ML111930453

Request for Additional Information - Proposed Merger Between Constellation Energy Group, Inc. and Exelon Corporation

ML111930453
Person / Time
Site:	Calvert Cliffs, Nine Mile Point, Ginna
Issue date:	07/14/2011
From:	Pickett D Plant Licensing Branch 1
To:	Barron H Constellation Energy Nuclear Group
Pickett D, NRR/DORL/LPL1-1, 415-1364
References
TAC ME6234, TAC ME6235, TAC ME6236, TAC ME6237, TAC ME6238
Download: ML111930453 (6)

Text

UNITED STATES NUCLEAR REGULATORY COMMISSION WASHINGTON, D.C. 20555*0001 Ju 1Y 14. 2011 Mr. Henry B. Barron President and Chief Executive Officer Constellation Energy Nuclear Group, LLC 100 Constellation Way, Suite 200C Baltimore, MD 21202

SUBJECT:

REQUEST FOR ADDITIONAL INFORMATION - PROPOSED MERGER BETWEEN CONSTELLATION ENERGY GROUP, INC. AND EXELON CORPORATION (TAC NOS. ME6234, ME6235, ME6236, ME6237, AND ME6238)

Dear Mr. Barron:

By letter dated May 12, 2011, as supplemented by letter dated June 17, 2011, pursuant to Title 10 of the Code of Federal Regulations (10 CFR) 50.80 and 72.50, Constellation Energy Nuclear Group, LLC (CENG) and Exelon Generation Company, LLC (Exelon Generation),

sought Nuclear Regulatory Commission (NRC) approval of the proposed indirect transfer of the NRC licenses held by subsidiaries of CENG. The indirect license transfers would result from the proposed corporate merger between Exelon Corporation and one of CENG's parent companies, Constellation Energy Group, Inc.

The NRC staff has determined that the enclosed request for additional information (RAI) will be necessary to complete its review. Based on discussions with your staff, we understand that you intend to respond to the staff's RAI within 30 days of the date of this letter.

Sincerely,

~vf~

Douglas V. Pickett, Senior Project Manager Plant Licensing Branch 1-1 Division of Operating Reactor Licensing Office of Nuclear Reactor Regulation Docket Nos. 50-220, 50-410, 50-244, 50-317, 50-318, 72-8, and 72-67

Enclosure:

As stated cc w/encl: Mr. Christopher M. Crane, President Exelon Generation Company, LLC 10 South Dearborn Street Chicago, IL 60603 Additional Distribution via Listserv

REQUEST FOR ADDITIONAL INFORMATION APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OF CONTROL OF LICENSES RESULTING FROM THE PROPOSED MERGER BETWEEN EXELON CORPORATION AND CONSTELLATION ENERGY GROUP, INC.

CALVERT CLIFFS NUCLEAR POWER PLANT. UNIT NOS. 1 AND 2 CALVERT CLIFFS INDEPENDENT SPENT FUEL STORAGE INSTALLATION (ISFSI)

NINE MILE POINT NUCLEAR STATION, UNIT NOS. 1 AND 2 RE. GINNA NUCLEAR POWER PLANT R E. GINNA ISFSI DOCKET NOS. 50-317, 50-318,72-8,50-220,50-410,50-244, AND 72-67 By application dated May 12, 2011 (Agencywide Documents Access and Management System (ADAMS) Accession No. ML11138A159), as supplemented by letter dated June 17, 2011 (ADAMS ML11173A067) (collectively, "the application"), pursuant to Section 184 of the Atomic Energy Act of 1954, as amended, Title 10 of the Code of Federal Regulations (10 CFR)

Section 50.80, "Transfer of licenses" and 10 CFR 72.50, "Transfer of license," Exelon Generation Company, LLC (Exelon Generation), acting on behalf of itself, Exelon Corporation (Exelon), and Exelon Ventures Company, LLC (Exelon Ventures), and Constellation Energy Nuclear Group, LLC (CENG), on behalf of its subsidiary licensees, Calvert Cliffs Nuclear Power Plant, LLC, Nine Mile Point Nuclear Station, LLC, and RE. Ginna Nuclear Power Plant, LLC (together, "the Applicants") requested that the Nuclear Regulatory Commission (NRC) consent to the indirect transfers of control of the above-listed NRC licenses as a result of the proposed merger between Exelon and one of CENG's parent companies, Constellation Energy Group, Inc. (CEG). Based on its review, the NRC staff requests the following additional information regarding financial qualifications and foreign ownerShip, control, or domination (FOCD).

