Exelon 2015 Annual Report Download - page 411

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Under a supplemental agreement reached in 2003, Midwest Generation agreed to reimburse ComEd and Generation for 50% of the specific
asbestos claims pending as of February 2003 and related expenses less recovery of insurance costs and agreed to a sharing arrangement for
liabilities and expenses associated with future asbestos-related claims as specified in the agreement.
On December 17, 2012 (Petition Date), EME and certain of its subsidiaries, including Midwest Generation, filed for protection under Chapter
11 of the U.S. Bankruptcy Code.
In 2012, the Bankruptcy Court approved the rejection of an agency agreement related to a coal rail car lease under which Midwest
Generation had agreed to reimburse ComEd for all obligations incurred under the coal rail car lease. The rejection left Generation as the party
responsible for making all remaining payments under the lease and performing all other obligations thereunder. A settlement was reached in
January 2015, to resolve the claims related to the coal rail car lease for approximately $14 million and Exelon recorded a gain upon receipt of the
funds, within Operating and maintenance expense in Exelon’s and Generation’s Consolidated Statement of Operations and Comprehensive
Income. No further action is expected related to the rail car lease.
On March 11, 2014, the Bankruptcy Court for the Northern District of Illinois entered its Order Confirming Debtors’ Joint Chapter 11 Plan of
Reorganization. On April 1, 2014 (Effective Date), NRG Energy purchased EME’s portfolio of generation, including Midwest Generation and the
Joint Chapter 11 Plan of Reorganization (Plan) became effective. As part of the Plan, the sale agreement, including the environmental indemnity,
and the asbestos cost-sharing agreement were rejected.
Generation increased its reserve for asbestos-related bodily injury claims pertaining to Midwest Generations’ share of liability as a result of
the rejection of the asbestos cost sharing agreement in the bankruptcy proceedings. Exelon and Generation may be entitled to damages
associated with the rejection of the agreement and a claim has been filed by Exelon for such damages. These amounts are considered to be
contingent gains and would not be recognized until realized.
As a prior owner of the generating stations, ComEd (and Generation, through its agreement in Exelon’s 2001 corporate restructuring to
assume ComEd’s rights and obligations associated with its former generation business) could face liability (along with any other potentially
responsible parties) for environmental conditions at the stations requiring remediation, with the determination of the allocation among the parties
subject to many uncertain factors. ComEd and Generation are unable to predict whether and to what extent they may ultimately be held
responsible for remediation and other costs relating to the generating stations and as a result no liability has been recorded as of December 31,
2015. Any liability imposed on ComEd or Generation for environmental matters relating to the generating stations could have a material adverse
impact on their future results of operations and cash flows.
Solid and Hazardous Waste
Cotter Corporation. The U.S. EPA has advised Cotter Corporation (Cotter), a former ComEd subsidiary, that it is potentially liable in
connection with radiological contamination at a site known as the West Lake Landfill in Missouri. On February 18, 2000, ComEd sold Cotter to an
unaffiliated third-party. As part of the sale, ComEd agreed to indemnify Cotter for any liability arising in connection with the West Lake Landfill. In
connection with Exelon’s 2001 corporate restructuring, this responsibility to indemnify Cotter was transferred to Generation. On May 29, 2008, the
U.S. EPA issued a Record of Decision approving the remediation option submitted by Cotter and the two other PRPs that required
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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