Variable Interest Entities (Exelon, Generation, PHI and ACE)

6 Months Ended

Jun. 30, 2020

Variable Interest Entites (Exelon, Generation, PHI and ACE)

Variable Interest Entities (Exelon, Generation, PHI and ACE)

At June 30, 2020 and December 31, 2019, Exelon, Generation, PHI and ACE collectively consolidated several VIEs or VIE groups for which the applicable Registrant was the primary beneficiary (see Consolidated VIEs below) and had significant interests in several other VIEs for which the applicable Registrant does not have the power to direct the entities’ activities and, accordingly, was not the primary beneficiary (see Unconsolidated VIEs below). Consolidated and unconsolidated VIEs are aggregated to the extent that the entities have similar risk profiles.

Consolidated VIEs

The table below shows the carrying amounts and classification of the consolidated VIEs’ assets and liabilities included in the consolidated financial statements of Exelon, Generation, PHI and ACE as of June 30, 2020 and December 31, 2019. The assets, except as noted in the footnotes to the table below, can only be used to settle obligations of the VIEs. The liabilities, except as noted in the footnote to the table below, are such that creditors, or beneficiaries, do not have recourse to the general credit of Exelon, Generation, PHI and ACE.



	June 30, 2020								December 31, 2019
	Exelon		Generation		PHI ^(a)		ACE		Exelon		Generation		PHI ^(a)		ACE
Cash and cash equivalents	$	114	$	114	$	—	$	—	$	163	$	163	$	—	$	—
Restricted cash and cash equivalents	105		102		3		3		88		85		3		3
Accounts receivable
Customer	145		145		—		—		151		151		—		—
Other	38		38		—		—		39		39		—		—
Unamortized energy contract assets ^(b)	22		22		—		—		23		23		—		—
Inventories, net
Materials and supplies	236		236		—		—		227		227		—		—
Other current assets	675		671		4		—		32		31		1		—
Total current assets	1,335		1,328		7		3		723		719		4		3
Property, plant and equipment, net ^(c)	5,939		5,939		—		—		6,022		6,022		—		—
Nuclear decommissioning trust funds	2,642		2,642		—		—		2,741		2,741		—		—
Unamortized energy contract assets ^(b)	258		258		—		—		250		250		—		—
Other noncurrent assets	44		30		14		11		89		73		16		14
Total noncurrent assets	8,883		8,869		14		11		9,102		9,086		16		14
Total assets	$	10,218	$	10,197	$	21	$	14	$	9,825	$	9,805	$	20	$	17
Long-term debt due within one year	$	191	$	167	$	24	$	20	$	544	$	523	$	21	$	20
Accounts payable	71		71		—		—		106		106		—		—
Accrued expenses	60		60		—		—		70		70		—		—
Unamortized energy contract liabilities	6		6		—		—		8		8		—		—
Other current liabilities	6		6		—		—		3		3		—		—
Total current liabilities	334		310		24		20		731		710		21		20
Long-term debt	947		934		13		11		527		504		23		21
Asset retirement obligations ^(d)	2,182		2,182		—		—		2,128		2,128		—		—
Unamortized energy contract liabilities	1		1		—		—		1		1		—		—
Other noncurrent liabilities	80		80		—		—		89		89		—		—
Total noncurrent liabilities	3,210		3,197		13		11		2,745		2,722		23		21
Total liabilities	$	3,544	$	3,507	$	37	$	31	$	3,476	$	3,432	$	44	$	41

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(a)	Includes certain purchase accounting adjustments not pushed down to the ACE standalone entity.


(b)	These are unrestricted assets to Exelon and Generation.


(c)	Exelon’s and Generation’s balances include unrestricted assets of $1 million and $20 million as of June 30, 2020 and December 31, 2019.


(d)	Exelon’s and Generation’s balances include liabilities with recourse of $2 million and $3 million as of June 30, 2020 and December 31, 2019, respectively.

