ML19322C787

Financial Qualifications,Licensing of Production & Utilization Facilities, 10CFR50,proposed Rule.Establishes Criteria for Evidence of Financial Qualifications to Pursue CP or Ol.W/Analysis of Proposed Regulation Encl

ML19322C787
Person / Time
Site:	Crane
Issue date:	04/27/1979
From:	NRC COMMISSION (OCM)
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ML19322C780	List: ML19322C779 ML19322C781 ML19322C782 ML19322C783 ML19322C784 ML19322C785 ML19322C786 ML19322C787 ML19322C788 ML19322C789
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RULE-PR-50, TASK-TF, TASK-TMR NUDOCS 8001230566
Download: ML19322C787 (32)

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ENCLOSURE 5 e

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' "# 1 ENCLOSURE 5 Lt a 1 15 NUCLEAR REGULATORY COMMISSION

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[10 CFR Part 50]

FINANCIAL QUALIFICATIONS

x LICENSING 0F PRODUCTION AND UTILIZATION FACILITIES e

's AGENCY:

U. S. Nuclear Regulatory Commission ACTION: Proposed Rule n

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SUMMARY

The fbclear Regulatory Commission is considering amending its regulations to (1) establish criteria that constitute conclusive evidence of an applicant's financial qualifications to pursue activities under a Part 50 construction permit or operating license; (2) eliminate the require-ment for a financial qualifications finding on applicants that would own an insignificant financial interest in a facility; (3) require applicants for

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research reactor operating licenses, or renewals thereof, to demonstrate q

}4; reasonable assurance of obtaining the funds to permanently shut down the

, jj.j reactor and maintain it in a safe condition; and (4) clarify the information u.. a f('-]

requirements on applicants and staff review practices.

DATES:

Comment period expires ADDRESSES:

Interested persons are invited to submit written comments and sugger,tfons on the proposal and/or the supporting.value/ impact analysis to

• Insert date 60 days from publication in Federal Register.

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the Secretary of the Comission, U. S. Nuclear Regulatory Commission, o

Washington, D. C.

20555, Attention: Docketing and Service Branch. Single copies of the value/ impact analysis may be obtained on request from Donald J. Skovholt, Office of Nuclear Reactor Regulation, U. S. Nuclear 3

Regulatory Commission, Washington, D. C.

20555 (Phone: 301-492-7492).

u Copies of the value/ impact analysis and of comments received by the Comission may be examined in the Comission's' Public Document Room at 1717 H Street, N.

W., Washington,4. C.

FOR FURTHER INFORMATION CONTACT:

Donald J. Skovholt, Office of Nuclear I

Reactor Regulation, U. S. Nuclear Regulatory Comission, Washington, I

D. C.

20555 (Phone: 301-492-7492)

SUPPLEMENTARY INFORMATION:

In its decision in Public Service Company of

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d New Hampshire, et al. (Seabrook Station, Units 1 and 2) 7 NRC 1, CLI-78-1 i

(1978) (hereinafter, "the Comission's Seabrook decision"), the Comission l

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directed (at page 20) the staff "to initiate a rulemaking proceeding in yn u

tj which the factual, legal, and policy aspects of the financial qualifications issue may be reexamined."

Specifically, the staff was to examine the re-lationship between tne financial qualifications of Part 50 applicants and licensees and their ability to safely construct and operate production and f

utilization facilities. Further, the staff was to prepare a proposed rule i

that would amend existing financial qualifications requirements if the i

staff's study indicated this to be appropriate.

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N1 On May 25,1978, the staff notified the public (43 FR 22373) of the f

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t Comission's order for a study of the generic financial qualifications "j

h issue. The staff requested interested members of the public to submit

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comments on the issue and to propose specific changes to the rules.

Comments were requested to be submitted by July 24, 1978.

In response o

to the notice, seven sets of Ce nts were received. Six of the sub-i

.l mittals were from electric utilities, the Edison Electric Institute l

(EEI) or law firms representing elect'ric utilities. The seventh set

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1 of comments was from the National Consumer Law Center, Inc.

The staff has prepared a detailed analysis of these coments which may be examined in the Comission's Public Document Room at 1717 H Street, N. W. Washington, i

D. C.

The following is a summary of the comments.

