Exelon 2015 Annual Report Download - page 344

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Generation had cash collateral posted of $1,267 million and letters of credit posted of $497 million, and cash collateral held of $21 million and
letters of credit held of $78 million as of December 31, 2015 for external counterparties with derivative positions. Generation had cash collateral
posted of $1,497 million and letters of credit posted of $672 million and cash collateral held of $77 million and letters of credit held of $24 million at
December 31, 2014 for external counterparties with derivative positions. In the event of a credit downgrade below investment grade (i.e. to BB+ by
S&P or Ba1 by Moody’s), Generation would have been required to post additional collateral of $2.0 billion and $2.4 billion as of December 31, 2015
and 2014, respectively. These amounts represent the potential additional collateral required after giving consideration to offsetting derivative and
non-derivative positions under master netting agreements.
Generation’s and Exelon’s interest rate swaps contain provisions that, in the event of a merger, if Generation’s debt ratings were to
materially weaken, it would be in violation of these provisions, resulting in the ability of the counterparty to terminate the agreement prior to
maturity. Collateralization would not be required under any circumstance. Termination of the agreement could result in a settlement payment by
Exelon or the counterparty on any interest rate swap in a net liability position. The settlement amount would be equal to the fair value of the swap
on the termination date. As of December 31, 2015, Generation’s and Exelon’s swaps were in an asset position, with a fair value of $13 million and
$38 million, respectively.
See Note 25—Segment Information for further information regarding the letters of credit supporting the cash collateral.
Generation entered into supply forward contracts with certain utilities, including PECO and BGE, with one-sided collateral postings only from
Generation. If market prices fall below the benchmark price levels in these contracts, the utilities are not required to post collateral. However, when
market prices rise above the benchmark price levels, counterparty suppliers, including Generation, are required to post collateral once certain
unsecured credit limits are exceeded. Under the terms of ComEd’s standard block energy contracts, collateral postings are one-sided from
suppliers, including Generation, should exposures between market prices and benchmark prices exceed established unsecured credit limits
outlined in the contracts. As of December 31, 2015, ComEd held no collateral from suppliers in association with energy procurement contracts.
Under the terms of ComEd’s annual renewable energy contracts, collateral postings are required to cover a fixed value for RECs only. In addition,
under the terms of ComEd’s long-term renewable energy contracts, collateral postings are required from suppliers for both RECs and energy. The
REC portion is a fixed value and the energy portion is one-sided from suppliers should the forward market prices exceed contract prices. As of
December 31, 2015, ComEd held approximately $19 million in the form of cash and letters of credit as margin for both the annual and long-term
REC obligations. See Note 3—Regulatory Matters for additional information.
PECO’s natural gas procurement contracts contain provisions that could require PECO to post collateral. This collateral may be posted in
the form of cash or credit support with thresholds contingent upon PECO’s credit rating from the major credit rating agencies. The collateral and
credit support requirements vary by contract and by counterparty. As of December 31, 2015, PECO was not required to post collateral for any of
these agreements. If PECO lost its investment grade credit rating as of December 31, 2015, PECO could have been required to post
approximately $25 million of collateral to its counterparties.
PECO’s supplier master agreements that govern the terms of its DSP Program contracts do not contain provisions that would require PECO
to post collateral.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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