L-17-085, Supplemental Information Regarding Pending Application for Order Consenting to Transfer of Licenses and Approving Conforming License Amendments (CAC MF78066): Exhibit G, Pro Forma Income Statements

Supplemental Information Regarding Pending Application for Order Consenting to Transfer of Licenses and Approving Conforming License Amendments (CAC MF78066): Exhibit G, Pro Forma Income Statements

ML17075A210
Person / Time
Site:	Beaver Valley
Issue date:	03/16/2017
From:	Belcher S FirstEnergy Nuclear Operating Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
Shared Package
ML17075A209	List: L-17-085, Supplemental Information Regarding Pending Application for Order Consenting to Transfer of Licenses and Approving Conforming License Amendments (CAC MF78066): Exhibit G, Pro Forma Income Statements
References
CAC MF78066, L-17-085
Download: ML17075A210 (9)

Text

CONFIDENTIAL FINANCIAL INFORMATION TO BEWITHHELD FROMPUBLIC DISCLOSURE PURSUANT TO 10CFR 2.390 AND 10 CFR 9.17 FENOC

'ffi 341 White Pond Drive Akron, Ohio 44320 Sumuel L. Belcher 330-436-1 393 President & Chief Nuclear Officer March16,2017 L-17-085 10cFR50.80 10cFR50.90 ATTN: Document ControlDesk U. S. NuclearRegulatory Commission Washington, DC 20555-0001

SUBJECT:

BeaverValleyPowerStation,UnitNo.2 DocketNo.50-412,LicenseNo.NPF-73 Supplemental Information ReqardinsPendinqApplication for Order Consenting to Transferof LicensesandApprovinq Conforminq LicenseAmendments (CACNo.MF 78066)

By letterdated June24,2016(Accession No.ML16182A155) andsupplemented by letters datedSeptember 13,2016(Accession No.ML16257A235) and December 15,2016 (Accession No.ML163504077), FirstEnergy NuclearOperating Company(FENOC)acting as agentfor andon behalfof FirstEnergy NuclearGeneration, LLC(FENGen), TheToledo EdisonCompany(TE),andthe OhioEdisonCompany(OE),submitted an application to the NuclearRegulatory Commission (NRC)requesting consentto the transferof the leasedinterestsin BeaverValleyPowerStation,UnitNo.2 (BVPS-2)andapprovalof an administrative amendment to conformthe licenseto reflectthe proposedtransfer(the Application).

On February21, 2017FirstEnergy Corp,(FE)and FirstEnergy SolutionsCorp.(FES)filed a U. S. Securities andExchange Commission Form10-Kproviding the FE andFES annualreportfor the fiscalyearendingon December31,2016. Theseresultsare comparedbelowto thefinancialinformation providedin theApplication currentlyunder NRCreview.In the tablebelow,the columntitled "lNlTlAL" reflectsthe financial information reportedin the initialapplication and relatedsupplements. Thecolumntitled "CURRENT" reflectsthe mostrecentlyreportedFE and FES financialinformation.

Enclosure C to this lettercontainsconfidential financialinformation.

Withhold frompublicdisclosure under10 CFR2.390and10 CFR9.17.

Uponremovalof Enclosure C, this letteris uncontrolled.

CONFIDENTIAL FINANCIAL INFORMATION TO BEWITHHELD FROMPUBLIC DISCLOSURE PURSUANT TO 10CFR2.390AND1OCFR9.17 BeaverValleyPowerStation,UnitNo.2 L-17-085 Page2 INITIAL CURRENT FE Revenue $ 1 5b i l l i o n $14.56billion FE Net Income(Loss) $578million ($0.18billion)

FESRevenue $5 billion $4.+billion FESNetIncome(Loss) $82 million ($5.+0billion)

FESProperty, Plant,Equipmsnl(t) $ 8 . Sb i l l i o n $ 1. 1 3b i l l i o n FESStockholder Equity $5.6billion(2) $218million Note(1)- NetProperty,Plant,andEquipment in service.

Note(2)- Thisis thevaluethatshouldhavebeenusedin theoriginal application.

Seethe FESstockholder equitydiscussion below.

