expose us to losses that could significantly exceed the difference between the consolidated assets and liabilities.



ASSETS AND LIABILITIES OF CONSOLIDATED VIEs
			GE Capital
(In millions)	GE		Customer Notes receivables(a)		Other(b)		Total

June 30, 2018
Assets
Financing receivables, net	$	—	$	—	$	1,003	$	1,003
Current receivables	76		418		—		494
Other assets	524		1,012		1,271		2,807
Total	$	600	$	1,429	$	2,274	$	4,304

Liabilities
Borrowings	$	44	$	—	$	1,154	$	1,198
Non-recourse borrowings	—		610		14		624
Other liabilities	257		663		584		1,504
Total	$	301	$	1,274	$	1,751	$	3,326

December 31, 2017
Assets
Financing receivables, net	$	—	$	—	$	792	$	792
Current receivables	59		570		—		630
Investment securities	—		—		918		918
Other assets	586		1,182		1,920		3,688
Total	$	646	$	1,752	$	3,630	$	6,028

Liabilities
Borrowings	$	39	$	—	$	1,027	$	1,066
Non-recourse borrowings	—		669		16		685
Other liabilities	345		1,021		1,525		2,891
Total	$	384	$	1,690	$	2,568	$	4,642


(a)	Two funding vehicles established to purchase customer notes receivable from GE, one of which is partially funded by third-party debt.

(b)

In January 2018, ownership of the equity shares of Electric Insurance Company ("EIC") were distributed to GE Capital by a bankruptcy trustee. We have previously reported EIC as a VIE because we received a 100% beneficial interest in the assets, liabilities and operations of EIC, related to an interim distribution in 2001. As EIC is now a consolidated voting interest entity we removed EIC from our VIE disclosure. In 2017, $1,470 million of assets and $959 million of liabilities were included related to EIC.

Total revenues from our consolidated VIEs were $164 million and $256 million for the three months ended June 30, 2018 and 2017 and $338 million and $508 million for the six months ended June 30, 2018 and 2017, respectively. Related expenses consisted primarily of cost of goods and services of $60 million and $83 million for the three months ended June 30, 2018 and 2017 and $133 million and $178 million for the six months ended June 30, 2018 and 2017, respectively.

Where we provide servicing for third-party investors, we are contractually permitted to commingle cash collected from customers on financing receivables sold to third-party investors with our own cash prior to payment to third-party investors, provided our short-term credit rating does not fall below A-1/P1. These third-party investors also owe us amounts for purchased financial assets and scheduled interest and principal payments. At June 30, 2018 and December 31, 2017, the amounts of commingled cash owed to the third-party investors were $23 million and $61 million, respectively.

UNCONSOLIDATED VARIABLE INTEREST ENTITIES

We become involved with unconsolidated VIEs primarily through assisting in the formation and financing of the entity. We do not consolidate these entities because we do not have power over decisions that significantly affect their economic performance. Our investments in unconsolidated VIEs, at June 30, 2018 and December 31, 2017 were $4,987 million and $5,833 million, respectively. Substantially all of these investments are held by Energy Financial Services. Obligations to make additional investments in these entities are not significant.