Variable Interest Entity and Equity Method Investments

9 Months Ended

Sep. 30, 2018

VARIABLE INTEREST ENTITY AND EQUITY METHOD INVESTMENTS

Southern Power

In May 2018, Southern Power sold a 33% limited partnership 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 September 30, 2018, SPSH had total assets of $6.4 billion, total liabilities of $111 million, 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 on Southern Company Gas' equity method investments.

Equity Method Investments

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



Investment Balance	September 30, 2018		December 31, 2017
	(in millions)
SNG	$	1,260	$	1,262
Atlantic Coast Pipeline	73		41
PennEast Pipeline	70		57
Other	126		117
Total	$	1,529	$	1,477



Earnings from Equity Method Investments	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
	(in millions)
SNG	$	29	$	28	$	95	$	86
PennEast Pipeline	2		1		4		5
Atlantic Coast Pipeline	1		1		4		4
Other	2		2		5		5
Total	$	34	$	32	$	108	$	100

Southern Natural Gas

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



Income Statement Information	Three Months Ended September 30, 2018		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2018		Nine Months Ended September 30, 2017
	(in millions)
Revenues	$	145	$	146	$	451	$	445
Operating income	$	71	$	71	$	230	$	218
Net income	$	58	$	57	$	190	$	172