ML072220214

Notification of Sale and Leaseback Transaction by Public Service Company of New Mexico

ML072220214
Person / Time
Site:	Palo Verde
Issue date:	08/01/2007
From:	Moore C PNM Resources
To:	Cyr K Document Control Desk, Office of Nuclear Reactor Regulation, NRC/OGC
References
Download: ML072220214 (21)

Text

PNM Resources Alvarado Square Albuquerque, NM 87158 www.pnmnresources.com PNi 1ýResources 10 C.F.R. § 50.81 August 1, 2007 U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission Attention: Document Control Desk Office of the General Counsel Washington, DC 20555 Attention: Karen D. Cyr, Esq.

Washington DC 20555 Sale and Leaseback Transaction by Public Service Company of New Mexico NRC Docket No. STN 50-529 Ladies and Gentlemen:

The purpose of this letter is to notify the Nuclear Regulatory Commission (the "Commission"), as a matter of courtesy, of the transfer of an equity interest in a sale and leaseback transaction that was the subject of a license amendment in the above docket.

Background. In 1986, Public Service Company of New Mexico ("PNM") proposed to enter into sale and leaseback transactions relating to Palo Verde Nuclear Generating Station

("PVNGS") Unit 2. By letter dated August 12, 1986, the Commission issued Amendment No. 2 to Facility Operating License NPF-51 (Palo Verde Unit 2), approving the transactions, subject to 10 C.F.R. § 50.81 and the conditions in the Amendment ("Amendment No. 2").

A copy of the August 12, 1986 Commission action is enclosed herewith as Enclosure I for convenient reference. Amendment No. 2 was issued in response to a February 14, 1986 application submitted to the Commission, as supplemented on April 22, June 10, July 29, July 30, August 6, and August 7, 1986. The August 12, 1986 approval was similar to the previous approval by the Commission in its Order of December 12, 1985, with regard to sale and leaseback transactions proposed by PNM for PVNGS Unit 1. Pursuant to these and other authorizations, PNM entered into a total of 11 sale and leaseback transactions in 1985 and 1986 relating to both PVNGS Units 1 and 2.

Subject of This Notice. The "equity investor" in one of PNM's original PVNGS Unit 2 transactions was First Chicago Lease Holdings, Inc. ("FCLH"). FCHL subsequently transferred its interest as an equity investor to Palo Verde Leasing Corporation, a Delaware corporation

("PVLC"). On June 29, 2007, PVLC and PNMR Development and Management Corporation ("PNMR Development") entered into a Sale Agreement, pursuant to which PNMR Development agreed to purchase PVLC's equity interest in the sale and leaseback A/ /-?,

August 1, 2007 Page 2 transaction. Also, on June 29, 2007, in accordance with the Sale Agreement, PVLC transferred its equity interest in the sale and leaseback transaction to PNMR Development.

The transfer was made in a manner which is specifically permitted under the lease transactions as approved by the Commission. Amendment No. 2 included several notice requirements, but the transfer of an equity interest in the sale and leaseback transaction, which does not affect the Commission license, is not one of the required notices. However, as a matter of courtesy, PNM is providing this notice to the Commission.

PNMR Development is a wholly owned subsidiary of PNM Resources; PNM is a subsidiary of PNM Resources and an affiliate of PNMR Development. The current "owner trustee" for the sale and leaseback transaction, U.S. Bank National Association, remains unchanged, and the terms of the lease remain unchanged.

A copy of the transfer document (the "Assignment and Assumption Agreement" dated June 29, 2007) is enclosed herewith as Enclosure 2 for filing with the Commission.

If you have any questions, please do not hesitate to call the undersigned at (505) 241-4935.

Sincerely, Charles L. Moore Associate General Counsel PNM Resources, Inc.

Enclosures cc:

Director of Nuclear Regulation Attention: Susan L. Uttal, Esq.

