Exelon 2014 Annual Report Download - page 143

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
VIE because there is not sufficient equity to fund the group’s activities without the additional credit support that is provided in the
form of a parental guarantee. Generation is the primary beneficiary of the retail gas entity group; accordingly, Generation
consolidates the retail gas entity group as a VIE.
The third-party gas supply arrangement is collateralized as follows:
• The assets of the retail gas entity group must be used to settle obligations under the third-party gas supply agreement before it
can make any distributions to Generation,
• The third-party gas supplier has a collateral interest in all of the assets and equity of the retail gas entity group, and
• Generation provides a $75 million parental guarantee to the third-party gas supplier in support of the retail gas entity group.
Other than credit support provided by the parental guarantee, Exelon or Generation do not have any contractual or other obligations
to provide additional financial support under the collateralized third-party gas supply agreement. The third-party gas supply creditors
do not have any recourse to Exelon’s or Generation’s general credit other than the parental guarantee.
Solar Project Entity Group. In 2011, Constellation formed a group of solar project limited liability companies to build, own, and
operate solar power facilities, which are now part of Generation. Additionally, on September 30, 2011, Generation acquired all of the
equity interests in Antelope Valley Solar Ranch One (Antelope Valley) from First Solar, Inc., a 242-MW solar PV project under
construction in northern Los Angeles County, California. While Generation owns 100% of these entities, it has been determined that
certain of the individual solar project 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 the solar project entities that qualify as VIEs because Generation controls the design,
construction, and operation of the solar power facilities. Generation provides operating and capital funding to the solar entities for
ongoing construction, operations and maintenance of the solar power facilities and provides limited recourse related to the Antelope
Valley project. In addition, these solar VIE entities have an aggregate amount of outstanding debt with third parties of $642 million,
as of December 31, 2014, for which the creditors have no recourse to Generation, however there is limited recourse to Generation
with respect to remaining equity contributions necessary to complete the Antelope Valley project. For additional information on these
project-specific financing arrangements refer to Note 13—Debt and Credit Agreements.
Retail Power Companies. In March 2014, Generation began consolidating retail power VIEs for which Generation is the primary
beneficiary as a result of energy supply contracts that give Generation the power to direct the activities that most significantly affect
the economic performance of the entities. Generation does not have an equity ownership interest in these entities, but provides
approximately $5 million in credit support for the retail power companies. These entities are included in Generation’s consolidated
financial statements, and the consolidation of the VIEs does not have a material impact on Generation’s financial results or financial
condition.
Wind Project Entity Group. Generation owns and operates a number of wind project limited liability entities, the majority of which
were acquired on December 9, 2010 with the acquisition of all of the equity interests of John Deere Renewables, LLC (now known as
Exelon Wind). Generation has evaluated the significant agreements and ownership structures and the risks of each of its wind
projects and underlying entities, and determined that certain of the entities are VIEs because either the projects have noncontrolling
equity interest holders that absorb variability from the wind projects, 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 the wind project entities that qualify
as VIEs because Generation controls the design, construction, and operation of the wind generation facilities. While Generation owns
100% of the majority of the wind project entities, nine of the projects have noncontrolling equity interests of 1% held by third parties.
Generation’s current economic interests in eight of these projects is significantly greater than its stated contractual governance rights
and all of these projects have reversionary interest provisions that provide the noncontrolling interest holder with a purchase option,
certain of which are considered bargain purchase prices, which, if exercised, transfers ownership of the projects to the noncontrolling
interest holder upon either the passage of time or the achievement of targeted financial returns. The ownership agreements with the
noncontrolling interests state that Generation is to provide financial support to the projects in proportion to its current
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