The utilities, the EEI and the law firms recommended that the regulations

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l' be revised to substantially reduce the scope of NRC's financial qualifications

'j review especially as it applies to applicants whose rates for service are either self-determined or are determined by state and/or federal regulatory

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AT agencies. These commenters generally maintained that a hirwy of successful plant construction and operation coupled with the legal re: *:ements placed on economic regulators together constitute " reasonable assurance" that adequate financing can be obtained. This group of commenters further argued that " cutting-corners" in construction or operation is not in the self-interest i

of the utility.

It is imperative that a plant provide long-term operation

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reliably and safely in accordance with NRC regulations.

The commenters h

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-1 said that the financial savings that could be achieved through " corner-cutting" would be small compared to the sums required to complete the project.

The i

risk of detection by NRC inspectors and possible resulting legal action L.," -

against the utility serve as tdditional disincentives to violations of NRC's regulations.

One of the above comenters expressed a preference for complete climination 4

of the financial qualifications fjnding as now required by the regulations.,

3 The comenter maintained that a causal relationship between financial qualifications and safety had not been demonstrated.

l One of the utility commenters, while endorsing its law firm's comments which are among those sumarized above, raised a consideration regarding the sources of funds statement that the NRC staff routinely requires of construction permit applicants.

The sources of funds statement, while not

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considered a forecast of what will necessarily occur, is a demonstration

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k-by the utility applicant of one method by which it might reasonably finance c M.

its overall construction program including the nuclear power plant. The WF P

commenter maintained that such projections, if published, (1) could mislead i

the investing public, possibly leading to liability for the company; and (2) may constitute a violation of federal securities laws.

The NRC staff has requested and received the sources of funds statement from a large number of construction permit applicants over the past four years. A very few of the:e applicants have requested proprietary treatment of their sources of funds statements using rationale similar to that above. These

.m requests have not been approved.

The NRC staff is not aware of any cases

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'Ti.m i of liability accruing to applicants because of the publication of such

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In the past three years, the NRC staff has 3.. /g twice inquired of the Securities and Exchange Comission (SEC) staff re-i garding the question of possible federal securities law violations. Both SEC replies indicate that the submission of such sources of funds statements f

by applicants to the NRC and subsequent release of the statements to the public do not contravene SEC requirements.

The second and most recent SEC T

reply is dated December 14,1978, which is subsequent to the above commenter's submission dated July 21, 1978.

The National Consumer Law Center, Inc. (NCLC) comented that the existing regulation is inadequate in that it does not require the filing of sufficient financial information to demonstrate financial qualifications for a construction permit or an operating license. NCLC provided a detailed list of the types of financial information that should be required of applicants. Most of the gm suggested information is currently required by tha NRC staff in its financial

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reviews. While much of this data is not specifically referred to in the w

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regulations, the NRC staff regularly obtains it from applicants under NRC's E n,: -

authority to require additional pertinent information. NCLC based its sug-gestion for NRC requiring such information on the holding that safe, reliable construction and operation of nuclear facilities is contingent upon the financial qualifications of the applicant.

It stated that insufficient financing during construction could lead to the use of substandard materials and to costly delays in construction. NCLC further suggested that NRC should h ]l$

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H promulgate a regulation requiring that nuclear facilities be constructed

1j with a reasonable cost of financing and that failing to do so may financially I1 burden the applicant and the applicant's owners and customers.

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The NRC staff's study of the generic financial qualifications issue included r

the following elements:

consideration of the public comments solicited on the matter; review and analysis of the Comission's Seabrook decision which l

included the Commission's own review of the issue as well as its Order for 3,

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this study; review and analysis of other NRC and Atomic Energy Commission l

licensing cases which have involved financial qualifications; and analysis of regulatory experience during the two decades of power reactor construction i

and operation. The staff also considered the relevant regulatory initiatives that have been adopted subsequent to the enactment of the Atomic Energy Act i

-j of 1954 that contained the financial qualifications requirement. These initia-l

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i tives include the establishment of comprehensive quality assurance require-

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. on licensees, the establishment of civil penalties as enforcement me' e

d vehicles, the promulgation of 10 CFR 21, " Reporting of Defects and Non-M compliance," and the initiation of the program for NRC resident inspectors g

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at reactor sites. Each of these measures provides additional assurances 1

regarding proper construction and operation and, thereby, serves to reduce the safety dependence on financial qualifications.