1. Financial Qualifications:

In accordance with 10 CFR 50.33(f)(2), the Applicants provided financial information on CENG and the licensees to demonstrate that they possess, or have reasonable assurance of obtaining the funds necessary to cover the projected operating costs of Calvert Cliffs Nuclear Power Plant, Unit Nos. 1 and 2 (CCNPP 1 and 2, including its ISFSI), RE. Ginna Nuclear Power Plant (Ginna, including its ISFSI), Nine Mile Point Nuclear Station (NMPNS 1), and a pro rata share of the estimated operating costs of NMPNS 2 associated with a total 82 percent undivided ownership interest for the period of their respective licenses.

Enclosure

-2 a) Based on information provided within the application, CENG states that it currently "maintains a cash pooling arrangement that provides an additional vehicle for managing the working capital needs of the Licensees" (CENG, has three NRC licensee subsidiary companies, Calvert Cliffs Nuclear Power Plant, LLC, Nine Mile Point Nuclear Station, LLC, and RE. Ginna Nuclear Power Plant, LLC), as reviewed by the NRC in connection with the Electricite de France (EDF) license transfer in 2009.

Provide the amount of funds currently available under the cash pooling arrangement, which was included in the NRC staff's Safety Evaluation (SE) for the Direct and Indirect Transfers of Control of the aforementioned licenses due to the proposed corporate restructuring, and in the October 30,2009 "Order Superseding Order of October 9,2009, Approving Application Regarding Proposed Corporate Restructuring." Also, state whether Exelon Generation will have the ability to modify the existing cash pooling arrangement and future financial support agreements.

b) In a supplement to the application dated June 17, 2011 (ADAMS ML11173A067), CENG provided a draft Form of Support Agreement between Exelon/CEG (the Applicants state they will notify the NRC once the Applicants have identified the appropriate parent entity that will provide this support agreement), and aforementioned subsidiary licensees for funding "[ ...] not to exceed 50.01 percent [...] or $205.029 million ...."

The NRC staff notes that the draft EDF Support Agreement that was submitted on February 26,2009 (ADAMS ML090630426), is between EDF International, SA, and the Subsidiary Licensees, and does not reflect its change in corporate form from a "societe anonyme" (SA to a "societe par actions simplifiee" (SAS) based on a letter dated April 15, 2011, that was sent to the NRC by CENG (ADAMS ML11109A035).

Provide copies of the current executed support agreements between CEG and the Subsidiary Licensees, and E.D.F. International SAS (EDFI) and the Subsidiary Licensees for the NRC staff's review, which were previously submitted as a draft on February 26, 2009. Also, state if the ED'F Support Agreement will be updated to reflect the new corporate form of EDF from a "societe anonyme" (SA) to a "societe par actions simplifiee" (SAS) based on the aforementioned April 15, 2011, letter.

2. Foreign Ownership, Control. or Domination:

In Section IV, "Foreign Ownership or Control," of the May 12, 2011, submittal, the licensees state that:

... Exelon's acquisition of CEG will not result in CENG or the Licensees being owned, controlled, or dominated by an alien, foreign corporation, or foreign government within the meaning of Sections 103d or 104d of the Atomic Energy Act, or the licensee eligibility requirements of 10 CFR 50.38.

