ComEd 2006 Annual Report Download - page 213

Exelon Corporation and Subsidiary Companies
Exelon Generation Company, LLC and Subsidiary Companies
Commonwealth Edison Company and Subsidiary Companies
PECO Energy Company and Subsidiary Companies
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
(c) Net income for 2005 included a pre-tax gain on sale of Sithe of $24 million.
(d) Net income for 2006 included a pre-tax gain on sale of Sithe as a result of the expiration of certain tax indemnifications and
the collection of a receivable arising from the sale of Sithe that had been fully reserved.
Acquisition of Sithe International, Inc. Tamuin International, Inc. (TII), a wholly owned subsidiary of
Generation (formerly Sithe International, Inc.), through its subsidiaries, has 49.5% interests in two
Mexican business trusts that own the Termoeléctrica del Golfo (TEG) and Termoeléctrica Peñoles
(TEP) power stations, two 230 MW petcoke-fired generating facilities in Tamuín, Mexico that
commenced commercial operations in the second quarter of 2004. On October 13, 2004, Sithe
transferred all of the shares of Sithe International, Inc. and its subsidiaries to a subsidiary of
Generation in exchange for cancellation of a $92 million note, which is eliminated as part of the
consolidation of Sithe. Effective January 26, 2005, Sithe International’s name was changed to Tamuin
International Inc.
Accounting Prior to the Consolidation of Sithe on March 31, 2004. Generation had accounted for
the investment in Sithe as an unconsolidated equity method investment prior to its consolidation on
March 31, 2004 pursuant to FIN 46-R. The book value of Generation’s investment in Sithe immediately
prior to its consolidation on March 31, 2004 was $49 million. For the year ended December 31, 2004,
Exelon recorded $2 million of equity method losses from Sithe prior to its consolidation.
Consolidation of Sithe as of March 31, 2004. The consolidation of Sithe at March 31, 2004 was
accounted for as a step acquisition pursuant to purchase accounting policies. Under the provisions of
FIN 46-R, the operating results of Sithe were included in Exelon’s results of operations beginning
April 1, 2004.
Sale of TEG and TEP. On November 6, 2006, Tamuin International Inc. (TII), a wholly owned
subsidiary of Generation, entered into a purchase and sale agreement to sell its 49.5% ownership
interests in TEG and TEP to a subsidiary of AES Corporation (AES) for $95 million in cash plus certain
purchase price adjustments. This transaction closed on February 9, 2007 and is not expected to have
a material impact on net income. In connection with the transaction, Generation entered into a
guaranty agreement under which Generation guarantees the timely payment of TII’s obligations to the
subsidiary of AES expressly covered under the purchase and sale agreement. Generation would be
required to perform in the event that TII does not pay any obligation covered by the guaranty that is not
otherwise subject to a dispute resolution process. Generation’s maximum obligation under the
guaranty is $95 million. Generation has not recorded a liability associated with this guaranty. The
exposures covered by this guaranty are anticipated to expire in the second half of 2008 and beyond.
Sale of Ownership Interest in Boston Generating, LLC (Exelon and Generation)
On May 25, 2004, Generation completed the sale, transfer and assignment of ownership of its
indirect wholly owned subsidiary Boston Generating, which owns the companies that own Mystic 4-7,
Mystic 8 and 9 and Fore River generating facilities, to a special purpose entity owned by the lenders
under Boston Generating’s $1.25 billion credit facility (Boston Generating Credit Facility).
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