Consolidated Entities and Equity Method Investments

3 Months Ended

Mar. 31, 2019

CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

Southern Power

Variable Interest Entities

See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information on Southern Power's VIEs.

Southern Power has certain wholly-owned subsidiaries that are determined to be VIEs. Southern Power is considered the primary beneficiary of these VIEs because it controls the most significant activities of the VIEs, including operating and maintaining the respective assets, and has the obligation to absorb expected losses of these VIEs to the extent of its equity interests. Southern Power previously consolidated SP Solar and SP Wind. Southern Power continues to consolidate them following the 2018 sales of noncontrolling interests in each entity, as the primary beneficiary of each VIE, since it controls the most significant activities of each entity, including operating and maintaining their assets. Transfers and sales of the assets in the VIEs are subject to limited partner consent and the liabilities are non-recourse to the general credit of Southern Power. Liabilities consist of customary working capital items and do not include any long-term debt.

SP Solar

At March 31, 2019, SP Solar had total assets of $6.5 billion, total liabilities of $373 million, and noncontrolling interests of $1.2 billion. Cash distributions from SP Solar are allocated 67% to Southern Power and 33% to Global Atlantic in accordance with their partnership interest percentage. Under the terms of the limited partnership agreement, distributions without limited partner consent are limited to available cash and SP Solar is obligated to distribute all such available cash to its partners each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves.

SP Wind

At March 31, 2019, SP Wind had total assets of $2.6 billion, total liabilities of $141 million, and noncontrolling interests of $46 million. Under the terms of the limited liability agreement, distributions without Class A member consent are limited to available cash and SP Wind is obligated to distribute all such available cash to its members each quarter. Available cash includes all cash generated in the quarter subject to the maintenance of appropriate operating reserves. Cash distributions from SP Wind are generally allocated 60% to Southern Power and 40% to the three financial investors in accordance with the limited liability agreement.

Southern Company Gas

See Note 7 to the financial statements 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 March 31, 2019 and December 31, 2018 and related income from those investments for the three-month periods ended March 31, 2019 and 2018 were as follows:



Investment Balance	March 31, 2019		December 31, 2018
	(in millions)
SNG	$	1,262	$	1,261
Atlantic Coast Pipeline	96		83
PennEast Pipeline	75		71
Other	124		123
Total	$	1,557	$	1,538



Earnings from Equity Method Investments	Three Months Ended March 31, 2019		Three Months Ended March 31, 2018
	(in millions)
SNG	$	42	$	39
Atlantic Coast Pipeline	3		1
PennEast Pipeline	2		1
Other	1		1
Total	$	48	$	42

SNG

Selected financial information of SNG for the three months ended March 31, 2019 and 2018 is as follows:



Income Statement Information	Three Months Ended March 31, 2019		Three Months Ended March 31, 2018
	(in millions)
Revenues	$	166	$	160
Operating income	106		99
Net income	84		78