- 3 However, in a letter responding to the United States Securities and Exchange Commission (SEC), dated June 30, 2010 1 , CEG stated that:

As evidenced by the composition of the CENG Board of Directors (Le., split equally between EDF and CEG) and the fact that significant day-to-day operating activities are governed at the Board level as specified in the Operating Agreement, control over the decisions and activities in the normal course of business is shared equally by the two equity holders.

Further, Constellation stated that:

In summary, based on our analysis of the totality of the rights and obligations of CEG and EDF as joint owners of CENG, we believe that EDF, through its equal representation on the CENG Board of Directors, has the contractual and ownership rights to effectively and substantively participate in significant day-to day operating, strategic, and governance decisions and activities in the ordinary course of operating the CENG joint venture [....] As a result, we concluded that CEG and EDF have joint control over CENG, and because CEG no longer holds a controlling financial interest in CENG as defined under the accounting rules, deconsolidation of the joint venture is the appropriate, required accounting treatment.

Section 103d of the Atomic Energy Act prohibits the NRC from issuing a license to:

[a]n alien or any corporation or other entity if the Commission knows or has reason to believe it is owned, controlled, or dominated by an alien, a foreign corporation or a foreign government.

Section 50.38 of 10 CFR is the regulatory provision that implements this statutory prohibition.

Based on the statements above, and in order to for the NRC staff to evaluate the foreign ownership, control, or domination (FOCD) regarding CENG, provide the following additional information:

a) Explain how joint control of CENG by CEG and EDF complies with the NRC's FOCD restrictions for nuclear generating facilities, consistent with guidance provided in Standard Review Plan "Foreign Ownership, Control, or Domination of Applicants for Reactor Licenses," dated June 1999.

b) Provide a copy of the Nuclear Advisory Committee's (NAC) latest prepared report that was delivered to the Board of Directors. Also, state whether the NAC has provided advice on and recommendations for appropriate additional policies to prudently assure the Company has continued compliance with provisions of U.S. law and regulations as stated within Section 7.5 "Nuclear Advisory Committee," of the Operating Agreement.

c) Please provide the names and citizenship of the current members of the NAC.

1 Letter dated June 30,2010, from Constellation Energy in response to the SEC's June 7, 2010 letter.

http://www.sec.gov/Archives/edgar/data/10044401000110465910036312/filename1.htm

- 4 d) Describe any unanimous consent issues which would potentially include foreign board members, quorum provisions, and other pertinent operational issues which may be subject to foreign control, either indirect or direct, related to NRC licensed activities, nuclear safety and security, access to restricted data, or responsibility for special nuclear material.

e) Do any non-U.S. citizens on CENG's Board of Directors have the power to control, directly or indirectly, or cause the direction of any decisions related to activities licensed by the NRC of your organization?

f) State whether EDF will have the power to control, directly or indirectly, or cause the direction of any decisions related to activities licensed by the NRC regarding Exelon Generation and its current licensed facilities.

g) Section 50.33(d)(3)(iii) states that the application shall state whether it is owned, controlled, or dominated by an alien, foreign corporation, or foreign government.

Provide additional detail regarding the information filed with the SEC, stating that EDF had joint control of CENG, and that EDF shares equally in the control over the decisions and activities in the normal course of CENG's business of operating nuclear power reactors. Include sufficient detail on the extent of EDF's control over matters involving NRC licensees for the staff to determine whether the negation action plan adequately negates foreign ownership, control, and domination.

h) Describe the functions of the compensation committee, corporate governance committee, audit committee, and risk oversight committee of Exelon's Board of Directors, and describe how they specifically relate to NRC activities (e.g.,

decommissioning funding assurance). Also, describe the roles and responsibilities of the directors on the aforementioned committees and state how Exelon will negate potential foreign influence and control over the committees as they pertain to NRC activities.

ML111930453 OFFICE: LPL 1-1/PM LPL 1-1/LA PFAIB/BC LPL1-1/BC NAME: DPickett SLittie (via e-mail) CRegan by memo NSalgado dated DATE: 07/14111 07/14/11 07108/11 07114/11