ML16181A057

Submittal of Sale and Leaseback Transaction

ML16181A057
Person / Time
Site:	Palo Verde
Issue date:	06/17/2016
From:	Baum S Arizona Public Service Co, Pinnacle West Capital Corp
To:	Office of Nuclear Reactor Regulation
References
Download: ML16181A057 (6)

Text

Shirley A. Baum

(.laps Associate General Counsel PO Box 53999 Phoenix, Arizona 85072-3999 Mail Station 8695 TEL 602.250.3706 Shirley.baum@pinnaclewest.com June 17, 2016 Via Certified Mail - Return Receipt Requested U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 Sale and Leaseback Transaction by Arizona Public Service Company NRC Docket No. STN 50-529 Renewed Facility Operating License No. NPF-51 Palo Verde Nuclear Generating Station, Unit 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.

The proposed transfer of the equity interest would be from PV2-APS 150 Corporation, a Delaware corporation (the "Transferor"), to Access Energy Investors III, LLC, a Delaware limited liability company (the "Transferee"). The Transferee has represented that its 100% owner, Access Leasing Corporation, a Delaware corporation, will have on the date the proposed transfer is consummated a net worth or capital and surplus of at least $25,000,000. The Transferee is not affiliated with Arizona Public Service Company ("APS"). Upon the transfer, the Transferee will own an equity interest, through an existing owner trust, of a portion of the interest in the Palo Verde Nuclear Generating Station ("PVNGS") Unit 2, which was the subject of a sale and leaseback transaction consummated in December, 1986.

Background. In 1986, APS proposed to enter into the sale and leaseback transaction relating to PVNGS Unit 2. By letter dated December 11, 1986, the Commission issued an amendment to Facility Operating License NPF-51 (Palo Verde Unit 2), approving the Unit 2 sale and leaseback transactions, subject to 10 C.F.R. § 50.81 and the conditions set forth in such amendment. Currently, the Transferor holds (through the existing owner trust structure) a 3.3758701 percent undivided ownership interest in Unit 2. Such amendment is Condition 8 to the Unit 2 Renewed Operating License Amendment No. 197.

Subject of this Notice. The Transferor's 3.3758701 percent undivided ownership interest in Unit 2 is the subject of this notice (the "Subject Interest"). With respect to another (unrelated) equity

June 17, 2016 Page2 interest transfer in 2007, Mike Markley of the Commission Staff advised Public Service Company of New Mexico ("PNM") by letter dated October 18, 2007 (TAC NOS. MD6791) that prior written notice to the Commission is required for the transfer of an equity interest in a PVNGS sale and leaseback transaction from one party to another, even if the terms of the sale and leaseback remain unchanged. Notably, this is a prior written notice requirement and not a Commission approval requirement. This point was clarified in an e-mail from Randy Hall in connection with the 2010 transfer of an interest in PVNGS Unit 1 from Cypress PV Partnership to Citicorp Buffalo Basin, Inc.

Mr. Hall, in an e-mail dated November 18, 2010, explained that the operating license condition to provide prior written notice to the Commission is satisfied by the delivery to the Commission of the notice letter.

The Transferor has notified APS that the Transferor proposes to transfer the Subject Interest to the Transferee and, in connection therewith, the Transferee will execute an assignment and assumption agreement for the Subject Interest, pursuant to which the Transferee will assume the rights and obligations of the Transferor under the existing applicable PVNGS sale and leaseback transaction documents and will otherwise comply with the transaction documents.

The Transferor has further notified APS that the parties plan to close the proposed transfer on or around June 30, 2016, and it has therefore requested that APS 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 transaction as it was originally approved by the Commission. The current "owner trustee" for the sale and leaseback transaction, U.S. Bank National Association, will remain unchanged, and the terms of the lease will remain unchanged.

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

a) Pro forma balance sheet of Access Leasing Corporation (the parent of the Transferee) dated as of March 31, 2016 (attached as "Exhibit A").

b) Summary about the Transferee and its ownership structure and management (attached as "Exhibit B ").

In addition, should you find it useful to reference, the Transferee also forwarded to us the company internet address of Access Leasing Corporation, which the Transferee indicated sets forth additional information regarding its businesses. The website can be found at:

http://www.accesslc.com.

Request. Consistent with the explanation provided by Mr. Hall in 2010 noted above, we are not seeking any kind of review, approval or other action from the Commission. The license requirement with which we are complying simply requires prior notice in writing to the Commission.

Accordingly, the signed "Return Receipt" confirming the Certified Mail delivery of this notice to the Commission will be used by the parties as confirmation of compliance with the prior

June 17, 2016 Page2 written notice requirement. We are sending an informational copy of this notice by e-mail to Margaret Watford, who we understand is the current Project Manager.

If you have any questions, please do not hesitate to contact the undersigned at (602) 250-3706. Again, as noted above, the Transferor and the Transferee plan to close the transaction on or around June 30, 2016.

Sincerely,

s. J~

Shir~

Associate General Counsel Pinnacle West Capital Corporation Counsel for APS SB:bd Attachments cc by e-mail: Siva Lingam, NRR Project Manager for PVNGS, (siva.lingam@nrc.gov)

Michael Green, Esq., Arizona Public Service Company, (michael.green@pinnaclewest.com )

EXHIBIT A ACCESS LEASING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES, AND SHAREHOLDER'S EQUITY ASSETS March31 2016 CURRENT ASSETS:

Cash $ 4,003,374 Investments in marketable securities 7,265,034 Lease revenue receivable 152,298 Prep aids 21,345 Notes receivable 32,525,850 Other receivables 2,148,387 Total current assets 46,116,287 PROPERTYANDEQUIPMENT,ATCOST:

Equipment held for leasing, secured 21,419,229 Office equipment and furniture 14 307 21,433,536 Less accumulated depreciation (1,793,739)

Total property and equipment 19,639,797 OTHER ASSETS:

Investment in and advance to partnerships 10,072,944 Investment in leveraged equipment leases 156,406 Other assets Loan fees (net) 159,721 Total other assets 10,389,071

$ 76.145.154

EXHIBIT A ACCESS LEASING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIES, AND SHAREHOLDER'S EQUITY LIABILITIES AND SHAREHOLDER'S EQUITY March31 2016 CURRENT LIABILITIES:

Notes payable tobanks $ 21,285,282 Notes payable 50,000 Accrued interest 25,407 Other payables 911 Total current liabilities 21,361,600 LONG-TERM LIABILITIES Deferred taxes arising from leveraged equipment leases 12 740 Total long-term liabilities 12 740 SHAREHOLDER'S EQUITY Common stock, no par value authorized 3,000 shares; issued and outstanding 3,000 shares 248,000 Unrealizedgain/(loss) (446,051)

Non-controlling interest in subsidiary 1,608,375 Retained earnings 53,360,490 Total shareholder's equity 54,770,814

$ 76.145.154 6/1/2016

EXHIBITB About Access Leasing Corporation -Transferee's Owner Ultimate management authority for Access Leasing Corporation rests with Charles Kremer, the controlling shareholder and President. Mr. Kremer became a Chartered Accountant in 1972 while working for Price Waterhouse in London, England. He began his equipment leasing career with PLM Corporation in 1979, and became President of PLM Financial Services in 1981 which grew to be a major equipment leasing syndicator and which was taken public in 1983. Mr. Kremer founded Access Leasing Corporation in 1984, the same year he became a US citizen. Access specializes in purchasing secondary market equipment leasing transactions from institutional lessors.