CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

3 Months Ended

Mar. 31, 2020

CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTS

See Note 7 to the financial statements in Item 8 of the Form 10-K for additional information.

Southern Power

Variable Interest Entities

Southern Power has certain 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.

SP Solar and SP Wind

At March 31, 2020 and December 31, 2019, SP Solar had total assets of $6.3 billion and $6.4 billion, respectively, and total liabilities of $382 million and $381 million, respectively. Noncontrolling interests totaled $1.1 billion at both March 31, 2020 and December 31, 2019. 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.

At March 31, 2020 and December 31, 2019, SP Wind had total assets of $2.5 billion and total liabilities of $123 million and $128 million, respectively. Noncontrolling interests totaled $45 million at both March 31, 2020 and December 31, 2019. 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 Power consolidates both SP Solar and SP Wind, as the primary beneficiary, since it controls the most significant activities of each entity, including operating and maintaining their assets. Certain transfers and sales of the assets in the VIEs are subject to 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.

Other Variable Interest Entities

Southern Power has other consolidated VIEs that relate to certain subsidiaries that have either sold noncontrolling interests to tax-equity investors or acquired less than a 100% interest from facility developers. These entities are considered VIEs because the arrangements are structured similar to a limited partnership and the noncontrolling members do not have substantive kick-out rights.

At March 31, 2020 and December 31, 2019, the other VIEs had total assets of $1.1 billion, total liabilities of $109 million and $104 million, respectively, and noncontrolling interests of $396 million and $409 million, respectively. Under the terms of the partnership agreements, distributions of all available cash are required each month or quarter and additional distributions require partner consent.

Equity Method Investments

At March 31, 2020 and December 31, 2019, Southern Power had equity method investments in several wind and battery storage projects totaling $45 million and $28 million, respectively.

Southern Company Gas

Equity Method Investments

On March 24, 2020, Southern Company Gas completed the sale of its interests in Pivotal LNG and Atlantic Coast Pipeline. See Note (K) under "Southern Company Gas" for additional information.

The carrying amounts of Southern Company Gas' equity method investments as of March 31, 2020 and December 31, 2019 and related income from those investments for the three-month periods ended March 31, 2020 and 2019 were as follows:



Investment Balance	March 31, 2020		December 31, 2019^(a)
	(in millions)
SNG^(b)	$	1,216	$	1,137
PennEast Pipeline^(c)	85		82
Other	32		32
Total	$	1,333	$	1,251


(a)	Excludes investments in Atlantic Coast Pipeline and Pivotal JAX LNG classified as held for sale at December 31, 2019. See Note 15 to the financial statements under "Assets Held for Sale" in Item 8 of the Form 10-K for additional information.


(b)	Increase primarily relates to a capital contribution, partially offset by the continued amortization of deferred tax assets established upon acquisition.


(c)	See Note (C) under "Other Matters – Southern Company Gas" for additional information on the PennEast Pipeline.



Earnings from Equity Method Investments	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
	(in millions)
SNG	$	37	$	42
Atlantic Coast Pipeline^(*)	3		3
PennEast Pipeline^(*)	2		2
Other	1		1
Total	$	43	$	48


(*)	Amounts primarily result from AFUDC equity recorded by the project entity.

SNG

Selected financial information of SNG for the three months ended March 31, 2020 and 2019 is as follows:



Income Statement Information	Three Months Ended March 31, 2020		Three Months Ended March 31, 2019
	(in millions)
Revenues	$	158	$	166
Operating income	98		106
Net income	75		84