Exelon 2014 Annual Report Download - page 148

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
electric distribution utility were to default under its obligation to buy power from the VIEs, the equity holder could transfer its equity
interests to Generation in lieu of repaying the loan. In this event, Generation would have the right to seek recovery of its losses from
the electric distribution utility. As a result, Generation has concluded that consolidation was not required. During 2013, the third-party
repaid their obligations of the loan with Generation which caused the entities to no longer be unconsolidated VIEs.
ZionSolutions. Generation has an asset sale agreement with EnergySolutions, Inc. and certain of its subsidiaries, including
ZionSolutions, LLC (ZionSolutions), which is further discussed in Note 15—Asset Retirement Obligations. Under this agreement,
ZionSolutions can put the assets and liabilities back to Generation when decommissioning is complete. Generation has evaluated
this agreement and determined that, through the put option, it has a variable interest in ZionSolutions but is not the primary
beneficiary. As a result, Generation has concluded that consolidation is not required. Other than the asset sale agreement, Exelon
and Generation do not have any contractual or other obligations to provide additional financial support and ZionSolutions’ creditors
do not have any recourse to Exelon’s or Generation’s general credit.
Fuel Purchase Commitments. Generation’s customer supply operations include the physical delivery and marketing of power
obtained through its generating capacity, and long-, intermediate- and short-term contracts. Generation also has contracts to
purchase fuel supplies for nuclear and fossil generation. These contracts and Generation’s membership in NEIL are discussed in
further detail in Note 22—Commitments and Contingencies. Generation has evaluated these contracts and its membership with
NEIL and determined that it either has no variable interest in an entity or, where Generation does have a variable interest in an
entity, the variable interest is not significant and it is not the primary beneficiary; therefore, consolidation is not required.
For contracts where Generation has a variable interest, the level of variability being absorbed through the contracts is not considered
significant because of the small proportion of the entities’ activities encompassed by the contracts with Generation. Further,
Generation has considered which interest holder has the power to direct the activities that most significantly affect the economic
performance of the VIE and thus is considered the primary beneficiary and is required to consolidate the entity. The primary
beneficiary must also have exposure to significant losses or the right to receive significant benefits from the VIE. In general, the most
significant activity of the VIEs is the operation and maintenance of the facilities. Facilities represent power plants, sources of uranium
and fossil fuels, or plants used in the uranium conversion, enrichment and fabrication process. Generation does not have control
over the operation and maintenance of the facilities considered VIEs, and it does not bear operational risk of the facilities.
Furthermore, Generation has no debt or equity investments in the entities and Generation does not provide any other financial
support through liquidity arrangements, guarantees or other commitments other than purchase commitments described in Note 22
—Commitments and Contingencies. Upon consideration of these factors, Generation does not consider itself to have significant
variable interests in these entities or be the primary beneficiary of these VIEs and, accordingly, has determined that consolidation is
not required.
Investment in Energy Development Projects and Energy Generating Facilities. Generation has several equity investments in
energy development projects and energy generating facilities. Generation has evaluated the significant agreements, ownership
structures and risks of each of its equity investments, and determined that certain of the entities are VIEs because the entity has an
insufficient amount of equity at risk to finance its activities, Generation guarantees the debt of the entity, provides equity support, or
provides operating services to the entity. Generation has reviewed the entities and has determined that Generation is not the primary
beneficiary of the entities that qualify as VIEs because Generation does not have the power to direct the activities that most
significantly impact the VIEs economic performance.
ComEd, PECO and BGE
The financing trust of ComEd, ComEd Financing III, the financing trusts of PECO, PECO Trust III and PECO Trust IV, and the
financing trust of BGE, BGE Capital Trust II are not consolidated in Exelon’s, ComEd’s, PECO’s or BGE’s financial statements.
These financing trusts were created to issue mandatorily redeemable trust preferred securities. ComEd, PECO, and BGE have
concluded that they do not have a significant variable interest in ComEd Financing III, PECO Trust III, PECO Trust IV or BGE Capital
Trust II as each Registrant financed its equity interest in the financing trusts through the issuance of subordinated debt and,
therefore, has no equity at risk. See Note 13—Debt and Credit Agreements for additional information.
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