Exelon 2001 Annual Report Download - page 93

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91
(22) Related Party Transactions
In August 2001, Exelon loaned Sithe, an equity method investment of Generation, $150 million. The note, which bore interest
at the eurodollar rate, plus 2.25%, was repaid in December 2001 with the proceeds of bank borrowings. In connection with the
bank borrowing, Exelon provided the lenders with a support letter confirming its investment in Sithe and Exelon’s agreement
to maintain a positive net worth of Sithe. Exelon recorded $2 million of interest income on the note in 2001.
Generation has entered into PPAs dated December 18, 2001 and November 22, 1999 with AmerGen. Under the 2001 PPA,
Exelon has agreed to purchase from AmerGen all the energy from TMI after December 31, 2001 through December 31, 2014.
Under the 1999 PPA, Generation has agreed to purchase from AmerGen all of the residual energy from Clinton, through
December 31, 2002. Currently, the residual output approximates 25% of the total output of Clinton. For the years ended
December 31, 2001, 2000 and 1999 the amount of purchased power recorded in Fuel and Purchased Power in the
Consolidated Statements of Income is $57 million, $52 million and $0 million, respectively. As of December 31, 2001 and 2000
Generation had a payable of $3 million resulting from this PPA .
In addition, under a service agreement dated March 1, 1999, Generation provides AmerGen with certain operation and
support services to the nuclear facilities owned by AmerGen. This service agreement has an indefinite term and may be
terminated by Generation or by AmerGen on 90 days’ notice. Generation is compensated for these services in an amount
agreed to in the work order but not less than the higher of Exelon’s fully allocated costs for performing the services or the
market price. For the years ended December 31, 2001,2000 and 1999 the amount charged to AmerGen for these services was
$80 million, $32 million and $1 million respectively. As of December 31, 2001 and 2000, Generation had a receivable of $47
million and $20 million, respectively, resulting from these services.
(23) Change in Accounting Estimate
Effective April 1, 2001, Exelon changed its accounting estimates related to the depreciation and decommissioning of certain
generating stations.The estimated service lives were extended by 20 years for three nuclear stations, by periods of up to 20 years
for certain fossil stations and by 50 years for a pumped storage station. Effective July 1, 2001, the estimated service lives were
extended by 20 years for the remainder of Exelon’s operating nuclear stations. These changes were based on engineering and
economic feasibility studies performed by Exelon considering, among other things, future capital and maintenance expenditures
at these plants. As a result of the change, net income for 2001 increased $90 million ($54 million, net of income taxes). At the end
of the year, annualized savings resulting from the change would be $132 million ($79 million, net of income taxes).