Mergers, Acquisitions, and Dispositions (Exelon and Generation)

9 Months Ended

Sep. 30, 2021

Mergers, Acquisitions, and Dispositions [Abstract]

Mergers, Acquisitions, and Dispositions (Exelon and Generation)

CENG Put Option (Exelon and Generation)

Prior to August 6, 2021, Generation owned a 50.01% membership interest in CENG, a joint venture with EDF, which wholly owns the Calvert Cliffs and Ginna nuclear stations and Nine Mile Point Unit 1, in addition to an 82% undivided ownership interest in Nine Mile Point Unit 2. CENG is 100% consolidated in Exelon's and Generation's financial statements. See Note 17 — Variable Interest Entities for additional information.

On April 1, 2014, Generation and EDF entered into various agreements including a NOSA, an amended LLC Operating Agreement, an Employee Matters Agreement, and a Put Option Agreement, among others. Under the amended LLC Operating Agreement, CENG made a $400 million special distribution to EDF and committed to make preferred distributions to Generation until Generation has received aggregate distributions of $400 million plus a return of 8.50% per annum.

Under the terms of the Put Option Agreement, EDF had 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. The transaction required approval by FERC and the NYPSC, which approvals were received on July 30, 2020 and April 15, 2021, respectively. On August 6, 2021, Generation and EDF entered into a settlement agreement pursuant to which Generation purchased EDF’s equity interest in CENG for a net purchase price of $885 million, which includes, among other things, an adjustment for EDF’s share of the balance of the preferred distribution payable by CENG to Generation. The difference between the net purchase price and EDF’s Noncontrolling Interest as of August 6, 2021 was recorded in Common Stock in Exelon’s Consolidated Balance Sheet and Membership Interest in Generation’s Consolidated Balance Sheet. As a result of the transaction, Exelon and Generation recorded deferred tax liabilities of $290 million and $288 million, respectively, in Common Stock in Exelon’s Consolidated Balance Sheet and Membership Interest in Generation’s Consolidated Balance Sheet. See Note 10 — Income Taxes for additional information.

The following tables summarize the effects of the changes in Generation's ownership interest in CENG in Exelon's Shareholders' Equity and Generation's Member's Equity:


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Net income attributable to Exelon's common shareholders	$	1,203	$	1,315
Pre-tax increase in Exelon's common stock for purchase of EDF's 49.99% equity interest(a)	1,080		1,080
Decrease in Exelon's common stock due to deferred tax liabilities resulting from purchase of EDF's 49.99% equity interest(a)	(290)		(290)
Change from net income attributable to common stock and transfers from noncontrolling interest	$	1,993	$	2,105

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Net income (loss) attributable to Generation's membership interest	$	607	$	(247)
Pre-tax increase in Generation's membership interest for purchase of EDF's 49.99% equity interest(a)	1,080		1,080
Decrease in Generation's membership interest due to deferred tax liabilities resulting from purchase of EDF's 49.99% equity interest(a)	(288)		(288)
Change from net income (loss) attributable to membership interest and transfers from noncontrolling interest	$	1,399	$	545

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(a)Represents non-cash activity in Exelon’s and Generation’s consolidated financial statements.

Agreement for Sale of Generation’s Solar Business (Exelon and Generation)

On December 8, 2020, Generation entered into an agreement with an affiliate of Brookfield Renewable, for the sale of a significant portion of Generation’s solar business, including 360 MW of generation in operation or under construction across more than 600 sites across the United States. Generation will retain certain solar assets not included in this agreement, primarily Antelope Valley.

Completion of the transaction contemplated by the sale agreement was subject to the satisfaction of several closing conditions which were satisfied in the first quarter of 2021. The sale was completed on March 31, 2021 for a purchase price of $810 million. Generation received cash proceeds of $675 million, net of $125 million long-term debt assumed by the buyer and certain working capital and other post-closing adjustments. Exelon and Generation recognized a pre-tax gain of $68 million which is included in Gain on sales of assets and businesses in Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive Income.

See Note 17 — Debt and Credit Agreements of the Exelon 2020 Form 10-K for additional information on the SolGen nonrecourse debt included as part of the transaction.

Agreement for the Sale of a Generation Biomass Facility (Exelon and Generation)

On April 28, 2021, Generation and ReGenerate Energy Holdings, LLC (“ReGenerate”) entered into a purchase agreement, under which ReGenerate agreed to purchase Generation’s interest in the Albany Green Energy biomass facility. As a result, in the second quarter of 2021, Exelon and Generation recorded a pre-tax impairment charge of $140 million in Operating and maintenance expense in Exelon’s and Generation’s Consolidated Statements of Operations and Comprehensive Income. Completion of the transaction was subject to the satisfaction of various customary closing conditions which were satisfied in the second quarter of 2021. The sale was completed on June 30, 2021 for a net purchase price of $36 million.