Exelon 2015 Annual Report Download - page 417

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
reasonable and proper reserves,” or unless it has specific authorization from the ICC. ComEd has also agreed in connection with financings
arranged through ComEd Financing III that it will not declare dividends on any shares of its capital stock in the event that: (1) it exercises its right
to extend the interest payment periods on the subordinated debt securities issued to ComEd Financing III; (2) it defaults on its guarantee of the
payment of distributions on the preferred trust securities of ComEd Financing III; or (3) an event of default occurs under the Indenture under which
the subordinated debt securities are issued.
PECO’s Articles of Incorporation prohibit payment of any dividend on, or other distribution to the holders of, common stock if, after giving
effect thereto, the capital of PECO represented by its common stock together with its retained earnings is, in the aggregate, less than the
involuntary liquidating value of its then outstanding preferred securities. On May 1, 2013, PECO redeemed all outstanding preferred securities. As
a result, the above ratio calculation is no longer applicable. Additionally, PECO may not declare dividends on any shares of its capital stock in the
event that: (1) it exercises its right to extend the interest payment periods on the subordinated debentures, which were issued to PEC L.P. or
PECO Trust IV; (2) it defaults on its guarantee of the payment of distributions on the Series D Preferred Securities of PEC L.P. or the preferred
trust securities of PECO Trust IV; or (3) an event of default occurs under the Indenture under which the subordinated debentures are issued.
BGE is subject to certain dividend restrictions established by the MDPSC. First, BGE was prohibited from paying a dividend on its common
shares through the end of 2014. Second, BGE is prohibited from paying a dividend on its common shares if (a) after the dividend payment, BGE’s
equity ratio would be below 48% as calculated pursuant to the MDPSC’s ratemaking precedents or (b) BGE’s senior unsecured credit rating is
rated by two of the three major credit rating agencies below investment grade. Finally, BGE must notify the MDPSC that it intends to declare a
dividend on its common shares at least 30 days before such a dividend is paid. There are no other limitations on BGE paying common stock
dividends unless: (1) BGE elects to defer interest payments on the 6.20% Deferrable Interest Subordinated Debentures due 2043, and any
deferred interest remains unpaid; or (2) any dividends (and any redemption payments) due on BGE’s preference stock have not been paid.
Baltimore City Franchise Taxes (BGE)
The City of Baltimore claims that BGE has maintained electric facilities in the City’s public right-of-ways for over one hundred years without
the proper franchise rights from the City. BGE has reviewed the City’s claim and believes that it lacks merit. BGE has not recorded an accrual for
payment of franchise fees for past periods as a range of loss, if any, cannot be reasonably estimated at this time. Franchise fees assessed in
future periods may be material to BGE’s results of operations and cash flows.
General (Exelon, Generation, ComEd, PECO and BGE)
The Registrants are involved in various other litigation matters that are being defended and handled in the ordinary course of business. The
assessment of whether a loss is probable or a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series
of complex judgments about future events. The Registrants maintain accruals for such losses that are probable of being incurred and subject to
reasonable estimation. Management is sometimes unable to estimate an amount or range of reasonably possible loss, particularly where (1) the
damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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