ComEd 2013 Annual Report Download - page 160

The pro formaimpactofthis acquisition wouldnot havebeen material to Exelon’s or Generation’s resultsofoperationsfor theyear
endedDecember 31,2011.
5. Investment in Constellation Energy Nuclear Group, LLC
Asaresult oftheConstellation merger,Generation ownsa50.01%interestinCENG, anuclear generation business. Generation’s
total equityin earnings (losses) on theinvestment inCENG is asfollows:
Year Ended
December 31,
2013
Period March 12,
through December 31,
2012
Equityinvestment income........................................................ $123 $73
Amortization ofbasis differenceinCENG ........................................... (114) (172)
Total equityin earnings (losses)—CENG ............................................ $ 9 $ (99)
AsofMarch 12,2012,Generation hadan initial basis differenceofapproximately$204million between theinitial carryingvalue ofits
investment inCENG anditsunderlyingequityinCENG. This basis differenceresultedfromtherequirement to recordtheinvestment
inCENG at fairvalue under purchaseaccounting while theunderlyingassetsandliabilitieswithinCENG continue to beaccounted
for on a historical costbasis. Generation is amortizingthis basis differenceover therespectiveuseful livesoftheassetsand
liabilitiesof CENG or asthoseassetsandliabilitiesaffectthe earnings of CENG.
Basedon taxsharingprovisionscontainedinthe operatingagreement for CENG, Generation maybeeligible for distributionsfromits
investment inCENG inexcess ofits50.01%ownershipinterest.Through purchaseaccounting, Generation hasrecordedthefair
value ofexpectedfuture distributions. When thesedistributionsare realized, Generation will recordareduction initsinvestment in
CENG. Any distributionsinexcess ofGeneration’s investment inCENG wouldberecordedin earnings.
Generation hasvariousagreementswith CENG to purchasepower andto providecertainservices. For further information regarding
theseagreementssee Note 25—RelatedPartyTransactions.
OnJuly29, 2013,Exelon,Generation andsubsidiariesofGeneration enteredinto a Master Agreement with EDF, EDF Inc. (EDFI) (a
subsidiaryof EDF) and CENG. TheMaster Agreement contemplatesthat the partieswill execute a seriesofadditional agreements
at a closingthat will occur followingthereceipt ofregulatoryapprovalsandthesatisfaction ofother customaryclosingconditions.
Exelon currentlyexpectsthat theclosingwill occur earlyinthesecondquarter of2014.
TheMaster Agreement requires CENG to maketwo pre-closingcash distributionsto EDF andGeneration, if CENG hascash in
excess ofreservesandtheamount ofan outstandingcreditfacilityare available,through one ofitswhollyownedsubsidiaries, as
ownersofthejoint venture.Generation receivedthefirstdistribution of$115million inDecember 2013 andrecordeditasareduction
to theInvestment inCENG on Exelon’s andGeneration’s ConsolidatedBalanceSheets. Asecond distribution will occur prior to the
closingprovidedthat CENG hassufficient available cash.
At theclosing, Generation, CENG andsubsidiariesof CENG will execute a Nuclear OperatingServicesAgreement (NOSA)pursuant
to which Generation will operate theCENG nuclear generation fleet owned by CENG subsidiariesandprovidecorporate and
administrativeservicesfor theremaininglifeoftheCENG nuclear plantsasiftheywere a part oftheGeneration nuclear fleet,
subjecttoEDFI’s rightsasamember of CENG. CENG will reimburseGeneration for itsdirectandallocatedcostsfor such services.
TheNOSAwill replacetheSSA.At theclosing, Nine Mile Point Nuclear Station,asubsidiaryof CENG, will alsoassigntoGeneration
itsobligationsasOperator ofNine Mile Point Unit2under an operatingagreement withtheco-owner.Inaddition,at theclosingthe
PSAA will beamendedandextendeduntilthe permanent cessation ofpower generation by theCENG generation plants.
Inaddition,at closing, Generation will makea$400 million loan to CENG, bearinginterestat5.25% per annumandpayable out of
specifiedavailable cash flows of CENG andinanyevent,payable upon thesettlement ofthePut Option Agreement discussed
below, if the put option is exercised, or payable upon thematuritydate ofthe note (which will be20yearsfromtheclosing),
whichever occursfirst. Immediatelyfollowingreceipt ofthe proceeds ofsuch loan, CENG will makea$400 million special distribution
to EDFI. The partieswill alsoexecute a FourthAmendedandRestatedOperatingAgreement for CENG, pursuant to which, among
other things, CENG will committomake preferred distributionsto Generation (after repayment ofthe$400 million loan)quarterlyout
ofspecifiedavailable cash flows, untilGeneration hasreceivedaggregate distributionsof$400 million plusa return of 8.5% per
annumfromthedate ofthespecial distribution to EDFI.
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