ML13014A493
| ML13014A493 | |
| Person / Time | |
|---|---|
| Site: | Comanche Peak  |
| Issue date: | 01/15/2013 |
| From: | Dusaniwskyj M NRC/NRR/DIRS/IFIB |
| To: | |
| Dusaniwskyj, Mike 301-415-1260 | |
| References | |
| Download: ML13014A493 (10) | |
Text
CONTAINS NON-PROPRIETARY INFORMATION CONTAINS NON-PROPRIETARY INFORMATION SAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION INDIRECT TRANSFER OF CONTROL OF FACILITY OPERATING LICENSES DUE TO CORPORATE RESTRUCTURING WITHIN ENERGY FUTURE HOLDINGS CORPORATION COMANCHE PEAK NUCLEAR POWER PLANT, UNITS 1 & 2 DOCKET NOs. 50-445 AND 50-446
1.0 INTRODUCTION
By letter dated October 11, 2012, (Agencywide Documents Access Management Systems (ADAMS) Accession No. ML12312A157), and supplemented on November 26, 2012 (ADAMS Accession No. ML12340A446), December 5, 2012 (ADAMS Accession No. ML12354A058), and December 17, 2012 (ADAMS Accession No. ML12363A028), hereinafter, the Application, Luminant Generation Company LLC (Luminant Power), acting on behalf of Energy Future Holdings Corp. (EFH), Energy Future Competitive Holdings Company (EFCH), Texas Competitive Electric Holdings Company LLC, and Luminant Holding Company LLC, requested that the United States Nuclear Regulatory Commission (NRC) consent to the indirect transfer of operating licenses NPF-87 and NPF-89 for Comanche Peak Nuclear Power Plant, Units 1 and 2 (CPNPP), respectively, now held by Luminant Power as owner and operator. There is also an Independent Spent Fuel Storage Installation (ISFSI) licensed under a general license that will be transferred as a result of the indirect transfer of operating license NPF-89
2.0 BACKGROUND
EFCH is a direct wholly owned subsidiary of EFH. EFCH, through its wholly owned subsidiaries, owns Luminant Power, the owner and operator of CPNPP. EFH is planning an internal transaction, the ultimate result of which is to convert EFCH from a Texas corporation into a Delaware limited liability company. Following the transaction, EFCH will remain a wholly owned subsidiary of EFH. Under the proposed internal restructuring, EFH would form a new wholly owned subsidiary known as EFH2 Corp. (EFH2), which would be a Texas corporation.
EFH would then contribute its stock in EFCH to EFH2 causing EFCH to become a wholly owned subsidiary of EFH2. EFCH would then convert to a Delaware limited liability company by operation of applicable Texas and Delaware law.1 Finally, EFH would merge with and into EFH2 with EFH2 being the surviving entity, and EFH2 would change its name to Energy Future Holdings Corp. and adopt the current certificate of formation and bylaws of EFH. After the 1 The applicants have stated that the feasibility of this proposed change is solely dependent on a positive private letter ruling from the Internal Revenue Service.
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CONTAINS NON-PROPRIETARY INFORMATION transaction, EFCH will remain a wholly owned subsidiary of EFH, and EFH will retain the same assets, liabilities, owners, board of directors, and management.2 According to the applicants, the proposed transactions involve no changes to any of CPNPPs facility Licenses. Accordingly, Luminant Power did not request any license amendments in the enclosed Application.
According to the applicants, none of Luminant Powers qualifications to own the facilities is affected by the proposed indirect transfer. Specifically, Luminant Powers financial qualifications and decommissioning funding assurance will not change as part of the proposed transaction.
Luminant Power is the licensed operator for CPNPP. The application does not request, or involve any change to Luminant Powers continued operation of CPNPP. The application does not request approval of any physical changes in the plant, or any changes to the conduct of operations at CPNPP. After the proposed transactions, Luminant Power will continue to operate and maintain each plant in accordance with its respective licensing basis. Other than having a new legal entity that is created and then survives as EFH, the transaction does not involve any change in the ownership or control of any entity in the chain that directly or indirectly owns, operates, or controls CPNPP, including Luminant Power.
The applicants do not request any license amendments or make additional commitments to the NRC, except a commitment to increase the amount of an existing financial support agreement.
