Variable Interest Entity and Equity Method Investments

6 Months Ended

Jun. 30, 2018

VARIABLE INTEREST ENTITY AND EQUITY METHOD INVESTMENTS

Southern Power

In May 2018, Southern Power sold a 33% equity interest in SPSH to Global Atlantic. See Note (J) under "Southern Power" for additional information. A wholly-owned subsidiary of Southern Power is the general partner and holds a 1% ownership interest in SPSH and another wholly-owned subsidiary of Southern Power owns the remaining 66% ownership in SPSH. SPSH is a variable interest entity (VIE) because the arrangement is structured as a limited partnership and the 33% limited partner does not have substantive kick-out rights against the general partner. Southern Power previously consolidated SPSH and will continue to do so as the primary beneficiary of the VIE because it controls the most significant activities of the partnership, including operating and maintaining its assets.

At June 30, 2018, SPSH had total assets of $6.5 billion, total liabilities of $0.1 billion, and noncontrolling interests related to other partners' interests of $1.2 billion. Cash distributions from SPSH are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their membership interests and the limited partnership agreement.

Transfers and sales of the assets in the VIE are subject to limited partner consent and the liabilities do not have recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.

Southern Company Gas

See Note 4 to the financial statements of Southern Company Gas in Item 8 of the Form 10-K for additional information.

Equity Method Investments

The carrying amounts of Southern Company Gas' equity method investments as of June 30, 2018 and December 31, 2017 and related income from those investments for the three and six-month periods ended June 30, 2018 and June 30, 2017 were as follows:



Investment Balance	June 30, 2018		December 31, 2017
	(in millions)
SNG	$	1,258	$	1,262
Atlantic Coast Pipeline	56		41
PennEast Pipeline	67		57
Triton	42		42
Pivotal JAX LNG, LLC	52		44
Horizon Pipeline	31		30
Other	1		1
Total	$	1,507	$	1,477



Earnings from Equity Method Investments	Three Months Ended June 30, 2018		Three Months Ended June 30, 2017		Six Months Ended June 30, 2018		Six Months Ended June 30, 2017
	(in millions)
SNG	$	27	$	24	$	66	$	58
PennEast Pipeline	1		1		2		4
Atlantic Coast Pipeline	1		2		3		3
Triton	1		2		2		2
Horizon Pipeline	1		—		1		1
Total	$	31	$	29	$	74	$	68

Southern Natural Gas

Selected financial information of SNG for the three and six months ended June 30, 2018 and June 30, 2017 is as follows:



Income Statement Information	Three Months Ended June 30, 2018		Three Months Ended June 30, 2017		Six Months Ended June 30, 2018		Six Months Ended June 30, 2017
	(in millions)
Revenues	$	146	$	143	$	306	$	298
Operating income	$	60	$	63	$	159	$	147
Net income	$	54	$	48	$	132	$	114