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The Commission has cuncluded, however, that although technical reviews and inspection efforts are very effective direct methods of discovering i

deficiencies that could affect safety, the analysis of financial qualifications t

is an additional method, albeit indirect, of determining an applicant's a

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p f-ability to satisfy safety requirements. The financial qualifications review gr

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" defense-in-depth" approach used in designing nuclear power plants.

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The Commission has also concluded that the scope of the financial qualiff-I cations review can appropriately be reduced for applicants in good financial condition whose rates for service,are either regulated or self-determined and for those applicants that have insignificant ovmership interests in facilities.

The Commission will retain the prerogative to increase the scope of its review in response to a financially-troubled applicant or licensee or in response to significant adverse economic developments.

The Commission will also retain its current scope of review for those applicants not enjoying regulated status and not having authority to set their own 1

rates.

The value of the proposed rule will be that the level of effort by applicants, C "

4c licensees, the staff and NRC adjudicatory boards will appropriately reflect I

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the relationship between financial qualifications and safety.

In cases where financial qualifications is a potential safety issue, the staff will conduct a detailed review; in cases wherb it is not, the staff's review will be minimal.

The proposed rule aims at eliminating extensive reviews in cases where the applicant is clearly qualified to finance activities under the proposed permit or license.

Under the existing rule, applicants in good financial condition and clearly financially qualified have been subject to

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sharply lessen the chance of that happening. On the other hand, an appli-E' 'I cant or licensee that is experiencing significant financial difficulties or that is in.a marginal financial condition will be subject to a full-scale review.

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It is noted that the Commission is now considering development of more r

explicit overall policy for nuclear facility decommissioning (including financial assurance related to the cost of decomissioning) and amending f,

its regulations in 10 CFR Parts 30, 40, 50 and 70 to include more specific I

guidance on decommissioning criteria for production and utilization facility 1

licensees and byproduct, source and special nuclear material licensees.

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Since the generic decomissioning study has not yet been completed, the rule t

change proposed herein does not reflect results of that study.

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.j In summary, the Comission has concluded that adoption of the proposed rule 3

will result in a substantial reduction in the impact, or burden, accompanying

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the requirement for a demonstration of financial qualifications with no

).W reduction in the value, to safety, that the requirement provides.

The g,,j..g 5

M. ~ ' q Comission's Value/ Impact Analysis of the proposed rule is available for m

public inspection as noted above.

10 CFR 50.33(f) and Appendix C to 10 CFR 50 are revised to read as follows.

A new paragraph (q) is added to 10 CFR 50.54 as follows.

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ENCLOSURE 5 W

3 10 CFR 50.33 (f) r

,4 Each application shall state:

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Information sufficient to demonstrate to the Comission the financial 9

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qualifications of the applicant to carry out, in accordance with the t

regulations in this chapter, the activities for which the permit or l

license is sought.

Appendix C to this Part specifies certain circum-

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i stances in which an applicant for an " insignificant financial interest" t

in a facility is normally not required to submit the financial information J

f addressed in this section and in the appendix to the Comission.

N (1) _If the application is for a construction permit, such information h

shall demonstrate that the applicant possesses or has reasonable I

h-assurance of obtaining the funds necessary to cover estimated i

i; construction costs and related fuel cycle costs. The applicant I

shall submit estimates of the total construction cost of the 1

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facility and related fuel cycle costs and shall indicate the J

source of funds to cover such costs.

(2) If the application is for an operating license, such information i

shall demonstrate that the applicant possesses or has reasonable assurance of obtaining the funds necessary to cover estimated nr operating costs for the period of the license, plus the estimated i,

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costs of permanently shutting the facility down and maintaining 3,.

it in a safe condition. The applicant shall submit estimates

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, of total annual operating costs for each of the first five years of operation of the facility and estimates of the costs to permanently shut down the facility and maintain it in a safe condition. The applicant shall also indicate the sources of funds to cover such costs.