U.S. Nuclear Regulatory Commission Washington, D.C. 20555 U.S. Nuclear Regulatory Commission NRC Project Manager for Palo Verde Nuclear Generating Station Attention: Mike Markley Washington, D.C. 20555 Arizona Public Service Company Attention: Nancy Loftin, Esq.

Michael Green, Esq.

467972

ENCLOSUREJ~

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UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, 0. C. 20555

1)

August 12, 1986 Docket No.:

50-529 Mr. E. E. Van Brunt, Jr.

Executive Vice President Arizona Nuclear Power Project Post Office Box 52034 Phoenix, Arizona 85072-2034

Subject:

Issuance of Amendment No. 2 to Facility Operating License NPF-51 for Palo Verde Unit 2 On February 14, 1986, the Arizona Public Service Company filed with the Nuclear Regulatory Commission an Application in Respect of Sale and Leaseback Transactions on behalf of Public Service Company of New Mexico (PNM)

(the "application").

This application was supplemented by subsequent submissions datedApril 22, June 10, July 29, July 30, August 6, and August 7, 1986.

On the totality of the circumstances presented, the Commission finds that the proposed financial transaction, subject to the conditions set forth below and specified in the enclosed license amendment, is acceptable under the Atomic Energy Act and the Commission regulations.

This approval is subject to the condition that the lessor and anyone else who may acquire an interest under the transaction which is the subject of this application are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde nuclear facility.

For purposes of this condition, the limitations in 10 C.F.R. 50.81 "Creditor Regulations," as now in effect and as these may be subsequently amended, are fully applicable to the named lessor and any successor in interest to that lessor as long as the license for Palo Verde Nuclear Generating Station, Unit 2, remains in effect.

This financial transaction shall have no effect on the license for the Palo Verde Nuclear Generating Station, Unit 2.

This transaction is similar to that approved by the Commission in its Order of December 12, 1985, with regard to the sale and leaseback of PNM's interest in Palo Verde Unit 1.

Subject to the foregoing, the Commission hereby approves the application under the conditions set forth in the enclosed Amendment No.

2 to the Palo Verde Unit 2 license.

A copy of the Safety Evaluation supporting the amendment is also enclosed.

Sincerely, Harold R. Denton, Director Office of Nuclear Reactor Regulation

Enclosures:

1. Amendment No. 2 to NPF-51

2.

Safety Evaluation cc:

See next page

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Mr. E. E. Van Brunt, Jr.

Arizona Nuclear Power Project cc:

Arthur C.. Gehr, Esq.

Snell & Wilmer 3100 Valley Center Phoenix, Arizona 85073 Mr. James M. Flenner, Chief Counsel Arizona Corporation Commission 1200 West Washington Phoenix, Arizona 85007 Charles R. Kocher, Esq. Assistant Council James A. Boeletto, Esq.

Southern California Edison Company P. 0. Box 800 Rosemead, California 91770 Mr. Mark Ginsberg Energy Director Office of Economic Planning and Development 1700 West Washington - 5th Floor Phoenix, Arizona 85007 Mr. Wayne Shirley Assistant Attorney General Bataan Memorial Building Santa Fe, New Mexico 87503 Mr.

Roy Zimmerman U.S. Nuclear Regulatory Commission P. 0. Box 239.

Arlington, Arizona 85322 Ms.

Patricia Lee Hourihan 6413 S. 26th Street Phoenix, Arizona 85040 Regional Administrator, Region V U. S. Nuclear Regulatory Commnission 1450 Maria Lane Suite 210 Walnut Creek, California 94596 Palo Verde Kenneth Berlin, Esq.

Winston & Strawn Suite 500 2550 M Street, NW Washington, DC 20037 Ms.

Lynne Bernabei Government Accountability Project

.of the Institute for Policy Studies 1901 Que Street, NW Washington, DC 20009 Ms. Jill Morrison 522 E. Colgate

Tempi, Arizona 85238 Mr. Charles B. Brinkman, Manager Washington Nuclear Operations Combustion Engineering, Inc.