3.0 REGULATORY EVALUATION
The applicants request for approval of the indirect transfer of control of the licenses for the units discussed in this safety evaluation is made under 10 CFR 50.80. The ISFSI The Commissions regulation at 10 CFR 50.80(a) states the following:
No license for a production or utilization facilityor any right thereunder, shall be transferred, assigned, or in any manner disposed of, either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to any person, unless the Commission gives its consent in writing.
The regulation at 10 CFR 72.50 states the following:
No license or any part included in a license issued under this part for an ISFSI or MRS [monitored retrievable storage installation] shall be transferred, assigned, or in any manner disposed ofunless the Commission gives its consent in writing.
In addition, the regulations at 10 CFR 50.80(b) and (c) and 10 CFR 72.50(b) and (c) apply.
10 CFR 50.80(b) states that an application for a license transfer shall include as much information described in 10 CFR 50.33, Contents of Applications; General Information, and 2 The application contained a simplified organization chart of the current and intended corporate structure identified as Enclosure 1 exhibit A and Enclosure 1 Exhibit B.
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CONTAINS NON-PROPRIETARY INFORMATION 10 CFR 50.34, Contents of Applications; Technical Information, with respect to the identity and technical and financial qualifications of the proposed transferee as would be required by those sections if the application were for an initial license.
The regulation at 10 CFR 50.80(c) states the following:
[t]he Commission will approve an application for the transfer of a license, if the Commission determines: (1) That the proposed transferee is qualified to be the holder of the license; and (2) That transfer of the license is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission pursuant thereto.
4.0 FINANCIAL QUALIFICATIONS:
The regulation at 10 CFR 50.33(f) provides that each application shall state the following:
Except for an electric utility applicant for a license to operate a utilization facility of the type described in § 50.21(b) or § 50.22, [an application shall state]
information sufficient to demonstrate to the Commission the financial qualification of the applicant to carry out, in accordance with regulations in this chapter, the activities for which the permit or license is sought.
The regulation at 10 CFR 50.2, Definitions, states, in part, that an electric utility is the following:
Any entity that generates or distributes electricity and which recovers the cost of this electricity, either directly or indirectly, through rates established by the entity itself or by a separate regulatory authority.
The NRC finds that the licensee of Comanche Peak Nuclear Power Plant, Units 1 & 2, Luminant Power, does not qualify as an electric utility as defined in 10 CFR 50.2. In accordance with 10 CFR 50.33(f), a non-utility applicant must provide information sufficient to demonstrate its financial qualifications to carry out the activities for which the license is being sought. The information must show that the applicant possesses, or has reasonable assurance of obtaining, the funds necessary to cover estimated operating costs for the period of the license. In making this showing, the applicant must submit estimated total annual operating costs for the first 5 years of facility operations and indicate the source(s) of funds to cover these costs. For license transfers, direct or indirect, the relevant 5-year period is that time immediately following the proposed merger. For indirect license transfers, the information submitted must demonstrate that the proposed merger and indirect transfers will not affect the financial qualifications of the licensee.
Also, 10 CFR 50.33(k)(1) requires that the licensees for the aforementioned facilities must provide information as described in 10 CFR 50.75, Reporting and Recordkeeping for Decommissioning Planning, demonstrating that there will be no effect on the licensees provision of reasonable assurance that funds will be available to decommission the aforementioned facilities. Section 5.0 of this SE discusses decommissioning funding
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CONTAINS NON-PROPRIETARY INFORMATION assurance.
The NRC evaluated whether the financial qualifications of the licensees would be affected by the proposed transfers in a manner that is consistent with the guidance provided in NUREG-1577, Revision 1, Standard Review Plan on Power Reactor License Financial Qualifications and Decommissioning Funding Assurance, issued March 1999 (NUREG-1577, Rev 1). The NRC reviewed the financial projections for the reasonableness of estimated operating costs, the reasonableness of financial projections and underlying assumptions, and the sensitivity of plant revenue projections to determine if the licensee possesses or has reasonable assurance of obtaining the funds necessary to cover the estimated operating costs for the period of the licenses.
4.1 COMANCHE PEAK NUCLEAR POWER PLANT, UNITS 1 & 2 According to the applicants, Luminant Power will continue to possess, or have reasonable assurance of obtaining, the funds necessary to cover the estimated operating costs of CPNPP for the period of the licenses in accordance with 10 CFR 50.33(f)(2) and NUREG-1577, Rev. 1.
