ComEd 2003 Annual Report Download - page 94

92 Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
The allocation of the purchase price to the fair value of
assets acquired and liabilities assumed in the acquisition
was as follows:
Current assets (including $12 million of cash acquired) $ 85
Property, plant and equipment 1,949
Deferred debits and other assets 63
Current liabilities (154)
Deferred credits and other liabilities (149)
Long-term debt (1,036)
Total purchase price $ 758
In connection with the acquisition, Generation assumed cer-
tain Sithe guarantees, including a guarantee of a contingent
equity contribution to be made to Sithe Boston Generating,
LLC (currently known as Boston Generating), a project sub-
sidiary of Exelon New England. Exelon New England made a
contribution of $38 million to Boston Generating in full sat-
isfaction of that contingent equity contribution guarantee in
December 2003.
Boston Generating has a $1.25 billion credit facility
(Boston Generating Facility), which was entered into primar-
ily to finance the development and construction of generat-
ing projects known as Mystic 8 and 9 and Fore River.
Approximately $1.0 billion of debt was outstanding under
the Boston Generating Facility at December 31, 2003, all of
which is reflected in Exelon’s Consolidated Balance Sheets as
a current liability due to certain events of default described
below. The Boston Generating Facility is non-recourse to Ex-
elon and an event of default under the Boston Generating
Facility does not constitute an event of default under any
other debt instruments of Exelon or its subsidiaries.
The Boston Generating Facility required that all of the
projects achieve “Project Completion,” as defined in the Bos-
ton Generating Facility (Project Completion), by July 12, 2003.
Project Completion was not achieved by July 12, 2003, result-
ing in an event of default under the Boston Generating
Facility. Mystic 8 and 9 and Fore River have all begun com-
mercial operation, although they have not yet achieved Proj-
ect Completion.
As a result of Generation’s continuing evaluation of the
projects and discussions with the lenders, in July 2003, Gen-
eration commenced the process of an orderly transition out
of the ownership of Boston Generating and the projects. The
transition out of Generation’s ownership of Boston Generat-
ing will take place in a manner that complies with applicable
regulatory requirements. For a period of time, Generation
expects to continue to provide administrative and opera-
tional services to Boston Generating in its operation of the
projects. Generation informed the lenders of its decision to
exit and that it will not provide additional funding beyond
its existing contractual obligations. Generation anticipates
that this transition will occur in 2004.
As a result of the decision to transition out of the owner-
ship of Boston Generating and the projects in the third quar-
ter of 2003, Generation recorded an impairment charge
related to Boston Generating’s long-lived assets pursuant to
SFAS No. 144 of $945 million ($573 million net of income
taxes). In determining the amount of the impairment
charge, management compared the carrying value of Boston
Generating’s long-lived assets to the fair value of those as-
sets. Because comparable asset sale data was not available,
the fair value of Boston Generating’s long-lived assets was
determined using the estimated future discounted cash
flows from those assets. Forecasted cash flows incorporated
assumptions relative to the period of time that Generation
will continue to own and operate Boston Generating.
Acquisition of Generating Plants from TXU
On April 25, 2002, Generation acquired two natural-gas gen-
eration plants with a total of 2,334 megawatts of capacity
from TXU Corp. (TXU) for an aggregate purchase price of
$443 million. The transaction included a purchased power
agreement for TXU to purchase power during the months of
May through September from 2002 through 2006. During
the periods covered by the purchased power agreement, TXU
makes fixed capacity payments, variable expense payments,
and provides fuel to Exelon in return for exclusive rights to
the energy and capacity of the generation plants. Sub-
stantially the entire purchase price was allocated to prop-
erty, plant and equipment.
InfraSource
On September 24, 2003, Enterprises sold the electric con-
struction and services, underground and telecom businesses
of InfraSource. Cash proceeds to Enterprises from the sale
were approximately $175 million, net of transaction costs and
cash transferred to the buyer upon sale, plus a $30 million
subordinated note receivable maturing in 2011. At the time
of closing, the present value of the note receivable was ap-
proximately $12 million. In connection with the transaction,
Enterprises entered into an agreement that may result in
certain payments to InfraSource if the amount of services
Exelon purchases from InfraSource during the period from
closing through 2006 is below specified thresholds. Pursuant
to the sales agreement, certain working capital adjustments
to the purchase price will be made in 2004.
In connection with the above agreement, Enterprises
recorded an impairment charge during the second quarter
of 2003 of approximately $48 million (before income taxes
and minority interest) pursuant to SFAS No. 142 related to
the goodwill recorded within the InfraSource reporting unit.
Management of Enterprises primarily considered the nego-
tiated sales price and the estimated book value of Infra-
Source at the time of the closing of the sale in determining
the amount of the goodwill impairment charge. In con-