The 2016FE and FESnet lossesandthe 2016FESnetproperty,plantandequipment valuesreflecta non-cashpre-taximpairment chargeto FE of $9.2billion($4.1billionfor FES)in thefourthquarterof 2016to reducethe carryingvalueof certainassetsto their estimated fairvalue,including long-lived assets,suchas generating plants(including the nuclearplants)and nuclearfuel,as wellas otherassets,suchas materials and supplies.

The powersupplyagreement (PSA)betweenFENGenand FESdescribedin the Application remainsin place. Underthe PSA,FENGenreceivessubstantially all of its revenuefromFESon a costof servicebasis.Therefore, FENGen will recover its operating, maintenance andcapitalcostsassociated withthe BVPS-2interests of 18.260/oand21.66%beingtransferred fromTE andOE,respectively, togetherwith its othernuclearpowerfacilities.However, dueto the impairment describedin the preceding paragraph, whichimpactsthe assetbaseuponwhichthe equityreturn associated withthe costof serviceformulain the powersupplyagreement is calculated, the FENGenfive-yearproformaincomestatement providedin ExhibitG to the original application hasbeenmaterially affected;as such,an updatedproformaincome statement is providedin Enclosure C (titledproprietary ExhibitG).

Thisfinancialinformation is confidential financialinformation, and FENOCrequeststhat Enclosure C be withheld frompublicdisclosure pursuant to 10 CFR2.390(a)(4) and 10 CFR9.17(aXa). A redacted versionof Enclosure C suitablefor publicdisclosure is providedin Enclosure A. An affidavitsupporting the requestfor withholding Enclosure C frompublicdisclosure is providedin Enclosure B.

Enclosure C to this lettercontainsconfidential financialinformation.

Withhold frompublicdisclosure under10 CFR2.390and10 CFR9.17.

Uponremovalof Enclosure C, thisletteris uncontrolled.

CONFIDENTIAL FINANCIAL INFORMATION TO BEWITHHELD FROMPUBLIC DISCLOSURE PURSUANT TO 10CFR2.390AND CFR9.17 1O BeaverValleyPowerStation,UnitNo.2 L-17-085 Page3 Also,duringthe comparison betweenthetwoyearsFENOCdetermined thatthe FES stockholder equityreportedin the originalsubmittalas $3.6billionshouldhavebeen reported as $5.6billion.In the December 15,2016supplement, a similarissueexisted.

Thevaluethatwas reportedwas$3.6billionwhenit shouldhavebeenreportedas $5.41 billion.Thisadministrative error(selecting the incorrect valuefromthefinancialreports) hasbeenenteredintothe FENOCcorrective actionprogram.The currentFES stockholder equityof $218millionreflectsthe impairment chargesdescribed above.

The 10-Kstatedthat FEShasenteredintoa two-yearsecuredcreditfacilitywith FE in whichFE provided a committed lineof creditto FESof up to $500millionand$200million of suretycreditsupport.Likewise, the $400millionfinancialsupportagreement fromFES to FENGenhasbeenmaintained.

Notwithstanding the notedimpairment, the conclusion of the keyFESfinancial qualificationinformation relevantto the proposed BVPS-2licensetransferremains unchanged.The proformaincomestatement providedin Enclosure C continues to showthat FENGen's expected revenues willcover FENGen's estimated annual operating costsforthefive-year period.In addition, the $400millionFESsupport agreement remainsin place. Lastly,the sufficiency of the BVPS-2decommissioning trustfund remainsunaffected withthe mostrecentresultsto be reportedin accordance with10 CFR50.75(f) to the NRCby March31, 2017.

Sincethe December 15,2016submittal, therehavebeenadditional directorand executive personnel changesat FE and FES. Thedirectorsandexecutive personnel for the aforementioned two companies are UnitedStatescitizens.

Thereare no regulatory commitments contained in thisletter.lf thereareany questions, or if additional information is required, pleasecontactMr.ThomasA. Lentz, Manager FleetLicensing, at 330-315-6810.

Enclosure C to thislettercontainsconfidential financialinformation.

Withhold frompublicdisclosure under10 CFR2.390and10 CFR9.17.

Uponremovalof Enclosure C, this letteris uncontrolled.

CONFIDENTIAL FINANCIAL INFORMATION TO BEWITHHELD FROMPUBLIC DISCLOSURE PURSUANT TO 10CFR2.390AND1OCFR9.17 BeaverValleyPowerStation,UnitNo.2 L-17-085 Page4 I declareunderpenaltyof perjurythatthe foregoingis trueand correct.Executedon MarchfiL,2017.

