Consolidated Entities and Equity Method Investments

3 Months Ended

Mar. 31, 2022

Regulated Operations [Abstract]

Consolidated Entities and Equity Method Investments

CONSOLIDATED ENTITIES AND EQUITY METHOD INVESTMENTSSee 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, 2022 and December 31, 2021, SP Solar had total assets of $6.0 billion and $6.1 billion, respectively, total liabilities of $407 million and $408 million, respectively, and noncontrolling interests of $1.1 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.

At March 31, 2022 and December 31, 2021, SP Wind had total assets of $2.3 billion, total liabilities of $180 million and $130 million, respectively, and noncontrolling interests of $41 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 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, 2022 and December 31, 2021, the other VIEs had total assets of $1.8 billion and $1.9 billion, respectively, total liabilities of $248 million and $263 million, respectively, and noncontrolling interests of $876 million and $886 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, 2022 and December 31, 2021, Southern Power had equity method investments in wind and battery energy storage projects totaling $56 million and $86 million, respectively. Earnings (loss) from these investments were immaterial for both periods presented. During the first quarter 2022, Southern Power sold an equity method investment in a wind project and received proceeds of $31 million. The gain associated with the transaction was immaterial.

Southern Company Gas

Equity Method Investments

The carrying amounts of Southern Company Gas' equity method investments at March 31, 2022 and December 31, 2021 and related earnings from those investments for the three months ended March 31, 2022 and 2021 were as follows:

Investment Balance	March 31, 2022		December 31, 2021
	(in millions)
SNG	$	1,138	$	1,129
Other(*)	40		44
Total	$	1,178	$	1,173

(*)Balance at March 31, 2022 reflects a $4 million distribution from PennEast Pipeline.

	Three Months Ended March 31,
Earnings from Equity Method Investments	2022		2021
	(in millions)
SNG	$	39	$	38
Other(*)	1		3
Total	$	40	$	41

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