An application to renew or extend the term of an ope.eting. license shall include the same financial.

s j information as required in an application for an initial license.

l Without limitation on the generality of the foregoing requirements, each application for a construction permit, or an operating license submitted by a newly formed entity organized for the primary purpose of constructing or operating a facility shall include'information showing the legal and financial relationships it has or proposes to

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have with its stockholders or owners, and their financial ability g

to meet any contractual obligation to such entity which they have sv rg incurred or propose to incur, and any other information deemed necessary ese

@S by the Comission to enable it to determine the applicant's financial

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4 Appendix C to this Part states in greater detail the financial data i

and other related information to be submitted by applicants for licenses to construct and operate production or utilization facilities 1

.l of the types described in Section 50.21(b) or Section 50.22, or a testing facility. The appendix sets forth certain financial criteria

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that, when satisfied by such an applicant, demonstrate conclusive evidence 4

t of financial qualifications. An applicant that satisfies the specified F

criteria is financially qualified under the Consnission's regulations to pursue the activities for which the permit or license is sought.

An applicant that does not satisfy the specified criteria will provide additional infor-mation at the Conmission's request to demonstrate its financial qualifications.

u Further inquiry and adjudication of an applicant's or a licensee's financial qualifications is foreclosed after the Conmission has determined that con-

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clusive evidence of financial qualifications has been demonstrated. An exception to this is the case of an applicant or a licensee, previously found financially qualified through the criteria that demonstrate conclusive i

evidence, that no longer satisfies either one or both of the specified criteria.

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Whether stated therein or not, the following shall be deemed conditions in every license issued:

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If the licensee had previously been found financially qualified by

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satisfying the criteria that demonstrate conclusive evidence, it h,

shall promptly report to the Commission when it no longer satisfies either one or both of the financial criteria specified in Appendix C.

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TABLE OF CONTENTS gj,

t Appendix C,10 CFR 50 - A GUIDE FOR THE FINANCIAL DATA AND RELATED INFORVATION REQUIRED TO DEFONSTRATE FINANCIAL QUALIFICATIONS FOR FACILITY CONSTRUCTION PERMITS AND OPERATING LICENSES I.

General Information.

II. Applicants Which Arc Established Entities.

A.

Applications for construction permits.

1.

Estimate of constructi,on costs.

2.

Sources of construction funds.

3.

Applicant's financial statements.

3 4.

Conclusive evidence of financial qualifications.

Reporting adverse changes to the Commission.

5.

Alternative demonstration of financial qualifications.

B.

Applications for operating licenses.

1.

Estimate of operating costs and sources of funds.

2.

Applicant's financial statements.

3.

Conclusive evidence of financial qualifications.

Reporting adverse changes to the Conmission.

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Alternative demonstration of financial qualifications.

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Applications by joint applicants.

A III. Applicants Which Are Newly formed Entities.

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Applications for construction permits.

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Estimate of construction costs.

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Sources of construction funds.

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Applicant's financial statements.

B.

Applications for operating licenses.

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Estimates of operating revenues and expenses.

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Applicant's financial statements.

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IV.

Transfers of Ownership Interests.

V.

Insignificant Financial Interests.

VI. Annual Financial Statements - Reporting Requirement.

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l VII. Additional Information.

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GENERAL INFORMATION h

This appendix is intended to apprise applicants for licenses to construct j

and operate production or utilization facilities of the types described

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in Section 50.21(b) or Section 50.22, or a testing facility, of the t

financial data and other related information that will demonstrate the financial qualifications of the applicant to carry out the activities for which the pennit or license is sought.

The provisions of this appendix are in accordance with the requirements of Section 50.33(f) of this Part.. _.

The appendix sets forth certain financial criteria that, when satisfied by an applicant, demonstrate conclusive evidence of financial qualifications.

An applicant that satisfies the specified criteria is financially qualified under the Commission's regulations to pursue the activities for which the permit or license is sought.

An applicant that does not satisfy the 4

specified criteria will provide additional information at the Commission's

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request to demonstrate its financial qualifications.

Further inquiry and m

N;r..q adjudication of an applicant's or a licensee's financial qualifications is L3:LJ g)p,;

foreclosed after the Comission has determined that conclusive evidence ph.s of financial qualifications has been demonstrated. An exception to this c

d-mc is the case of an applicant or a licensee, previously found financially qualified through the criteria that demonstrate conclusive evidence, that no longer satisfies either one or both of the specified criteria.

Item V of this appendix specifies cer'tain circumstances in which an applicant for an " insignificant financial interest" in a facility is normally not required to submit the financial information addressed in Section 50.33(f) of this Part and in this appendix to the Comission.

