RS-11-181, Submittal of Revised Post-Transaction Organization Related to Application for Approval of Indirect Transfer of Control of Licenses
| ML113180265 | |
| Person / Time | |
|---|---|
| Site: | Calvert Cliffs, Nine Mile Point, Ginna  |
| Issue date: | 11/11/2011 |
| From: | Fewell J Exelon Generation Co |
| To: | Document Control Desk, Office of Nuclear Material Safety and Safeguards, Office of Nuclear Reactor Regulation |
| References | |
| RS-11-181 | |
| Download: ML113180265 (12) | |
Text
10 CFR 50.80 10 CFR 72.50 RS-11-181 November 11, 2011 U.S. Nuclear Regulatory Commission ATTN: Document Control Desk Washington, DC 20555-0001 Calvert Cliffs Nuclear Power Plant, Units 1 and 2 Renewed Facility Operating License Nos. DPR-53 and DPR-69 Docket Nos. 50-317 and 50-318 Calvert Cliffs Independent Spent Fuel Storage Installation Materials License No. SNM-2505 Docket No. 72-8 Nine Mile Point Nuclear Station, Units 1 and 2 Renewed Facility Operating License Nos. DPR-63 and NPF-69 Docket Nos. 50-220 and 50-410 R.E. Ginna Nuclear Power Plant Renewed Facility Operating License No. DPR-18 Docket No. 50-244 R.E. Ginna Independent Spent Fuel Storage Installation General License Docket No. 72-67
Subject:
Submittal of Revised Post-Transaction Organization Related to Application for Approval of Indirect Transfer of Control of Licenses
References:
(1) Letter from Henry B. Barron (Constellation Energy Nuclear Group, LLC) and Christopher M. Crane (Exelon Generation Company, LLC) to Document Control Desk (NRC), dated May 12, 2011, Application for Approval of Indirect Transfer of Control of Licenses (2) Exelon Generation Company, LLC letter to USNRC, "Request for Threshold Determination Under 10 CFR 50.80," dated May 18, 2011 (3) Letter from Steven L. Miller (Constellation Energy Nuclear Group, LLC) to Document Control Desk (NRC), dated June 17, 2011, Supplement to Application for Approval of Indirect Transfer of Control of Licenses
Document Control Desk November 11, 2011 Page 2 (4) Letter from Henry B. Barron (Constellation Energy Nuclear Group, LLC) to Document Control Desk (NRC), dated August 12, 2011, Response to NRC's Request for Additional Information on License Transfer Application In connection with the proposed merger of Exelon Corporation (Exelon) and Constellation Energy Group, Inc. (CEG), Exelon Generation Company, LLC (Exelon Generation) and Constellation Energy Nuclear Group, LLC (CENG) submitted in Reference 1 an application for the NRC's approval of the indirect transfer of control of the NRC licenses held by subsidiaries of CENG. In Reference 2, Exelon Generation requested that the NRC make a threshold determination that the proposed transaction does not involve any direct or indirect transfer of control of the Exelon Generation licenses that would require approval pursuant to 10 CFR 50.80. References 1 and 2 both described the steps involved in the merger and provided an organizational chart (Figure 3) showing the planned post-transaction corporate organizational alignment.
Based on additional post-merger planning, a change is being made to the restructuring steps and corporate alignment that will facilitate certain tax and other corporate efficiencies for the combined company. The change will result in the elimination of CEG as part of the restructured corporate organization, but this change should not affect the NRC's overall review for the reasons explained herein. Specifically, with respect to the steps enumerated in Attachment 1 (at page 2) of Reference 1, the acquisition of CEG and subsequent restructuring by Exelon are now expected to proceed as follows:
Steps 1 through 4 will occur as originally described. Concurrently with the distribution of CEG's equity interests in RF HoldCo LLC (the holding company for Baltimore Gas & Electric Company), CEG will merge into Exelon, resulting in Constellation Nuclear, LLC, becoming a direct wholly-owned subsidiary of Exelon and the termination of CEG's corporate existence.
In steps 5 and 6, which will still occur immediately after step 4, Exelon and then Exelon Ventures will contribute the equity interest in Constellation Nuclear LLC, rather than CEG, to Exelon Generation resulting in Constellation Nuclear LLC becoming a direct wholly owned subsidiary of Exelon Generation.