Sincerely, fuelL. Belcher

Enclosures:

A. Non-Proprietary ExhibitG B. Affidavit C. ProprietaryExhibitG cc: NRR(withoutEnclosure Director, C)

NRCRegionI Administrator (withoutEnclosure C)

NRCResidentlnspector(withoutEnclosure C)

NRRProjectManager(withoutEnclosure C)

DirectorBRP/DEP(withoutEnclosure C)

SiteBRP/DEPRepresentative (withoutEnclosure C)

EnclosureC to thislettercontainsconfidentialfinancialinformation.

Withhold frompublicdisclosure under10CFR2.390and10 CFR9.17.

Uponremovalof Enclosure C, thisletteris uncontrolled.

EnclosureA L-17-085 ExhibitG Non-Proprietary (Onepagefollows)

ExhibitG Page1 EXHIBITG (Non-Proprietary Version)(r)

FirstEnergyNuclearGeneration,LLC Pro FormaIncomeStatements

($ in millions) 2017 2018 OperatingRevenues OperatingExpenses:

Fuel Purchased Power O&MExpenses GeneralTaxes Depreciation rtrltl TotalOperatingExpenses OperatingIncome OtherIncome(Expenses):

InvestmentIncome InterestExpense AFUDC(2) rrrltllltl Total Otherlncome t1 I1 I] t1 I1 (Expenses)

IncomeBeforeIncomeTaxes tl t1 I1 I1 I1 IncomeTaxes rr rl 11 I] II GAAP(3)Net Income rlrltltltl Note:

(1) Information contained proprietary.

withinthe brackets[ ] is considered (2)AFUDC= Allowance for FundsUsedDuringConstruction (3) GAAP = GenerallyAcceptedAccountingPrinciples

Enclosure B L-17-085 Affidavit (Twopagesfollow)

10cFR 2.390 10cFR 9.17 AFFIDAVIT OF SAMUELL. BELCHER I, SamuelL. Belcher, Chainnan of the FirstEnergy Nuclear Operating Company (FENOC)

Board. Presidentof FENOC and Chief Nuclear Officer of FENOC statethat:

l. I am authorizedto executethis affidavit on behalf of FENOC and its affiliates.

2. FENOC is providing information in support of its "Application for Order Consentingto Transfer of License and Approving Conforming License Amendments." The Proprietary Version of Exhibit G being provided in EnclosureC of this submittal containsfinancialpro forma statementsrelated to anticipatedrevenuesfrom salesof energy and capacity from Beaver Valley Power Station, Unit No. 2 (BVPS-2) and confidential information regarding anticipated assets,liabilities and capital structureat the time of transfer. The information soughtto be withheld in the Proprietary Version of Exhibit G is identified by being enclosedinside squffe brackets [ ]. The Proprietary Version of Exhibit G containsproprietary financial information that should be held in confidenceby the Nuclear Regulatory Commission (NRC) pursuantto the policy reflectedin 10 CFR 2.390(a)(a)and 10 CFR 9.17(a)@),because:

a. This information is and has beenheld in confidencebv FENOC and its affiliates.

b. This information is of a type that is held in confidence by FENOC and its affiliates, and there is a rational basis for doing so becausethe information contains sensitive financial competitive information concerning FENOC's affiliates' anticipated revenuesand operating expenses.

c. This information is being transmittedto the NRC in confidence.

d. This information is not available in public sourcesand could not be gatheredreadily from other publicly available information.

e. Public disclosure of this information would create substantialharm to the competitive position of FENOC by disclosing its internal financial pro forma statementsand the commercial terms of a unique transactionto other parties whose commercial interestsmay be adverseto thoseof FENOC.

3. Accordingly,FENOCrequeststhat the designated documentsbe withheldfrom public pursuanttothepolicyreflectedin 10 CFR2.390(a)(a) disclosure and10CFR9.17(il().

FirstEnergyNuclearOperatingCompany SamuelL. Belcher Chairman of the Board, President,and Chief Nuclear Officer srArEop lHr rt couNrYoF $Un " tT J Public, in and for the Stateand County above Subscribedand swor^nto 1ne,a Notary named, this /0 fl auyor /lo^e( zut.

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