Exelon 2014 Annual Report Download - page 208

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
During the third quarter of 2011, Sacramento PV Energy, a subsidiary of Generation, entered into floating-to-fixed interest rate
swaps to manage a portion of its interest rate exposure in connection with the long-term borrowings. See Note 13—Debt and Credit
Agreements for additional information regarding the financing. The swaps have a total notional amount of $26 million as of
December 31, 2014 and expire in 2027. After the closing of the Constellation merger, the swaps were re-designated as cash flow
hedges. At December 31, 2014, the subsidiary had a $3 million derivative liability related to these swaps.
During the third quarter of 2012, Constellation Solar Horizons, a subsidiary of Generation, entered into a floating-to-fixed interest rate
swap to manage a portion of its interest rate exposure in connection with the long-term borrowings. See Note 13—Debt and Credit
Agreements for additional information regarding the financing. The swap has a notional amount of $26 million as of December 31,
2014, and expires in 2030. This swap is designated as a cash flow hedge. At December 31, 2014, the derivative asset related to the
swap was immaterial.
During the first quarter of 2014, ExGen Renewables I, LLC, a subsidiary of Generation, entered into floating-to-fixed interest rate
swaps to manage a portion of its interest rate exposure in connection with the long-term borrowings. See Note 13—Debt and Credit
Agreements for additional information regarding the financing. The swaps have a notional amount of $213 million as of
December 31, 2014 and expire in 2020. The swaps are designated as cash flow hedges. At December 31, 2014, the subsidiary had
a $2 million derivative liability related to the swaps.
During the third quarter of 2014, ExGen Texas Power, LLC, a subsidiary of Generation, entered into a floating-to-fixed interest rate
swap to manage a portion of its interest rate exposure in connection with the long-term borrowing. See Note 13—Debt and Credit
Agreements for additional information regarding the financing. The swaps have a notional amount of $505 million as of
December 31, 2014 and expire in 2019. The swap was designated as a cash flow hedge in the fourth quarter of 2014. At
December 31, 2014, the subsidiary had a $8 million derivative liability related to the swap.
During 2014, Exelon entered into $400 million of floating-to-fixed forward starting interest rate swaps to manage a portion of the
interest rate exposure associated with the anticipated refinance of existing debt. The swaps are designated as cash flow hedges. At
December 31, 2014, Exelon had a $28 million derivative liability related to the swaps.
During the years ended December 31, 2014 and 2013, the impact on the results of operations as a result of ineffectiveness from
cash flow hedges was immaterial.
Economic Hedges. During 2014, Exelon entered into $1,900 million of floating-to-fixed forward starting interest rate swaps to
manage a portion of the interest rate exposure associated with the anticipated future debt issuance related to the proposed PHI
acquisition. At December 31, 2014, Exelon had a $100 million derivative liability related to the swaps.
During the fourth quarter, fixed-to-floating interest rate swaps, which were marked-to-market, acquired as part of the Constellation
merger, expired for Exelon and Generation. The notional amounts of the swaps was $150 million.
At December 31, 2014, Generation had $126 million in notional amounts of interest rate derivative contracts to economically hedge
risk associated with the interest rate component of commodity positions and $349 million in notional amounts of foreign currency
exchange rate swaps that are marked-to-market to manage the exposure associated with international purchases of commodities in
currencies other than U.S. dollars.
Fair Value Measurement and Accounting for the Offsetting of Amounts Related to Certain Contracts
Fair value accounting guidance and disclosures about offsetting assets and liabilities requires the fair value of derivative instruments
to be shown in the Notes to the Consolidated Financial Statements on a gross basis, even when the derivative instruments are
subject to legally enforceable master netting agreements and qualify for net presentation in the Consolidated Balance Sheet. A
master netting agreement is an agreement between two counterparties that may have derivative and non-derivative contracts with
each other providing for the net settlement of all referencing contracts via one payment stream, which takes place as the contracts
deliver, when collateral is requested or in the event of default. Generation’s use of cash collateral is generally unrestricted unless
Generation is downgraded below investment grade (i.e. to BB+ or Ba1). In the table below, Generation’s energy related economic
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