Summary
Exelon Corporation, through its wholly owned subsidiary UII, LLC, has finalized an agreement to terminate a coal-fired generating station lease with the City of San Antonio, Texas (CPS) and related agreements. This termination, effective February 26, 2014, was prompted by a credit rating downgrade of a third-party credit support provider for CPS, which required CPS to either find a new provider or post additional collateral. As part of the termination agreement, UII will receive a net early termination payment of $335 million from CPS. Exelon views this termination as beneficial due to economic uncertainties regarding end-of-lease term options, which could have led to significant capital expenditures and increased operational risk for UII. While the termination results in a net loss at UII that is deemed not material, Exelon and its subsidiaries anticipate a significant tax payment of approximately $285 million in 2014, with Commonwealth Edison Company contributing around $150 million of this amount.
Key Highlights
- 1Exelon's subsidiary UII, LLC terminated a material coal-fired generating station lease agreement with the City of San Antonio (CPS) on February 26, 2014.
- 2The termination was triggered by a credit rating downgrade of a third-party credit support provider for CPS.
- 3UII will receive a net early termination payment of $335 million from CPS.
- 4Exelon believes the termination is in its best interest due to economic uncertainties and potential capital expenditures associated with end-of-lease term options.
- 5The termination will result in a net loss at UII, which is not material to Exelon.
- 6Exelon and its subsidiaries expect to pay approximately $285 million in taxes in 2014 related to this termination.
- 7Commonwealth Edison Company will account for approximately $150 million of the total tax payment.