The applicants provided financial information concerning EFH as a whole is contained in the EFH Annual Report for the year ending December 31, 2011, as filed by EFH with the Securities and Exchange Commission (SEC) on February 21, 2012. A copy of this filing, SEC Form 10K, is maintained by the SEC at:
http://www.sec.gov/Archives/edgar/data/1023291/000102329112000004/efh-20111231x10k.htm EFHs income statement for the year ended December 31, 2011 and balance sheet as of December 31, 2011 are provided in Item 6 at pages 50-51 of the Annual Report. This Annual Report shows that EFH had total assets of more than $44 billion, including net property, plant and equipment of more than $19 billion.
Luminant Power provided financial information, which includes: (1) pro forma projected income statement for CPNPP as a stand-alone operation for the five-year period from January 1, 2013 through December 31, 2017; (2) a balance sheet as of December 31, 2011 and pro forma projected income statement for Luminant Power as a whole (including its non nuclear generation assets) for the same five year period; and (3) a balance sheet of Luminant Holding Company LLC as of December 31, 2011.3 NRC staff notes that Luminant Powers projected net income is impacted by depreciation and amortization charges required by the purchase accounting rules found in generally accepted accounting principles. The applicants state that these rules are applicable to EFH and Luminant Power because of the acquisition of EFH in 2007 by its current owners. This depreciation and 3 Copies of the balance sheets and projected income statements (with related schedules) are contained in a proprietary version of Exhibit D provided in a separate Addendum. Luminant Power requested that this Addendum be withheld from public disclosure, as described in the Section 2.390 Affidavit of Fred W.
Madden.
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CONTAINS NON-PROPRIETARY INFORMATION amortization is a non-cash item. Thus, Luminant Powers earnings before interest, taxes, depreciation and amortization (EBITDA) and its separate Clash Flow statement demonstrate an availability of operating cash flow to support the safe operation of CPNPP.
The pro forma projected income statements show that anticipated revenues from sales of energy from CPNPP provide reasonable assurance of an adequate source of funds to meet the needs and obligations for CPNPPs ongoing operating and maintenance expenses.
Furthermore, the pro forma projected income statements for Luminant Power as a whole (including its coal-fired generation assets) demonstrate its capacity to meet its own operating expenses as well as those of CPNPPs ongoing operating and maintenance expenses.
The following is an abbreviated version of the projected income statement submitted in, Addendum Exhibit D, of the application:
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CONTAINS NON-PROPRIETARY INFORMATION Table 1 (Abbreviated) Projected Income Statement Luminent Generation Company LLC (Luminant Power)
(Comanche Peak Nuclear Power Plant, Unit Nos. 1 and 2)
$ MILLIONS 2013 2014 2015 2016 2017 Total Revenue:
Total Operating Exps:
Operating Income:
Less Expenses & Tax:
Net Income:
NRC Staff review of the Projected Income Statement for Luminant Generation Company LLC, indicates that the licensee for Comanche Peak Nuclear Power Plant, Units 1 & 2 has a negative net income for the fiscal years 2013 and 2014, as well as a very weak net income for fiscal year 2015. Based solely on the Projected Income Statement above, the NRC staff would be unable to find that Luminant Power has reasonable assurance of obtaining the revenue funds necessary to cover estimated operating costs for the period of the license.
The NRC staff has previously made only one finding of reasonable assurance of financial qualifications for a plant with a negative income statement as part of an indirect license transfer.
The finding, summarized in the April 11, 2008, Safety Evaluation for an indirect transfer related to a restructuring of Entergy Corporation (ADAMS Accession No. ML080920596), addressed a negative income statement for the Vermont Yankee Nuclear Power Station (VY). The NRC staff found VY financially qualified, based in part on additional financial assurance provided by support agreements put in place by Entergy Corporation, the parent company of VY, as well as access to a line of credit.
The NRC staff has chosen to test the sensitivity of the financial information set forth in the above (Abbreviated) Projected Income Statement by analyzing two scenarios: One changes the assumptions for revenue by changing the market price for a Megawatt hour of electricity, and the other that changes the assumptions for purchased power by changing the capacity factor.
The applicants have provided a Projected Income Statement that assumes a 10 percent reduction in market prices. This schedule reflects reduced market revenues each year by 10 percent beginning with 2013.
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CONTAINS NON-PROPRIETARY INFORMATION The applicants also provided a Projected Income Statement that assumes a 10 percent reduction capacity factor.