This revised final corporate organizational alignment that will result is essentially identical to the alignment shown in the Figure 3 provided in References 1 and 2, except that CEG will disappear and Constellation Nuclear, LLC will become a direct subsidiary of Exelon Generation. The resulting organizational structure is shown in the revised Figure 3 - Post-Transaction Final Organization, provided in Enclosure 1. The applicants will keep the NRC informed if there is any change in the structure or timing of the proposed transaction.
These changes have no impact on the evaluations or conclusions previously submitted in References 1 and 2. The revised corporate realignment will not alter the chain of Exelon companies directly or indirectly owning Exelon's current nuclear fleet, and therefore has no bearing on the request for the threshold determination. With respect to the application for consent to the indirect transfer of control of the NRC licenses held by subsidiaries of CENG, ultimately the only difference in the post-transaction final organization is that Constellation Energy Group, Inc. will be eliminated as an
Document Control Desk November 11 , 2011 Page 3 intermediate parent of Constellation Nuclear LLC and indirectly of CENG. Throughout these transactions, Constellation Nuclear, LLC's ownership of CE Nuclear LLC, and its 50.01 % ownership of CENG, and CENG's ownership of Constellation Nuclear Power Plants, LLC and the CENG licensees will remain unchanged.
The revised restructuring and the elimination of CEG as an intermediate parent does not affect the governance of CENG. As a result of the revised restructuring, Exelon will essentially step into the shoes of CEG as one of the two ultimate parent companies of CENG. CEG itself is not party to the CENG Operating Agreement (submitted as to Reference 1). The CENG Operating Agreement is by and among Constellation Nuclear, LLC (CNL), CE Nuclear, LLC, EDF Development Inc. (now EDF Inc.), and E.D.F. International S.A. Thus, the elimination of CEG as an intermediate parent company in the corporate organization above CENG does not affect the management of CENG under the Operating Agreement. Indeed, eliminating CEG streamlines the organizational structure between Exelon and CNL.
Similarly, the elimination of CEG as an intermediate parent does not affect the negation action plan for CENG that was approved by the NRC in connection with the CENG-EDF transaction in 2009. The negation action plan is implemented primarily through the governance provisions of the CENG Operating Agreement, which ensure that final decision making authority over matters of nuclear safety, security and reliability remains in the hands of U.S. citizens. Under the CENG Operating Agreement, Constellation Nuclear, LLC appoints five of the ten directors to the CENG Board of Directors, including the Chairman, who must be a U.S. citizen. All directors appointed by CNL or any successor to CNL must be U.S. citizens (Sections 7.2(a) and 7.3(c)). The Chief Executive Officer and Chief Nuclear Officer of CENG must also be U.S. citizens (Section 7.3(d) and 0)). The CNL-appointed U.S. Chairman has tie-breaking authority in the event of a deadlock of the CENG Board of Directors on specified matters, including matters related to regulatory strategy or the relationship with the U.S. Government including the NRC; the safety, security and reliability of the nuclear facilities; and any matter that, in view of U.S. laws or regulations, requires or makes it reasonably necessary to assure U.S. control (Section 7.3(c)). In addition, the negation action plan includes the establishment of the independent Nuclear Advisory Committee, which provides additional oversight in order to assure there is no foreign domination or control of CENG. These approved negation measures ensure continued U.S. control over all matters required to be under U.S. control by the Atomic Energy Act and 10 CFR 50.38, and they remain in place and are unaffected by the proposed Exelon/CEG merger, including the elimination of CEG as an intermediate parent. It is understood that any NRC order approving the proposed transaction will contain a standard condition requiring CENG or Exelon Generation to submit to the NRC, within 30 days of knowledge of a filing with the U.S. Securities and Exchange Commission, any Schedules 13D or 13G filed pursuant to the Securities and Exchange Act of 1934 that disclose beneficial ownership of any registered classes of Exelon stock.
The revised corporate structure does not materially affect the analysis and conclusions stated in the applicants' responses to NRC requests for additional information (RAI) related to the proposed license transfers. In some cases, the text of an RAI response was based on the original planned structure with CEG continuing to be an intermediate parent of CENG, or otherwise referred to CEG's role as one of the ultimate parents of CENG. For example, the response to RAI 2(a) in Reference 4 reiterated a statement
Document Control Desk November 11,2011 Page 4 from the license transfer application to the effect that "CEG will continue to be a parent company of CENG and will continue indirectly to hold a 50.01% ownership interest in CENG ...." This statement is superseded by the revised restructuring described above.
