Exelon 2015 Annual Report Download - page 341

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
counterparties, which reduces Generation’s exposure to counterparty risk by providing for the offset of amounts payable to the counterparty
against amounts receivable from the counterparty. Typically, each enabling agreement is for a specific commodity and so, with respect to each
individual counterparty, netting is limited to transactions involving that specific commodity product, except where master netting agreements exist
with a counterparty that allow for cross product netting. In addition to payment netting language in the enabling agreement, Generation’s credit
department establishes credit limits, margining thresholds and collateral requirements for each counterparty, which are defined in the derivative
contracts. Counterparty credit limits are based on an internal credit review process that considers a variety of factors, including the results of a
scoring model, leverage, liquidity, profitability, credit ratings by credit rating agencies, and risk management capabilities. To the extent that a
counterparty’s margining thresholds are exceeded, the counterparty is required to post collateral with Generation as specified in each enabling
agreement. Generation’s credit department monitors current and forward credit exposure to counterparties and their affiliates, both on an individual
and an aggregate basis.
The following tables provide information on Generation’s credit exposure for all derivative instruments, NPNS, and applicable payables and
receivables, net of collateral and instruments that are subject to master netting agreements, as of December 31, 2015. The tables further delineate
that exposure by credit rating of the counterparties and provide guidance on the concentration of credit risk to individual counterparties. The figures
in the tables below exclude credit risk exposure from individual retail counterparties, Nuclear fuel procurement contracts and exposure through
RTOs, ISOs, NYMEX, ICE and Nodal commodity exchanges, further discussed in ITEM 7A.—QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK. Additionally, the figures in the tables below exclude exposures with affiliates, including net receivables
with ComEd, PECO and BGE of $15 million, $36 million and $31 million, respectively.
Rating as of December 31, 2015
Total
Exposure
Before Credit
Collateral
Credit
Collateral
Net
Exposure
Number of
Counterparties
Greater than 10%
of Net Exposure
Net Exposure of
Counterparties
Greater than 10%
of Net Exposure
Investment grade $ 1,397 $ 50 $ 1,347 1 $ 432
Non-investment grade 67 25 42 — —
No external ratings
Internally rated—investment grade 521 — 521 — —
Internally rated—non-investment grade 77 7 70 — —
Total $ 2,062 $ 82 $ 1,980 1 $ 432
Net Credit Exposure by Type of Counterparty December 31, 2015
Financial institutions $ 187
Investor-owned utilities, marketers, power producers 886
Energy cooperatives and municipalities 872
Other 35
Total $ 1,980
(a) As of December 31, 2015, credit collateral held from counterparties where Generation had credit exposure included $13 million of cash and $69 million of letters of credit.
ComEd’s power procurement contracts provide suppliers with a certain amount of unsecured credit. The credit position is based on forward
market prices compared to the benchmark prices. The
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(a)
Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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