The NRC staff notes that, in the market price scenario, if the price per megawatt hour drops by an average of 10 percent, the effect on the 5-year net income stream is a drop from the projected average of million per year, to a possible million per year. In the capacity factor scenario, if the capacity factor drops by an average of 10 percent, the effect on the 5-year net income stream is a drop from the projected average of million per year to a possible million per year.
Therefore, the NRC staff finds that funds provided in support agreement, would result in sufficient revenue funds to cover anticipated maintenance and operation expenses for Comanche Peak.
Accordingly, based on the above, the NRC staff finds that Luminant Generation Company LLC has reasonable assurance of obtaining the funds necessary to cover estimated operating costs for the period of the license, including a 6-month outage, and thus will continue to be financially qualified to hold the license, notwithstanding the indirect transfer of Luminant Generation Company LLC in accordance with 10 CFR 50.33(f)(2) and NUREG-1577, Rev. 1.
According to the application, Luminant Power proposes an amendment to an existing support agreement which was referenced in the October 11, 2012 submittal. This support agreement provides approximately million in financial support, an increase from the original support agreement of million, which is sufficient to cover a 6-month outage scenario for the two plants. As stated in the application, Number 4484874 is the Commitment number used by Luminant Power for the internal tracking of this CPNPP commitment support agreement. A copy of the executed support agreement was provided by Luminant Powers letter (CP 200700046) dated November 5, 2007 (ADAMS Accession No. ML073180490). The proprietary version of Exhibit D in the attached addendum also provides balance sheet and projected income information for Luminant Holding Company LLC.
Therefore, this Safety Evaluation contains the following condition of the transfer:
On October 10, 2007, Luminant Holding Company LLC, the immediate parent company of Luminant Power, provided Luminant Power with a support agreement in the amount of million.
IT IS HEREBY ORDERED that in connection with the proposed transaction, Luminant Holding Company LLC shall increase the amount available under this support agreement to million, which provides a source of funding in an amount that is adequate to fund approximately one years worth of the average projected expense for the fixed operations and maintenance (O&M) of CPNPP.
Table 2 provides an abbreviated projected income statement for Luminent Holding Company LLC. The NRC staff looks to this statement for reasonable assurance that Luminant Holding
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CONTAINS NON-PROPRIETARY INFORMATION Company has the ability to support the proposed million support agreement with Luminant Power.
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CONTAINS NON-PROPRIETARY INFORMATION Table 2 (Abbreviated) Projected Income Statement Luminent Holding Company LLC
$ MILLIONS 2013 2014 2015 2016 2017 Total Revenue:
Total Operating Exps:
Operating Income:
Less Expenses & Tax:
Net Income:
The NRC staff finds that Luminant Holding Company LLC has provided reasonable assurance of its ability to support the million support agreement with Luminant Power.
The NRC staff notes that Luminent Holding Company LLC states in the application that it possesses (as of June 30, 2012) Billion in revolving credit.
5.0 DECOMMISSIONING FUNDING
ASSURANCE:
As stated by the applicants, the financial qualifications of Luminant Power to continue to own the 100% undivided ownership interest in CPNPP are further demonstrated by the fact that Luminant Power will continue to provide financial assurance for decommissioning funding in accordance with 10 CFR 50.75(e)(1)(i) and (ii), using the external sinking fund method with access to non-bypassable charges to retail electric customers. See Texas Utilities Code § 39.205. Luminant Power currently maintains and will continue to maintain decommissioning trust funds that have been established to provide funding for decontamination and decommissioning for CPNPP. A report regarding the status of these funds was submitted to the NRC on March 28, 2011, as Luminant Powers biennial 50.75(f) report (Accession number ML110960274). Luminant Power is filing an update to this status report separately to be filed soon after submitting this Application.
In addition, Luminant Power states in the application that it will continue to receive contributions to those trust funds pursuant to a non-bypassable charge (within the meaning of 10 CFR 50.75(e)(1)(ii)(B)). These decommissioning funding arrangements were specifically approved by the Public Utility Commission of Texas. These arrangements assure that Luminant Power will have the total amount of funds estimated to be needed for decommissioning pursuant to 10 CFR 50.75.
Decommissioning Funding Assurance for Comanche Peak Units 1 and 2 will be reviewed under a separate action involving Decommissioning Funding Status Reports due to the NRC by March 31, 2013.