In addition, responses to RAI 2(d), (e), and (g) in Reference 4 referred to CEG's role as a parent of CENG. These references should be understood to refer to CNL's role as a member of CENG, which will continue as described above. In any event, the prior RAI responses were based on Exelon Corporation being an ultimate corporate parent of CENG. Thus, notwithstanding the clarification provided herein, the analysis and conclusions stated in the RAI responses provided in Reference 4 remain unchanged.
The Operating License and Technical Specifications for the CENG, LLC plants have been reviewed to confirm that the elimination of CEG as the intermediate parent company does not require any amendment to any license conditions or provisions. The Calvert Cliffs Nuclear Power Plant, Units 1 and 2, License Appendix C, Condition (b),
and Nine Mile Point Nuclear Station, Units 1 and 2, License Condition (10)b and (13)b, respectively, prohibit investments of decommissioning funds in the securities or obligations of Constellation Energy Group, Inc, New Controlled (an affiliate that was formed to facilitate CEG's reorganization in the early 2000s that no longer exists), or their affiliates, successors, or assigns. The current language in these license conditions ensures that this restriction will continue to apply to Exelon as the successor to CEG, and Exelon's affiliates, including Exelon Generation, and does not need to be revised.
Additionally, Nine Mile Point Nuclear Station, Units 1 and 2, License Conditions (12) and (15), respectively, required NMP LLC to enter into an intercompany credit agreement with CEG when the licenses for these units were transferred to NMP LLC in November 2001. This condition was satisfied at that time. The license condition permitted the intercompany credit agreement to be modified or canceled with NRC's prior written consent; and the NRC Orders approving the CENG joint venture in 2009 approved new financial support arrangements for the licensees, expressly superseding the prior arrangements. Further, those Orders included new conditions (not incorporated into the licenses) governing the new financial arrangements. Therefore, the 2001 license conditions no longer have any effect and do not need to be revised.
Reference 3 provided a draft of the proposed Support Agreement for the Exelon/Constellation side of CENG. Since the corporate parent structure has been determined as described above, the form of agreement has been revised to specify the agreement between Exelon Generation Company, LLC and the CENG plant LLCs. The revised Support Agreement is provided in Enclosure 2. As noted in Reference 3, the NRC Orders from October 2009 approving EDF Inc.'s investment in CENG contain a condition requiring NRC written consent before the existing Support Agreements can be cancelled or materially modified. Enclosure 2 is submitted in accordance with that condition. As also noted in Reference 3, the draft Support Agreement is substantially the same as the existing CEG Support Agreement except that the amount provided is increased in light of changes in estimated fixed operating and maintenance costs for a six-month outage.
This correspondence does not contain any regulatory commitments.
If any additional information is needed, please contact David J. Distel at (610) 765-5517.
Document Control Desk November 11, 2011 Pages I declare under penalty of perjury that the foregoing is true and correct. Executed on the
~o: November, 2011.
~leYFeWel Vice President and Deputy General Counsel Exelon Generation Company, LLC
Enclosures:
(1) Revised Figure 3 - Post-Transaction Final Organization (2) Revised Draft Exelon Generation Company, LLC Support Agreement cc: Regional Administrator* NRC Region I NRC Senior Resident Inspector - Calvert Cliffs Nuclear Power Plant, Units 1 and 2 NRC Senior Resident Inspector - Nine Mile Point Nuclear Station, Units 1 and 2 NRC Senior Resident Inspector - R. E. Ginna Nuclear Power Plant D. V. Pickett, NRC Senior Project Manager
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RS-11-181 Enclosure 2 ENCLOSURE 2 Draft Exelon Generation Company. LLC Support Agreement
Form of SUPPORT AGREEMENT Between Exelon Generation Company, LLC and Calvert Cliffs Nuclear Power Plant. LLC Nine Mile Point Nuclear Station, LLC, and R. E. Ginna Nuclear Power Plant, LLC THIS SUPPORT AGREEMENT, dated as of . 2011 between Exelon Generation Company, LLC ("Exelon Generation"), and Calvert Cliffs Nuclear Power Plant, LLC, Nine Mile Point Nuclear Station, LLC and R. E. Ginna Nuclear Power Plant, LLC, each individually herein referred to as a "Subsidiary Licensee" and all collectively herein referred to as "Subsidiary Licensees."