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.c;;5, Since separate findings of financial qualifications will be made by the j

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Commission at the construction permit stage of the licensing process and a

u, at the operating license stage, the nature of the information to be included j

in the application at each of these stages is discussed separately.

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It is important to observe also that both Section 50.33(f) and this appen-

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dix distinguish between applicants which are established entitias and

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those which are newly formed entities organized primarily for the purpose of S-engaging in the activity for which the permit or license is sought. Those' ~ 1 P

e in the former category will normally have a history of operating experience i

and be able to submit data reflecting the financial results of past operations.

With respect to the applicant which is a newly formed company established primarily for the purpose of carrying out the licensed activity, f.

with little or no prior operating history, somewhat more detailed data g,

jf) and supporting documentation will generally be necessary. For this reason,

-k the appendix describes separately the scope of information to be included an+

I41 ry in applications by each of these two classes of applicants.

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ids kl The data specified in this guide will generally be sufficient for the Com-

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1 mission to determine an applicant's financial qualifications for a con-ct H

struction permit or an operating license. However, the Commission reserves

.i the right to require additional financial information prior to construction i

or during construction or operation of the facility.

This is particularly true in cases of significant adverse changes in the financial condition of an applicant or licensee or in response to significant adverse economic F'

developments.

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5 Applicants, permit holders and licensees are encouraged to consult with rg the Conmission with respect to any questions they may have relating to the requirements of the Commission's regulations or the information set forth in this appendix.

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II.

APPLICANTS WHICH ARE ESTABLISHED ENTITIES I

A.

Applications for construction permits -

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Estimate of construction costs. For electric utilities, each applicant's estimate of the total' cost of each unit of the pro-posed facility should be broken down as follows and be accompanied by a statement describing the bases from which the estimate is derived:

l (a) Total nuclear production plant costs............. $

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(b) Transmission, distribution and fl jQ general plant costs...... $

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@w (c) Nuclear fuel inventory cost.for 3..yj fi rst Core........... $

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Total Estimated Cost... $

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.. p If the fuel is to be acquired by lease or other arrangement than purchase, the application should so state. The items to be in-cluded in these categories should be the same as those defined in the applicable electric plant and nuclear fuel inventory accounts Q};a_

stated in the Unifonn System of Accounts of the Federal Energy kg x :

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Regulatory Commission or an explanation given as to any departures

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Since the composition of construction cost estimates for produc-l tion and utilization facilities other than nuclear power reactors i

will vary according to the type of facility, no particular for-mat is suggested for submitting such estimates.

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should, however, be itemized by categories of cost in sufficient 3

detail to permit an evaluation of its reasonableness.

2.

Sources of construction funds. The application shall include a brief statement of the applicant's general financial plan for fi-nancing the cost of the facility, identifying the source or sources a

q upon which the applicant will rely for the necessary construction funds, e.g., internal sources such as retained earnings and

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% n4 depreciation accruals or external sources such as issuance J ;j of debt and equity securities. The application shall indicate

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[4i the relative degree to which each source of funds is expecte:.;

}j to contribute to the total required funds. The projected overall N

capital structure of the applicant during construction of the facility shall also be indicated.

A publicly-owned applicant shall submit excerpts from statutes, ordinances or other legal authority that allow it to issue bonds or other forms of indebtedness and to take other actions necessary to finance the facility.

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Applicant's financial statements. The application shall also

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such a report is not published, the balance sheet and operating l

statement covering the latest complete accounting year together l

with all pertinent notes thereto and certification by a public 4

accountant shall be furnished.

4.

Conclusive evidence of-financial qualifications.

An applicant I

that satisfies the following two criteria is financially quali-fied under the Comission's regulations governing the issuance of construction permits. In addition to providing the information spec;fied above, each applicant shall state in its application

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information sufficient to demonstrate how it does or does not satisfy each of the following two criteria:

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(a) The applicant's rates for service are determined by state and/or federal regulatory agencies or by the applicant it-am sel f.

For this purpose, the applicant's rates shall be con-w' sidered to be self-determined if its rates are established either directly for itself or by its controlling governmental unit (e.g., by the city council for its municipal utility);

and a

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The applicant's most senior long-term debt is rated "A" or higher by both of the major securities rating services (Moody's Investors Service, Inc., and Standard and Poor's Corporation).