7910 Woodmont Avenue Suite 1310 Bethesda, Maryland 20814 Mr.

Ron Rayner P. 0. Box 1509

Goodyear, AZ 85338 Chairman Arizona Corporatinn Comlssion P. 0. 8ox 6019 Phoenix, Arizona 85003 Arizona Radiation Regulatory Aqency ATTN:

Ms. Clara Palovic, Librarian 925 South 52nd Street Tempe, Arizona 85238 Mr. Charles Tedford. Director Arizona Radiation Regulatory Aqency 924 South 52nd Street, Suite 2 Tempe, Arizona 85281 Chairman Maricopa County.Board of Supervisors 1II South Third Avenue Phoenix, Arizona.85003 o L-C4

UNITED STATES 2

NUCLEAR REGULATORY COMMISSION O

WASHINGTON, 0. C. 2055 ARIZONA PUBLIC SERVICE COMPANY, ET AL.*

DOCKET NO.

STN 50-529 PALO VERDE NUCLEAR GENERATING STATION, UNIT NO.

2 AMENDMENT TO FACILITY OPERATING LICENSE Amendment No.

2 License No.

NPF-51

1.

The Nuclear Regulatory Commission (the Commission) has found that:

A.

The present amendment, issued in response to the February 14, 1986 application (and supplemental letters dated April 22, June 10, July 29, July 30, August 6, and August 7, 1986) by the Arizona Public Service Company with respect to a sale and leaseback financing transaction by licensee, Public Service Company of New Mexico, complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act) and the Commission's regulations'set forth in 10 CFR Chapter I; B.

In approving the aforementioned application, the Director of the Office of Nuclear Reactor Regulation by letter of August 12,

1986, stated:

This approval is subject to the condition that the lessor and anyone else who may acquire an interest under the transaction which is the subject of this application are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde nuclear facility.

For purposes of this condition, the limitations in 10 C.F.R. 50.81 "Creditor Regulations," as now in effect and as these may be subsequently amended, are fully applicable to the named lessor and any successor in interest to that lessor as long as the license for Palo Verde Nuclear Generating Station, Unit 2, remains in effect.

This financial transaction shall have no effect on the license for the Palo Verde Nuclear Generating Station, Unit 2.

• The other licensees are the Salt Piver Project Agricultural Improvement and Power District, El Paso Electric Company, Southern California Edison Company, Public Service Company of New Mexico, Los Angeles Department of Water ana Power, and Southern California Public Power Authority.

This transaction is similar to that approved by the Commission in its Order of December 12, 1985, with regard to the sale and leaseback of PNM's interest in Palo Verde Unit 1. Subject to the foregoing, the Commission hereby approves the application under the conditions set forth in the enclosed Amendment No. 2 to the Palo Verde Unit 2 license.

C.

The facility will operate in conformity with the above application and the Director of the Office of Nuclear Reactor Regulations letter of August 12, 1985, the provisions of the Act, and the regulations of the Commission; D.

There is reasonable assurance (i) that the activities authorized by this amendment can be conducted without endangering the health and safety of the public, and (ii) that such activities will be conducted in compliance with the Commission's regulations; E.

The issuance of this amendment will not be inimical to the common defense and security or to the health and safety of the public; F.

The issuance of this amendment is in accordance with 10 CFR Part 51 of the Commission's regulations and all applicable requirements have been satisfied.

G.

The present amendment authorizes any such sale and leaseback transactions made pursuant thereto until September 30, 1986.

2.

Accordingly, a new Paragraph, 2.6(6) is added to read as follows:

(6)(a)

The Public Service Company of New Mexico (PNM) is authorized to transfer all or a portion of its 10.2% ownership share in Palo Verde Unit 2 and a proportionate share of a third of PNM's interest in the Palo Verde common faciities to certain equity investors identified in its submission of Apgust 6, 1986, and at the same time to lease back from such purchasers such interest sold in the Palo Verde Unit 2 facility.

The term of the lease is for approximately 29-1 years subject to a right of renewal.

Any such sale and leaseback transaction is subject to the representations and conditions set forth in the aforementioned application of February 14, 1986, and. the subsequent submittals dated April 22, June 10, July 29, July 30, August 6, and August 7, 1986, as well as the letter of the Director of the Office of Nuclear Reactor Regulation dated August 12, 19866 consenting to such transactions.

Specifically, the lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising directly or indirectly any control over the licensees of the Palo Verde Nuclear Generating Station, Unit 2.

Fur purposes of this condition the limitations in 10 CFR 50.E3, may be subsequently amended, are fully applicable to the lessor and any successor in interest to that lessor as long as the license for Palo Verde Unit 2 remains in effect; this financial transaction shall have no effect on the license for the Palo Verde nuclear facility throughout the term of the license.

(b)

Further, the licensees are also required to notify the NRC in writing prior to any change in:

(i) the terms or conditions of any lease agreements executed as part of this transaction; (ii) the ANPP Participation Agreement, (iii) the existing property insurance coverage for the Palo Verde nuclear facility, Unit 2 as specified in licensee counsel's letter of November 26, 1985, and (iv) any action by the lessor or others that may have an adverse effect on the safe operation of the facility.

3.

This license amendment is effective as of the date of issuance.

FOR THE NUCLEAR REGULATORY COMMISSION Frank 3.'Miraglia, Director Division of PWR Licensing-B Date of Issuance:

August 12, 1986

4 UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, 0. C. 20555 SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION RELATED TO AMENDMENT NO. 2 TO FACILITY OPERATING LICENSE NO.

NPF-51 ARIZONA PUBLIC SERVICE COMPANY, ET AL.

PALO VERDE NUCLEAR GENERATING STATION, UNIT NO.

2 DOCKET NO.

STN 50-529

1.0 INTRODUCTION

By application dated February 14, 1986, the Arizona Public Service Company (APS) on behalf of Public Service Company of New Mexico (PNM),

requested approval for PNM to sell and leaseback all or part of the remaining portion of PNM's 10.2 'percent ownership interest in the Palo Verde Nuclear Generating Station, Unit 2, and a proportionate share of one-third of PNM's 10.2 percent ownership interest in the Palo Verde common facilities.

In addition to information provided in the application, the licensees provided financial and other information by letters dated April 22, June 10, July 29, July 30, August 6, and August 7, 1986.

2.0 COMMISSION ACTION On December 12, 1985, the'Nuclear Regulatory Commission, upon review of the staff's Policy Papers SECY-85-350 and SECY 85-367 which,contained a discussion of this type of proposed transaction, issued an Order -

consenting to a sale and leaseback transaction for Palo Verde Unit 1. To provide for health and safety concerns, it required that:

(1) The lessor and anyone else who may acquire an interest under the proposed transaction be prohibited from exercising directly or indirectly any control over the licensees of Palo Verde Unit 1. For purpose of this condition, the limitations in 10 CFR 50.81 "Creditor Regulations" as now in effect, and as they may be subsequently amenoed, are fully applicable to the named lessor and any successor in interest to that lessor as long as the license for the Palo Verde Unit I remains in effect.

Accordingly, this financial transaction shall have no effect on the license for Palo Verde Unit 1 throughout the term of the license.

-/

Arizona Public Service Company (Palo Verde Unit 2), Docket No.

STN 50-52E December 12, 19H'*.

(2)

The Palo Verde Unit 1 operating license be amended to expressly require that the NRC be notified in writing prior to any change in:

(i) the executed lease agreements; (ii) the ANPP Participation Agreement; (iii) the existing insurance policies; and (iv) any action by the lessor or others which may have an adverse effect on the safe operation of the facility.

(3)

The Palo Verde Unit 1 license be amended to reflect the licensee's position as a lessee of the facility.

The Commission's Order authorized the sale and leaseback of PNM's interest in the Palo Verde Unit 1 facility.

The present application for license amendment seeks authorization for a similar sale and leaseback of PNM's interest in Palo Verde Unit 2.

By letter of August 12, 1986, the Director of the Office of Nuclear Reactor Regulation has authorized such amendment.

3.0 CONTACT WITH STATE OFFICIAL The Arizona Radiation Regulatory Agency has been advised of the proposed determination of no significant hazards consideration with regard to this amendment.

No comments were received.

'i 4.0 ENVIRONMENTAL CONSIDERATIONS This amendment only involves the administration of the credit and financial arrangements for Palo Verde Unit 2.

The parties will enter into agreements which provide for the sale and leaseback of.PNM's ownership share under terms requiring PNM's continued full control and responsibility over this ownership share.

The lessor and anyone else who may acquire an interest under this transaction are prohibited from exercising, directly or indirectly, any control of the license.

The amendment also includes a reporting requirement that the NRC must be notified in writing prior to any change in the executed lease agreements, the ANPP participation agreement, and the existing insurance caepolicies.

Accordingly, this amendment meets the eligibility criteria for pcategorical exclusion set forth in 10 CFR 51.22 (c)(c0).

5.0 CONCLUSION

lhe staff has concluded, based on the considerations discussed above, that (1) there is reasonable assurance that the health and safety of the public will not be endangered by operation in the proposed manner, (2) such activities will be conducted in compliance with the Commission's regulations, and (3) the issuance of this amenoment will rot be inimical to the common defense and security or to the health and safety of the public.

We, therefore, conclude that the request is acceptable.

Dated: August 12, 1986

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.JaJ A...JJu NRC License Amend.

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NUCLEAR REGULATORY CO*MW=OIJ "AAHj0ig D8.

L 20 Vt..

E.. Van lrwrt, Jr.

Executive Vic* Prvts6ertt Arizon Kuclur Pfter Projetv' Post Off ice bci USU3 Pboerix, Arizomi

&UC72-2034

Dear Xi,

Van Brunyt:

Subject:

Errata for DArMwnt No. 2' Palo Verde Kclw" net'rat~i on AAMVst 12, 1986, the &bo awero*

hereby rt~ssued to correct an% error &

at thea end of the page.

Vertical lirp to "9

Facility Operatihng Stationi, Unit Z License Mo. UPF-51 nt wes issued.

Paq* 3 of the ameramnt Is r4tz inclhude a limI n~advert~ntly mitted us in tM odr~in lndlcata th'a arts of the Sicr~erlyt, 4ýE.

L 4ta.0eor Project asr PIProject coask 7 Division~ of F% Licensing-&

Enclosure:

PS9e 2 of Ahefdwt I cc-. S02 "nt page i f.

'I-..

-35.2.508 NRC License Amend.

This trnfsaction is 2iffilar to th'at Wmr~ed bathe Comissio-M in its Order Of DtCbesr 12, L985. with re~ard toaUl"e and lI#ASeb4Ck Of PWQ~S Ifit.is~t In Palo Verde WLtJ

1. SUbje~t to the. fortgolng, the Cc=lssin twraby 1;;r~v6S the Wpp1Utioin under tOw com4ltI.Ar $at forth in the erclmoiAan bwtt ko. 2 to th'e PAID Yorto Unit k l1~i=se.

C.

Tha facilit.7 will opear-ts In c~fctrxit with the abmr application and the Dirt~ttr of thea Office of Wjqear Reactor P4ijlatiotis 1*tter of August 12. LW,5 the pni~vsiom of. the Act, and ttw rewplatlons of the Coission; D).

'There Is reasonable assurance (1) that the activities s..ýrtoized by this auwmnent can We tonc~ctad vitbm~t ei-danqriM; the tealth and safety of the putlic, and (ii) that such activities will be contctad in c=.p1inct with the C~owssion's replations; E.

Tha isswArxe of this £2en~tt will not be 1inivictl to the eowwt defrn~se an4 sacuirit~y or to the hetlth L*4 safety of the purblic;9 F.

The issuance of this apm1~wrtt is in atccrdonc with 10 CR Part 51 Of th'e CC=ASsi61oo r~glatloo0 aWd All aPPIlC~abl* rev~irvents halve been satisfied.

G.

The prtsent awe1~ent awthori'zus any s uesle an~d leasoebck trtrsicttotts madt pusrsuant thereto until

-ept r 30. IM8.,

2.

Akc;rdir~qlys a raw Partqrstoo 2.8(6) is adMd to reui as follow's:

(6)(&)

The Public Sevleic Cmpmn~

of Mew Mexico (Pm) is &u~thar12ed tz tran~sfer all or a portion~ of its 10.2% ammehip share in Palo Weon* Unit I and a proportiwnata shars of s thir4 of PWs intarest In th'i Palo Verde c~own faclitlas to certzift euiy iftmutors idfttified in Its submissionl of Auipst 6, 16, Ms A at the s~w tim to lust. back frW SucJ' purcbesars SVCNiInterest sold in Ute Palo Verde Unit 2 facility. The term of the least is for opproilitely 894 reers svtbect toe a1WI of renewal.

Any such sale &Wd l"ee ac t action is subje'ct to th vereplmlnrtations and coditions W fortA in Ote aforwmtiofled a~lic..tlon of Februar~y 14, 19f6, end the subseqmet submittAls dt April 229 Jima 10, ul 29, July 30, August 6, and Au'just 7t M68.

u wall as the letter of the Director of the Office of kclear Usct~r kgmWlati4*

dbt~e AT"s 12 1966, conlefitins to SVCb t.

ect1WO Sp~iftfcAlptb lessor afhd &nM* else wibo may c=;rv in ttivtst under' this naction art Orohibited fr= exercisilgdirectly or Indirectly &VL coftml OYI the 11caeAeS of tePilo Verd* Wdclur Ge~netinq Stations Unidt 2.

For purpow~ of this condition the lll~tatlons In 10 CR 50-81s 8Cr~1t~r ftgulativd, as nc=

In *ffict W as t~v

ENCLOSURE 2

ASSIGNMENT AND ASSUMPTION AGREEMENT THIS ASSIGNMENT AND ASSUMPTION AGREEMENT, dated June 29,2007, is made between PALO VERDE LEASING CORPORATION, a Delaware corporation ("Seller"),

and PNMR DEVELOPMENT AND MANAGEMENT CORPORATION, a New Mexico corporation ("Purchaser").

RECITALS A.

Pursuant to the Bill of Sale and Assignment dated as of January 30, 1987 from First Chicago Lease Holdings, Inc. ("FCLH") to Seller, and the Instrument of Assumption dated as of January 30, 1987 by Seller (copies of which are attached hereto for ease of reference),

Seller was substituted for FCLH as "Owner Participant" in respect of the Transaction Documents (such term and the other capitalized terms used herein without definition having the respective meanings specified in Appendix A to that certain Participation Agreement dated as of August 12,

'1986 (the "Participation Agreement") to which Seller (as assignee of FCLH) and Public Service F

Company of New Mexico, among others, are party).

B.

Seller has agreed to sell, assign and transfer, and Purchaser has agreed to

-puchase, assume and accept the Transferred Interests.

ACCORDINGLY, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

1.

Definitions. The following capitalized terms used in this Agreement shall have the meanings set forth below. Such definitions shall be equally applicable to both the singular and plural forms of the terms defined.

"Agreement shall mean this Assignment and Assumption Agreement.

"Assignment" shall mean the assignment of the Transferred Interests pursuant to Section 2 hereof.

"Beneficial Interest" shall mean 100% of the beneficial interest in the Trust Estate.

"Effective Date" shall mean the date hereof.

to the "Seller-Retained Rights" shall mean all accrued benefits and rights of Seller with respect to the Beneficial Interest or pursuant to any of the Transaction Documents in respect of the

'F..period prior to the Closing Date, including, without limitation, (a) all rights to indemnification and cost reimbursement in respect of Taxes and other matters with respect to such period, including, without limitation, under the Tax Indemnification Agreement and Section 13 of the Participation Agreement; (b) all rights to any amount payable under the Transaction Documents or with respect to the Transferred Interests that accrue or become due and payable prior to the 7'v Closing Date, without regard to when the payment is actually made; and (c) all rights and claims

in respect of obligations of other parties to the Transaction Documents due and owing prior to the Closing Date.