As of June 30, 2020 and December 31, 2019, Exelon's and Generation's consolidated VIEs consist of:



Consolidated VIE or VIE groups:	Reason entity is a VIE:	Reason Generation is primary beneficiary:
CENG - A joint venture between Generation and EDF. Generation has a 50.01% equity ownership in CENG. See additional discussion below.	Disproportionate relationship between equity interest and operational control as a result of NOSA described further below.	Generation conducts the operational activities.
EGRP - A collection of wind and solar project entities. Generation has a 51% equity ownership in EGRP. See additional discussion below.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
Bluestem Wind Energy Holdings, LLC - A Tax Equity structure which is consolidated by EGRP. Generation is a minority interest holder.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
Antelope Valley - A solar generating facility, which is 100% owned by Generation. Antelope Valley sells all of its output to PG&E through a PPA.	The PPA contract absorbs variability through a performance guarantee.	Generation conducts all activities.
Equity investment in distributed energy company - Generation has a 31% equity ownership. This distributed energy company has an interest in an unconsolidated VIE (see Unconsolidated VIEs disclosure below). Generation fully impaired this investment in the third quarter of 2019. See Note 11— Asset Impairments of the Exelon 2019 Form 10-K for additional information.	Similar structure to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation conducts the operational activities.
NER - A bankruptcy remote, special purpose entity which is 100% owned by Generation, which purchases certain of Generation’s customer accounts receivable arising from the sale of retail electricity. NER’s assets will be available first and foremost to satisfy the claims of the creditors of NER. See Note 5 - Accounts Receivable for additional information on the sale of receivables.	Equity capitalization is insufficient to support its operations.	Generation conducts all activities.

CENG - On April 1, 2014, Generation, CENG, and subsidiaries of CENG executed the NOSA pursuant to which Generation conducts all activities associated with the operations of the CENG fleet and provides corporate and administrative services to CENG and the CENG fleet for the remaining life of the CENG nuclear plants as if they were a part of the Generation nuclear fleet, subject to the CENG member rights of EDF.

EDF has the option to sell its 49.99% equity interest in CENG to Generation exercisable beginning on January 1, 2016 and thereafter until June 30, 2022. On November 20, 2019, Generation received notice of EDF's intention to exercise the put option to sell its interest in CENG to Generation and the put automatically exercised on January 19, 2020 at the end of the sixty-day advance notice period.

At this time, Generation cannot reasonably predict the ultimate purchase price that will be paid to EDF for its interest in CENG. The transaction will require approval by the NYPSC and the FERC. The process and regulatory approvals could take one to two years or more to complete.

See Note 2 - Mergers, Acquisitions and Dispositions of the Exelon 2019 Form 10-K for additional information regarding the Put Option Agreement with EDF.

Exelon and Generation, where indicated, provide the following support to CENG:

•

Generation executed an Indemnity Agreement pursuant to which Generation agreed to indemnify EDF against third-party claims that may arise from any future nuclear incident (as defined in the Price-Anderson Act) in connection with the CENG nuclear plants or their operations. Exelon guarantees Generation’s obligations under this Indemnity Agreement. See Note 18 — Commitments and Contingencies of the Exelon 2019 Form 10-K for more details,


•	Generation and EDF share in the $688 million of contingent payment obligations for the payment of contingent retrospective premium adjustments for the nuclear liability insurance, and


•	Exelon has executed an agreement to provide up to $245 million to support the operations of CENG as well as a $165 million guarantee of CENG’s cash pooling agreement with its subsidiaries.

EGRP - EGRP is a collection of wind and solar project entities and some of these project entities are VIEs that are consolidated by EGRP. Generation owns a number of limited liability companies that build, own, and operate solar and wind power facilities some of which are owned by EGRP. While Generation or EGRP owns 100% of the solar entities and 100% of the majority of the wind entities, it has been determined that certain of the solar and wind entities are VIEs because the entities require additional subordinated financial support in the form of a parental guarantee of debt, loans from the customers in order to obtain the necessary funds for construction of the solar facilities, or the customers absorb price variability from the entities through the fixed price power and/or REC purchase agreements. Generation is the primary beneficiary of these solar and wind entities that qualify as VIEs because Generation controls the design, construction, and operation of the facilities. Generation provides operating and capital funding to the solar and wind entities for ongoing construction, operations and maintenance and there is limited recourse related to Generation related to certain solar and wind entities.

In 2017, Generation’s interests in EGRP were contributed to and are pledged for the ExGen Renewables IV non-recourse debt project financing structure. Refer to Note 12— Debt and Credit Agreements for additional information on ExGen Renewables IV.

As of June 30, 2020 and December 31, 2019, Exelon's, PHI's and ACE's consolidated VIE consists of:



Consolidated VIEs:	Reason entity is a VIE:	Reason ACE is the primary beneficiary:
ACE Funding - A special purpose entity formed by ACE for the purpose of securitizing authorized portions of ACE’s recoverable stranded costs through the issuance and sale of Transition Bonds. Proceeds from the sale of each series of Transition Bonds by ATF were transferred to ACE in exchange for the transfer by ACE to ATF of the right to collect a non-bypassable Transition Bond Charge from ACE customers pursuant to bondable stranded costs rate orders issued by the NJBPU in an amount sufficient to fund the principal and interest payments on Transition Bonds and related taxes, expenses and fees.	ACE’s equity investment is a variable interest as, by design, it absorbs any initial variability of ATF. The bondholders also have a variable interest for the investment made to purchase the Transition Bonds.	ACE controls the servicing activities.

Unconsolidated VIEs

Exelon’s and Generation’s variable interests in unconsolidated VIEs generally include equity investments and energy purchase and sale contracts. For the equity investments, the carrying amount of the investments is reflected in Exelon’s and Generation’s Consolidated Balance Sheets in Investments. For the energy purchase and sale contracts (commercial agreements), the carrying amount of assets and liabilities in Exelon’s and Generation’s Consolidated Balance Sheets that relate to their involvement with the VIEs are predominately related to working capital accounts and generally represent the amounts owed by, or owed to, Exelon and Generation for the deliveries associated with the current billing cycles under the commercial agreements.

As of June 30, 2020 and December 31, 2019, Exelon and Generation had significant unconsolidated variable interests in several VIEs for which Exelon or Generation, as applicable, was not the primary beneficiary. These interests include certain equity method investments and certain commercial agreements.

The following table presents summary information about Exelon's and Generation’s significant unconsolidated VIE entities:



	June 30, 2020						December 31, 2019
	Commercial Agreement VIEs		Equity Investment VIEs		Total		Commercial Agreement VIEs		Equity Investment VIEs		Total
Total assets^(a)	$	705	$	417	$	1,122	$	636	$	443	$	1,079
Total liabilities^(a)	172		227		399		33		227		260
Exelon's ownership interest in VIE^(a)	—		168		168		—		191		191
Other ownership interests in VIE^(a)	533		22		555		604		25		629

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(a)

These items represent amounts on the unconsolidated VIE balance sheets, not in Exelon’s or Generation’s Consolidated Balance Sheets. These items are included to provide information regarding the relative size of the unconsolidated VIEs. Exelon and Generation do not have any exposure to loss as they do not have a carrying amount in the equity investment VIEs as of June 30, 2020 and December 31, 2019.

As of June 30, 2020 and December 31, 2019, Exelon's and Generation's unconsolidated VIEs consist of:



Unconsolidated VIE groups:	Reason entity is a VIE:	Reason Generation is not the primary beneficiary:
Equity investments in distributed energy companies - 1) Generation has a 90% equity ownership in a distributed energy company. 2) Generation, via a consolidated VIE, has a 90% equity ownership in another distributed energy company (See Consolidated VIEs disclosure above). Generation fully impaired this investment in the third quarter of 2019. See Note 11— Asset Impairments of the Exelon 2019 Form 10-K for additional information.	Similar structures to a limited partnership and the limited partners do not have kick out rights with respect to the general partner.	Generation does not conduct the operational activities.
Energy Purchase and Sale agreements - Generation has several energy purchase and sale agreements with generating facilities.	PPA contracts that absorb variability through fixed pricing.	Generation does not conduct the operational activities.