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1 (An applicant whose long-term debt is guaranteed by the United 13 States, or an agency thereof, shall be deemed to have satisfied this criterion. Such an applicant shall submit copies of a loan h_

comitment notice for debt that will finance construction of the I

facility.)

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f Reporting adverse changes to the Commission.

If at any time after submitting its construction permit application and before an operating license is issued, an applicant (that had previously been found financially qualified by satisfying the criteria i

that demonstrate conclusive evidence) no longer satisfies one or j

both of the above criteria, it shall promptly report the circtmstances and reasons therefore to the Comission.

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5.

Alternative demonstration of financial qualifications.

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An applicant that does not satisfy either one or both of the p

u rw above criteria of conclusive evidence will provide additional

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E financial information at the Comission's request. The information e;

will enable the Comission to analyze the applicant's financial y

'l qualifications in greater detail and to determine if the appli-

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cant is financially qualified to pursue activities under the p-p F

proposed permit.

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Applications for operating licenses -

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1.

Estimate of operating costs and sources of-funds. During the l.

review of an application for an operating license, the applicant h

will provide, at the Comission's request, current estimates of 1

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the total annual cost to operate the facility for each of the I

first five years of operation cnd estimates of the costs to

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permanently shut dowr the facility ana maintain it in a safe condition.

The applicant will also describe the sources of funds to cover operating costs and shutdown and maintenance costs.

2.

Applicant's financial statements.

The application shall include the applicant's latest published annual financial report, to-j gether with its most recent interim financial statements.

If t

such a report is not published, the balance sheet and operating

'l statement covering the latest complete accounting year together with ali pertinent notes thereto and certification by a public accountant shall be furnished.

3.

Conclusive evidence of financial qualifications. An applicant that satisfies the following criterion is financially qualified V o

w Q Q,j under the Commission's regulations governing the issuance of

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-g$rl@k operating licenses.

Each applicant shall state in its application

{$$i information sufficient to demonstrate how it does or does not

e 9 satisfy the following criterion

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The applicant's rates for service are determined by state and/or federal regulatory agencies or by the applicant it-l self. For this purpose, the applicant's rates shall be con-sidered to be self-determined if its rates are established either directly for itself or by its controlling governmental Ig}

unit (e.g., by the city council for its municipal utility).

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((4(!y Reporting adverse changes to the Cormission.

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If at any time after submitting its application or while the J.

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viously been found financially qualified by satisfying the 7g A

criterion that demonstrates conclusive evidence) no longer ta:

satisfies the above criterion, it shall promptly report the t

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circumstances and reasons therefore to the Commission.

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Alternative demonstration of financial qualifications.

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s, An applicant that does not satisfy the above criterion of conclu-sive evidence will provide additional financial information at the Commission's request.

The information will enable the Commission to analyze the applicant's financial qualifications in greater detail and to determine if the applicant is financially qualified to pursue activities under the proposed license.

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Applications by joint applicants -

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?Qi?@T Joint applicants are a group of established entities that have agreed p %yj gj$

to apply for and to pursue activities under a construction permit mo) p[j[3 or operating license. Each joint applicant is individually subject

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to all of the above requirements for established entities.

In addition to providing the Commission with the information required for established entities, joint applicants shall submit copies of their joint ownership and operation agreement (or similar agreement or contract) that outlines the financial responsibilities of the parties.

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Joint applicants are differentiated from a newly formed entity in Z

fg that the latter does not have a significant operating history that

'l can be analyzed from the financial qualifications standpoint. The

, y,. i requirements for newly formed entities are covered in III, below.

E III. APPLICANTS WHICH ARE NEWLY FORMED ENTITIES A.

Applications for construction permits -

1.

Estimate of construction costs. The information that is nor-mally required of applicants which are newly formed entities does not differ in scope from that required of established

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l entities. Accordingly, applicants shall submit construction cost estimates as described above for established entities.

2.

Sources of construction funds.

The appifcation shall specif-ically identify the source or sources upon which the applicant gj will rely for the funds necessary to pay the cost of constructing A;

3,t.[.3 the facility, and the amount to be obtained from each. With m

respect to each source, the application shall describe in detail the applicant's legal and financial relationships c x Q;<.

with its stockholders, corporate affiliates, or others (such as financial institutions) upon which the applicant is relying c-for financial assistance.

If the sources of funds relied upon include parent companies or other corporate affiliates, information to support the financial capability of each such L. ;. 2 company or affiliate to meet its comitments to the applicant

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yl a shall be set forth in the application.

This information shall

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be of the same kind and scope as would be required if the parent r'4 companies or affiliates were in fact the applicant.

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3 The established entities comprising the newly formed entity

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shall submit copies of their joint ownership and operat ion agreement (or similar agreement or contract) that outlines f

the financial responsibilities of the parties.

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Applicant's financial statements.

As noted earlier in this appendix, an applicant which is a newly formed entity will normally not be in a position to submit the usual types of balance sheets and income statements reflecting the results of prior operations. The applicant shall, however, include in its application a statement of its assets, liabilities and capital structure as of the date of the application.

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Applications for operating licenses-wgjj 1.

Estimates of operating revenues and expenses.

During the y

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review of an application for an operating license, the applicant will provide, at the Comission's request, current estimates of the facility's annual operating revenues and operating expenses for each of the first five years of operation. The statement should list operating revenues and expenses in sufficient de-tail to permit an assessment of the reasonableness of the esti-mates. The expected source of operating revenues shall be

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['h indicated.

In addition, the applicant shall include its esti-5 mate of costs and indicate the source of funds to permanently i

shut down the facility and maintain it in a safe condition.

2.

Applicant's financial statements.

In its application for a

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license to operate the facility, the applicant shall include a statement of its assets, liabilities and capital structure

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as of the date of the application.

IV. TRANSFERS OF OWNERSHIP INTERESTS 1

j A transfer of ownership interest in a licensed facility requires prior Commission approval by amendment to the permit or license.

(SeeSection 50.10.) The financial information required by the Commission for its review of a proposed ownership transfer is the same type of information H

required for an initial permit or license.

Accordingly, a proposed

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new owner or an owner seeking an increased ownership share in a licensed

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ggp facility is subject to the requirements of this appendix and Section cv j_fg 50.33(f). The provisions for insignificant financial interests in V, below, are an exception to these requirem'nts.

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V.

INSIGNIFICANT FINANCIAL INTERESTS s

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y An ownership interest of less than five percent in a facility by any one applicant is considered insignificant from the financial qualifi-

.Y cations standpoint.

(With respect to a nuclear power plant, " facility" means each nuclear unit.) Accordingly, the Commission generally does not

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review and no finding is necessary on the financial qualifications of an

, a applicant for less than a five percent ownership interest in a facility.

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?,y, Likewise, the applicant for such an interest is normally not required to submit the financial information specified in Section 50.33(f) of this Part and in this appendix.

(Such an applicant is required to file its annual financial report with the Commission in accordance with VI, below, and Section 50.71(b).) However, the Conmission may elect to review such an interest if it appears that extenuating circumstances may 1

be present. For example, such an interest would be subject to the financial qualifications review if the interest appears to represent

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a significant level of control over the construction or operation of the facility.

Likewise, an application for a license amendment involving less than a five percent increase in ownership interest by any one applicant is not subject to the financial qualifications review.

However, such an applicant is subject to the financial qualifications review if its ly q 3

2, proposed total ownership in the facility is greater than five percent I

and the applicant has not previously been subject to the financial J

qualifications review with respect to that facility.

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These provisions for insignificant financial interests do not affect other provisions in this Chapter for licensing of an ownership interest or for prior approval by the Commission of transfers of ownership interests.

VI. ANNUAL FINANCIAL STATEMENTS REPORTING REQUIREMENT Each licensee and each holder of a construction permit for a production or utilization facility of a type described in Section 50.21(b) or J-4 s...

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Section 50.22, or a testing facility is required by Section 50.71(b) to file its annual financial report with the Comission at the time 4

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i of issuance thereof. This requirement does not apply to licensees or

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l holders of construction permits for medical and research reactors.

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f-VII. ADDITIONAL INFORMATION l

y The Comission may, from time to time, request the applicant or licensee, j

e whether an established entity or newly formed entity, to submit additional

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or more detailed information respecting its financial arrangements and status of funds if such information is deemed necessary to enable l

I the Comission to determine the applicant's financial qualifications for the permit or license or a licensee's financial qualifications 3

to continue the conduct of the activities authorized by the license and to permanently shut down the facility and maintain it in a safe O

condition.

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