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Material Impairments

Exelon Generation Company, LLC (Generation), through subsidiaries, has invested as a non-operator in the development, exploration, and harvesting of oil, natural gas and natural gas liquids properties (Upstream). Generations upstream subsidiary, CEU Holdings, LLC (CEUH), entered into a 5-year reserve based lending agreement (RBL) in July 2011. In January 2014, the RBL was amended and extended through January 2019. Pursuant to the RBL, as of December 31, 2015, CEUH borrowed $68 million secured by $187 million of Upstream assets. The RBL debt is without recourse to Generation, Exelon Corporation (Exelon) or any Exelon entity beyond CEUH, its subsidiaries and the Upstream assets.

The borrowing base committed under the RBL was $85 million as of December 31, 2015. The commitment l evel can be increased or decreased by the lenders based on the value of the underlying assets. The value of the borrowing base is impacted by projected production and commodity prices.

In February 2016, as part of their semi-annual borrowing base re-determination testing, the RBL lenders notified CEUH that the RBL borrowing base was decreased to $45 million, resulting in a borrowing base deficiency under the RBL of $23 million. Given the decline in value of the Upstream assets resulting from lower commodity prices, CEUH chose not to provide...


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