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6.0 ANTITRUST REVIEW
The Atomic Energy Act of 1954, as amended, does not require or authorize antitrust reviews of post-operating license transfer applications. Kansas Gas and Electric Co., et al. (Wolf Creek Generating Station, Unit 1), CLI-99-19, 49 NRC 441 (1999). The application here postdates the issuance of the operating licenses for the units under consideration in this Safety Evaluation, and therefore no antitrust review is required or authorized.
7.0 FOREIGN OWNERSHIP, CONTROL or DOMINATION:
According to the applicants, no material changes have been made to the U.S.-based control exercised through the ownership structure of EFH and its subsidiaries that own CPNPP since the NRC approved EFHs (then TXU Corp.s) change in ownership in 2007. In addition, there are no material adverse changes to the other information previously provided regarding both U.S.-based control exercised through the ownership structure of EFH and the citizenship of EFHs and Luminant Powers directors and key management personnel. Since approval in 2007, one EFH board member, who had been a foreign citizen, has become a U.S. citizen, and a new EFH board member with Canadian citizenship has joined the EFH board. Thus, EFH continues to have just one non U.S. citizen board member.
On September 10, 2007, the NRC determined in its safety analysis report approving the license transfers for the structure of the then TXU Corp. would not result in any foreign ownership, domination, or control of TXU Power within the meaning of the AEA. Because, since the 2007 approval, there have been no material changes to the U.S.-based control exercised through the ownership structure of EFH, the successor company to TXU Corp., and its subsidiaries that own CPNPP, and there are no material changes being made as a result of the proposed transaction, there will continue to be no foreign ownership, control or domination (FOCD) of EFH or its subsidiaries, including Luminant Power.
In addition, the NRC staff has previously imposed negation measures to address any potential FOCD issue in the form of the following License Condition 2.C.(9) in each of the Licenses for CPNPP:
Following the subject indirect transfer of control of the licenses, all of the officers of the general partner or controlling member of the licensee of CPNPP shall be U.S. citizens. This condition may be amended upon application by the licensee and approval by the Director of the Office of Nuclear Reactor Regulation.
The NRC staff does not know or have reason to believe that Luminant Power and its immediate controlling parent, Luminant Holding Company LLC, are owned, controlled or dominated by an alien, foreign corporation, or foreign government.
8.0 TECHNICAL QUALIFICATIONS:
The applicants have stated that the technical qualifications of Luminant Power are not affected by the proposed indirect license transfers. There will be no changes in the officers, personnel,
CONTAINS NON-PROPRIETARY INFORMATION 11 CONTAINS NON-PROPRIETARY INFORMATION or day-to-day operations of CPNPP in connection with the indirect transfer of control. It is anticipated that Luminant Power will at all times remain the licensed operator of the CPNPP.
Based on the applicants statements above, NRC staff expects that the technical qualifications that were in place immediately before the proposed transfers will continue after the proposed transfers is executed. Therefore, no further technical qualifications review is needed.
9.0 PRICE-ANDERSON INDEMNITY AND NUCLEAR INSURANCE:
According to the application, the proposed indirect transfers of control of the licenses would not affect the existing Price-Anderson indemnity agreements and the required nuclear property damage insurance under 10 CFR 50.54(w) and nuclear energy liability insurance required under Section 1770 of the AEA and 10 CFR Part 140, Financial Protection Requirements and Indemnity Agreements.
Also, the NRC has no reason to believe that the proposed indirect transfer will affect the ability of Luminant Power to meet its financial obligations for its pro rata share of obligations for retrospective premiums for Comanche Peak Nuclear Power plant, Units 1 & 2.
Therefore, in consideration of the foregoing, the NRC concludes that the indirect transfers of control of the licensees held by Luminant Power will have no adverse impact on its ability to provide required nuclear insurance and indemnity coverage and its ability to meet its nuclear insurance obligations.
10.0 CONCLUSION
In view of the foregoing, the NRC staff finds that the proposed indirect transfer of the licensee for the Comanche Peak Nuclear Power Plant, Units 1 & 2 as a result of change in Energy Future Competitive Holding Company, a Texas corporation, to Energy Future Competitive Holding Company LLC, a Delaware limited liability company, will not affect the qualifications of the holder of the license, Luminant Power, for Comanche Peak Nuclear Power Plant, Units 1 &
2, and that the transfer of the licenses is otherwise consistent with applicable provisions of law, regulations, and orders issued by the Commission pursuant thereto.
Principal Contributor: Michael A. Dusaniwskyj Dated: