ML100060405

Submittal of Proposed Transfer of an Equity Interest in a Sale and Leaseback Transaction

ML100060405
Person / Time
Site:	Palo Verde
Issue date:	12/31/2009
From:	Sanchez L PNM Resources
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
Download: ML100060405 (5)

Text

Alvarado Square Albuquerque, NM 87158 PNMResources.com December 31, 2009 sourceso Certified Mail - Return Receipt Requested U.S. Nuclear Regulatory Commission Attention: Document Control Desk Washington, DC 20555 Sale and Leaseback Transaction by Public Service Company of New Mexico NRC Docket Nos. STN 50-528 and STN 50-529 Palo Verde Nuclear Generating Station, Units 1 & 2 Ladies and Gentlemen:

The purpose of this letter is to provide prior written notification to the Nuclear Regulatory Commission (the "Commission") of the proposed transfer of an equity interest in a sale and leaseback transaction that was the subject of a license amendment in the above docket.

This is the same transaction of which we informally advised Commission Staff by e-mail of December 22, 2009. The proposed transfer of the. equity interest would be from, MFS Leasing Corp. ý(..MFS) .t6 Cypress PV Partnership ("Cypress")', neither. of Which';isaffiliated with Public

-.'of *NeM ('"PeM").'6{JUpoii tihe. transfer, C~,rqess,'.Wiil own equ intest, th~ofigh. existing ovwnier trusts, portion. of thie. interests'i. tlie.'Pal6 Vefde*'Nucleai Generating Station .("PVNGS :)'). Units4'1*' and :2, which 'Were .,th&.'sujet of£ale and: leasnback transactions in 1985'aind 1986, resp'ectively, that were approved bythe Commission. .

Background. In 1985 and 1986, PNM proposed to enter into sale and leaseback transactions relating to PVNGS Unit 1 and Unit 2, respectively. By letter dated December 26, 1985, the Commission issued Amendment No. 3 to Facility Operating License NPF-41 (Palo Verde Unit 1), .approving the Unit 1 sale and leaseback transactions, subject to 10 C.F.R. § 50.81 and the conditions set'forth in such Amendment. By letter dated August 12, 1986, the Commission issued Amendment No. 2 to Facility Operating License NPF-51 (Palo Verde Unit 2), approving the Unit 2 saie,,and leaseback transactions, subject to 10 C.F.R. § 50.81 and the conditions set forth in such Aifendment. Currently, MFS holds (through the existing owner trust structures) (i) a 1.36 percent undivided ownership interest in Unit 1, (ii) a 1.36 percent undivided ownership interest in Unit 2, a'nd (iii) a separate 1.13 percent undivided ownership interest in Unit 2 (which interest (iii) is not the subject of this notice).

Subject of this Notice. MFS's 1.36 percent undivided ownership interests in each of Unit 1 and Unit 2 are the subject of this notice (the "Subject Interests"). With respect to another (unrelated) equity interest transfer in2007, Mike Markley of the Commission Staff advised PNM by-letteIr dated Octoberi18,' 2007::(TAC NOS. MD679.1).that priorwriitein notice .to the Cormifsiofi' is rjequired for'the .transf'er' 6f an equity. interesf' in: a PVNGS sale arid leaseback trafnsaction 'froim 'one0party to anothert, even if the terms of the sale . and'- leaseback remain unchanged: :Notably, this is a prior written notice requirem6rit and not'a'Cominission approMa!

requirement.

Ao!

,( i¢g

December 31, 2009 Page 2 MFS and Cypress have notified PNM that MFS proposes to transfer the Subject Interests to Cypress and, in connection therewith, Cypress will execute an assignment and assumption agreement for each Subject Interest, pursuant to which Cypress will assume the rights and obligations of MFS under the existing applicable PVNGS sale and leaseback transaction documents.

MFS and Cypress have further notified PNM that they plan to close the proposed transfer on or after February 1, 2010, and they have therefore requested that PNM provide this advance written notice to the Commission with respect to the transfer. The proposed transfer will be made in a manner that is specifically permitted under the sale and leaseback transactions as they were originally approved by the Commission (i.e., the transferee meets the net worth requirement of $25,000,000 and has provided the requisite notices and form of assignment and assumption agreements to the relevant parties to the sale and leaseback transactions). The current "owner trustee" for the sale and leaseback transactions, U.S. Bank National Association, will remain unchanged, and the terms of both leases will remain unchanged.

We have attached for your reference the following materials relating to Cypress, as forwarded to us by counsel to Cypress:

• Balance sheet dated as of December 22, 2009 (attached as "Exhibit A")

• Summary about Cypress and its ownership structure and management (attached as "Exhibit B")

In addition, should you find it useful to reference, Cypress also forwarded to us their company internet address, which they have indicated has additional information regarding the company and its businesses. The website can be found at: http://www.cypressleasing.com If you have any questions, please do not hesitate to contact Charles Moore at (505) 241-4935 or the undersigned at (505) 241-4941. Again, as noted above, MFS and Cypress plan to close the transaction on or after February 1, 2010.

Sincerely, Leonard D. Sanchez Senior Counsel PNM Resources, Inc.

cc: Certified Mail - Return Receipt Requested Office of Nuclear Reactor Regulation Division of Operating Reactor Licensing Plant Licensing Branch IV Attention: John R. Hall, Senior Project Manager U.S. Nuclear Regulatory Commission Washington, DC 20555 Arizona Public Service Company Attention: David Falck, Esq.

Michael Green, Esq.

Exhibit A 9:29 AM Cypress PV Partnership 12/23/09 Balance Sheet As of December 22, 2009 Dec 22, 09 ASSETS Current Assets Checking/Savings Cash and cash equivalents CNB Ops .. 1492 50,840,000.00 Total Cash and cash equivalents 50,840,000.00 Total Checking/Savings 50,840,000.00 Total Current Assets 50,840,000.00 TOTAL ASSETS 50,840,000.00 LIABILITIES & EQUITY Equity Contributions Contributions; Cypress PV-A 26,436,800.00 Contributions; Cypress PV-B 24,403,200.00 Total Contributions 50,840,000.00 Total Equity 50,840,000.00 TOTAL LIABILITIES & EQUITY 50,840,000.00 Page 1

EXHIBIT B About the Purchaser - Cypress PV Partnership The Purchaser of the owner participation interests will be Cypress PV Partnership, a California general partnership. The purchaser has two general partners, Cypress PV-A, LLC and Cypress PV-B, LLC, each a California limited liability company managed by Cypress Equipment Management Corporation V, a California corporation. The members of Cypress PV-A, LLC and Cypress PV-B, LLC are various Cypress Funds, which are themselves California limited liability companies. The membership of each of Cypress PV-A, LLC and Cypress PV-B, LLC is listed below, together with each member's capital contribution and the name of each member's manager:

Members of Cypress PV-A, LLC Capital Member Name Contribution Manager of Member sEquipment Fund 14, LLC $1,057,680.00 Cypress Equipment Management Cypress ECorporation IV Cypress Equipment Fund 15, LLC $10,047,960.00 Cypress Equipment Management CCorporation IV Cypress Equipment Fund 16, LLC $9,254,700.00 Cypress Equipment Management Corporation IV Cypress Equipment Fund 17, LLC $6,081,660.00 Cypress Equipment Management Corporation V Total Capital Contributions $26,442,000.00 Members of Cypress PV-B, LLC Capital Member Name Contribution Manager of Member Cypress Income Fund IV,LLC $976,320.00 Cypress Equipment Management Corporation III Cypress Income Fund VI, LLC $488,160.00 Cypress Equipment Management sCorporation IV Cypress Income Fund VII, LLC $7,078,320.00 Cypress Equipment Management Corporation IV Cypress Income Fund 8, LLC $7,664,112.00 Cypress Equipment Management Corporation V Cypress Income Fund 9, LLC $7,810,560.00 Cypress Equipment Management Corporation V Cypress Participation Fund, LLC $390,528.00 Cyprass Equipment Management

$24,408,000.00 _ _ _ _ __IV Total Capital Contributions Each of the Cypress Funds is made up of fewer than 500 individual investors. Non-US ownership interests in any of the Cypress Funds are de minimus. All of the Cypress Funds are managed by affiliates of Cypress Financial Corporation and the manager of each Fund has sole and absolute authority with respect to the investment and other decisions made by each Fund, subject only to certain limitations spelled out in the Private Placement Memorandum for each Fund. Investors in Cypress Funds have no participation in the management of the Funds.

Ultimate management authority for Cypress Financial Corporation and each of the managers of the Cypress Funds rests with Mr. Stephen R. Harwood, the controlling direct or indirect shareholder and the President of each of those corporations. Mr. Harwood received a bachelor's

{00132577-1}

degree from Princeton University in 1966 and an MBA from University of Chicago in 1968. From 1968 to 1973, he was employed by Exxon Corporation. He began his equipment leasing career with ITEL Leasing Corporation in 1973. In 1978, he became president of CIS Equipment Leasing Corporation, which grew to be a major lessor of computer and capital equipment. Mr. Harwood founded the Cypress Companies in 1985. Cypress specializes in purchasing secondary market equipment leasing transactions from institutional lessors. Acquisitions are made on behalf of Cypress managed investment programs and for Cypress' own account.

{00132577-1}