WIT N E SSE T H:
WHEREAS, through its intermediate subsidiary or affiliated companies, Exelon Generation is the indirect owner of 50.01 % of the Subsidiary Licensees; WHEREAS, E.D.F. International SAS ("EDFI"), through its intermediate subsidiary companies, is the indirect owner of 49.99% of the Subsidiary Licensees; WHEREAS, the Subsidiary Licensees are the corporate entities that hold the NRC licenses for Calvert Cliffs Nuclear Power Plant, Unit Nos. I & 2, Operating Licenses DPR-53 & DPR-69, Nine Mile Point Nuclear Station, Unit Nos. I & 2, Operating Licenses DPR-63 & NPF-69, and R. E. Ginna Nuclear Power Plant, Operating License DPR-I8 (individually, each a "Facility," and collectively the "Facilities");
WHEREAS, Exelon Generation and the Subsidiary Licensees desire to take certain actions to assure the ability of the Subsidiary Licensees to pay their respective approved expenses of maintaining the Facilities safely and reliably and of protecting the public health and safety (the "Operating Expenses")
and to meet Nuclear Regulatory Commission ("NRC") requirements during the life of each Facility (the "NRC Requirements");
WHEREAS, EDFI is entering into a separate agreement with the Subsidiary Licensees that has substantially the same terms and purposes as this Support Agreement (hereafter, the "EDFI Agreement");
WHEREAS, Exelon Generation and EDFI, as provided in the Second Amended and Restated Operating Agreement for Constellation Energy Nuclear Group, LLC dated as of November 6, 2009
("Operating Agreement"), plan to provide the Subsidiary Licensees with adequate resources for approved Page 1 of 5
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working capital and other needs on an ongoing basis through various mechanisms such as capital contributions, member loans or advances, or other mutually approved funding mechanisms as discussed in the Operating Agreement; however, if these funding sources, at any time, cannot meet those needs, then Exelon Generation and EDFI have agreed to provide credit to the Subsidiary Licensees, in the manner as described below, to allow the Subsidiary Licensees to meet their obligations to protect public health and safety.
Now, THEREFORE, in consideration of the mutual promises herein contained, the patties hereto agree as follows:
- 1. Availability of Funding. Upon the written request of a Subsidiary Licensee, Exelon Generation shall provide or cause to be provided to such Subsidiary Licensee such funds as the Subsidiary Licensee determines to be necessary to pay Operating Expenses or meet NRC Requirements at the same time or times as the same amount is paid by EDFI under the EDFI Agreement up to the limits set forth in that agreement; provided, however, that Exelon Generation's maximum liability to provide funding hereunder shall not exceed (x) 50.01 percent of the total funding required by the Subsidiary Licensee pursuant to this Support Agreement and the EDFI Agreement, or (y) $205.029 million cumulatively over the life of this Support Agreement, unless, and to the extent that, advances of funds under this Support Agreement have been reimbursed in whole or part through repayments by the Subsidiary Licensee to Exelon Generation. As such, the aggregate amount outstanding under this Support Agreement at anyone time shall not exceed $205.029 million, and this shall be the maximum unreimbursed amount Exelon Generation is obligated to provide under this Support Agreement.
- 2. Request for an Advance. If the funding mechanisms as described under the Operating Agreement, at any time, are not sufficient to allow a Subsidiary Licensee to meet its needs, the Subsidiary Licensee may submit to Exelon Generation a request for an advance of funds under this Support Agreement. Each request for an advance of funds under this Support Agreement shall be made not later than noon Eastern Time (USA) on the tenth business day prior to the proposed drawdown by notice from the Subsidiary Licensee to Exelon Generation (pursuant to procedures that may be changed from time to time by mutual agreement) specifying the amount of the advance and a certification that such advance is for the purpose specified in Section 6.
- 3. Substitution. Exelon Generation can terminate funding provided under this Support Agreement upon 45 days' written notice to the Subsidiary Licensee if Exelon Generation has procured a substitute loan facility and/or letter of credit for the Subsidiary Licensee that is mutually agreed to by Exelon Generation and EDFI and meets the financial assurance requirements of the NRC to protect the public health and safety.
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- 4. Interest. Interest on any principal amount outstanding shall accrue daily at such rate, and shall be payable at such times, as mutually established by Exelon Generation and EDFI at the time of an advance under this Support Agreement. The interest rate applicable to any advance and the time of payment shall be noted in a note or other writing. Such notation shall be conclusive absent manifest error.
- 5. Optional Prepayments. The Subsidiary Licensee, at its option, may repay all or any part of the principal amount outstanding from time to time without penalty or premium, upon notice to Exelon Generation made not later than noon Eastern Time (USA) on at least the second business day prior to such prepayment (which notice, if oral, shall be confirmed promptly in writing); provided, however, that if the interest rate is LIBOR based, a prepayment penalty may be assessed against the Subsidiary Licensee. Any prepayment penalty would be mutually established by Exelon Generation and EDFI at the time of an advance. Exelon Generation, at its option, may waive such notice requirements as to any prepayment.