K, :"Subject Property" shall mean all property comprising the Trust Estate.

"Transaction" shall mean the transactions described in the Transaction Documents.

"Transferred Interests" shall have the meaning given such term in Section 2 hereof.

2.

Assignment. Effective on and as of the Effective Date, Seller hereby GRANTS, BARGAINS, ASSIGNS, TRANSFERS, SELLS, DELIVERS AND CONVEYS UNTO PURCHASER, ITS SUCCESSORS AND ASSIGNS, TO HAVE AND TO HOLD FOREVER, all of Seller's right, title, interest and obligations in, to and under the Beneficial Interest and the Transaction Documents (including, without limitation, Seller's obligations under the Transaction Documents, subject to any debt outstanding on the Effective Date under the Notes relating to the Beneficial Interest, excluding the Seller-Retained Rights (collectively, the "Transferred Interests").

3.

Acceptance and Assumption. Effective on and as of the Effective Date, Purchaser hereby (i) accepts the Assignment, and (ii) assumes and agrees to pay and perform all of the obligations contained in or relating to the Transferred Interests (including, without limitation, to pay any indebtedness accruing or becoming due and payable from and alter the Effective Date relating to the Transferred Interests as described in the Transaction Documents), and (iii) unconditionally and irrevocably agrees to be bound by all the terms of, and undertake all of the obligations of Seller, if any, contained in, the Transaction Documents to which Seller was a party, and all references to Seller, or beneficial owner or Owner Participant as related to Seller, in the Transaction Documents shall be deemed to be references to Purchaser.

4.

Transferee Requirements. Purchaser hereby represents and warrants as of the date hereof that it meets (i) all requirements under the Transaction Documents applicable to a permitted or qualified Transferee (as such term is defined in Section 15 of the Participation Agreement) of all or any of the Transferred Interests, and (ii) all requirements under the Trust Agreement to relieve Seller of any liability for Purchaser's obligations thereunder from and after the Closing Date. Specifically, but without limiting any other requirement under the Transaction Documents, Purchaser has a net worth of not less than $25,000,000, as determined in accordance with generally accepted accounting principles.

5.

Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns, subject to any limitations set forth in the Transaction Documents.

6.

Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the conflict of laws provisions thereof.

7.

Counterparts. This Agreement may be executed in separate counterparts, each of which when so executed and delivered shall be an original for all purposes, but all such counterparts shall constitute but one and the same instrument.

2

8.

Headings. The section headings contained herein are for convenience only and shall not be construed as part of this Agreement.

[signature page follows]

3

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed on, and with effect from, the day and year first above written.

SELLER:

PALO VERDE LEASING CORPORATION Name: Mý5ZM-T* *:*

Title:

'*C*

• tS-e iY" PURCHASER:

PNMR DEVELOPMENT AND MANAGEMENT CORPORATION By:

Name:

Title:

4

IN WITNESS WHEREOF, the parties hereto have each caused this Agreement to be duly executed on, and with effect from, the day and year first above written.

SELLER:

PALO VERDE LEASING CORPORATION By:

Name:

Title:

PURCHASER:

PNMR DEVELOPMENT AND MANAGEMENT CORPORATION Name: 'iWe A.

an

Title:

-Vice President and Treasurer

-I,.',

4 CHI:9!9900.3

CHARLES L. MOORE PNM RESOURCES INC ALVARADO SQUARE MS-1200 ALBUQUERQUE NM 87158 0G 1.063 110 Red(3m8,7 2

US NUCLEAR REGULATORY COMMISSION ATTN DOCUMENT CONTROL DESK WASHINGTON DC 20555 77' n 7 3;3