- 6. Use (~f Proceeds. In order to provide financial assurance, any advance may be used by a Subsidiary Licensee only to meet its approved Operating Expenses and NRC Requirements, including payments for nuclear property damage insurance and a retrospective premium pursuant to Title 10, Part 140, Section 21 of the Code of Federal Regulations (10 CFR 140.21).
- 7. No Guarantee. This Support Agreement is not, and nothing herein contained, and no action taken pursuant hereto by Exelon Generation shall be construed as, or deemed to constitute, a direct or indirect guarantee by Exelon Generation to any person of the payment of the Operating Expenses or of any liability or obligation of any kind or character whatsoever of the Subsidiary Licensees. This Agreement may, however, be relied upon by the NRC in determining the financial qualifications of each Subsidiary Licensee to hold the operating license for a Facility.
- 8. Waivers. Exelon Generation hereby waives any failure or delay on the part of the Subsidiary Licensees in asserting or enforcing any of their rights or in making any claims or demands hereunder.
- 9. Amendments and Termination. This Agreement may not be amended or modified at any time without 30 calendar days prior written notice to the NRC. This Agreement shall terminate at such time as Exelon Generation is no longer the direct or indirect owner of any of the shares or other ownership interests in a Subsidiary Licensee. This Agreement shall also terminate with respect to the Operating Expenses and NRC Requirements applicable to a Facility whenever such Facility permanently ceases commercial Page 3 of 5
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operations and certification is made as to the permanent removal of fuel from the reactor vessel; provided, however, that this Agreement may be extended for successive periods of two years each upon the mutual agreement of the parties.
- 10. Successors. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.
- 11. Third Parties. Except as expressly provided in Sections 3 and 6 with respect to the NRC, this Agreement is not intended for the benefit of any person other than the parties hereto, and shall not confer or be deemed to confer upon any other such person any benefits, rights, or remedies hereunder.
- 12. Other Financial Support Arrangements. This Agreement supersedes any other support arrangement relating to NRC requirements, if any exists prior to the date hereof, between Exelon Generation and a Subsidiary Licensee to provide funding when necessary to pay Operating Expenses and meet NRC Requirements for the Facilities, and any such other financial support arrangement is hereby voided, revoked and rescinded. Accordingly, the total available funding provided for in this Support Agreement shall be limited as set forth in Section 1 herein and shall not be cumulative with any other financial support arrangement for purposes of meeting NRC Requirements. For avoidance of doubt, the parties agree that this section does not apply to financial guarantees or commitments made to third parties, even where such agreements may relate to compliance with NRC requirements.
- 13. Governing Law. This Agreement shall be governed by the laws of the State of Maryland.
- 14. Dispute Resolution. In the event of any dispute arising out of or in connection with this Support Agreement, executives of Exelon Generation and the Subsidiary Licensee will exercise good faith efforts to resolve the dispute in a timely manner. In the event that the executives of Exelon Generation and the Subsidiary Licensee are unable to reach a resolution, the dispute, including any dispute regarding the existence, termination or validity of this Support Agreement, each Party shall have the right to have recourse to and shall be bound by the pre-arbitral referee procedure of the applicable rules of the American Arbitration Association. All disputes arising out of or in connection with this Support Agreement (including as to existence, termination and validity) shall be finally settled under the applicable rules of the American Arbitration Association (the "Rules")
by three arbitrators appointed in accordance with said Rules. The place of the pre-arbitral referee procedure and of the arbitration procedure shall be Baltimore, Maryland, United States of America. The proceedings before the arbitral tribunal (including with respect to the Pre-Arbitral Referee Procedure) shall be governed by the Rules. The rules of law to Page 4 of 5
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be applied by the arbitral tribunal to the merits of the dispute shall be the rules of law of the State of Maryland. The language of the arbitration shall be English. Evidence shall be provided in English and pleadings shall be done in English. The arbitral tribunal shall render its decision within six months from the date of signature of the terms of reference.
Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The parties waive to the extent permitted by applicable law any rights to appeal or to review of such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the day and year first above written.
ACKNOWLEDGED AND AGREED Exelon Generation Company, LLC Nine Mile Point Nuclear Station, LLC By: _ By: _
Name: _
Calvert Cliffs Nuclear Power Plant, LLC R. E. Ginna Nuclear Power Plant LLC By: _
By: _
Name: _
Title:
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