ML19331C110

Safety Evaluation Supporting Amends 3 to CPPR-135 & CPPR-136

ML19331C110
Person / Time
Site:	Seabrook
Issue date:	08/06/1980
From:	Office of Nuclear Reactor Regulation
To:
Shared Package
ML19331C103	List: ML19331C102 ML19331C105 ML19331C110
References
NUDOCS 8008140175
Download: ML19331C110 (34)

Text

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O AUG 0 5 3 0 SAFETY EVALUATION SUPPORTING AMENDMENT NO. 3 TO CONSTRUCTION PERMIT NOS. CPPR-135 AND CPOR-136 SEABROOK STATION. UNITS 1 AND 2 Introduction On July 7, 1976, Construction Permit Nos. CPPR-135 anc CPPR-136 were issued to the joint owners of the Seabrook Station, Units 1 anc 2.

Suosecuently, Amenc-ment Nos. 1 and 2 nere issued (December 27, 1978 and January 31, 1979, rescec-tively) approving certain ownership transfers.

The respective current cenersnio interests of eacn of the co-holders of the above construction permits are snown in column I of Table 1.

By letter dated May 16, 1979 (Amendment 40 to the Licanse Acclication) and as amenced by letter dated March 14, 1980 (Supplement No. a to Amendment A0), a further amendment to the permits was recuested, wnereby ownersnip interests in the facility are proposed to be rearranged among several of the existirg.:artic-ipants ano an interest would ce assumed by one new proposed joint owner.

In order to further clarify the proposed transfer and to rescend to the staff's request for additional financial information, the applicants sucmitted ad::i-tional information on June 1, 1979; August 3, 1979; Octccer 10, 197?: 'daren

~a, 1980; Aoril 24,1980; and May 15, 1980.

The prooosed rescective :wnersnic interests of eacn of the participants are shown in column III of Tacle 1.

7e amount of the rescective ne. increase in ownership interests for each Of the

.800814017g

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Seacrcok Station, Units 1 anc 2 Percent Cwrersnic Interest r.e -)

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t go asp

cunt of 23rtic40 ant

?-ev 0us ease 3-0:osec 4

?.clic 3ervice Comcany of New Hamesnire 50.00000 35.23497 The Unitec Illuminating C:mcany 20.00000 15.23531 Central Maine ?cwer Comcany 2.51173 3.50000 5.04173 Central Vermont ? colic 3ervice Corcoration

~.59095 1.5EC95

'he Connecticut Lf;nt & Power l

Comoany 3.32123 3.02:43 FitC.90Urg Gas and Slectric Lignt Cemeany2 0.50432 0.25C37 0.55519 Montau Siectric Ccmoany:

2.93531 2.C6459 5.00000 New Seaford Gas anc Scison 1

,a. n.,omcany

.. :.:0

-,1 g.v a.:-:c New Snglanc ower Company 9.35765 9.35755 Tcwn of Hucson Lignt anc ?cwer Ceoartment 0.05730 0.01957 0.37.737 Vermer. 51ectric Coccerative, In'.o rcorated 0.21259 0.21259 Massacnusetts Manicipal ' Wholesale ilectric Comcany 5.592a9 5.C0091 11.59340

4aine.3 colic Service uomoany 3...e0:e-

2.. e v,: o-

.aangor nycro :lectric comoany 0.-<c..q 0,.,c, c..:

c. 2 <

Taunten Munici a1 Lignting Plant 0.1C03J 0.33 25 0.43479 New damosnire 51ectric Coco., Inc.

2. 739'.

2.17391 100.00CCO

}c0.00000

-New 3ecforc was previously accrevec by NRC for a :tal Ownersaf: intr?est of 2.37370 percent.

This interest inc!ucec a rce sec transfer of 1 '2d a?

ercent from Connecticut Lign 1 P0wer wni:n,as :an:ailec.

New 5ecforc's currently Orccesed total ownersni: interest is smaller tnan :ne interest for.nica it was founc financially :uali'f ac an a::covec Oy NRC.

2 i eneurg anc Montaue incluce percentage *ansfers (3.13332 anc 1.C3542, res:ectively) fr:m tne Connecticut Lign 130.er :::ary Oreviously accrevec

y NRC Out not yet consummatec.

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. participants as a result of tnis amencment will be as shown in column II of Table 1.

For those participants not seeking increases in ownership interests, the proposed ownership interests under the requested amendment will be equal to or lower than the previously approved ownership interests.

Witn respect to the Allottee's tecnnical qualifications, in Amencment 40 to the License acclication datec May 14, 1979, and transmittec by letter of May 16, 1979, Puol;c Service Company of New Hamosnire mace reference (i) to the Joint i

Cwnership Agreement wnicn vests total rescensibility for construction anc coeration in Puolic Servics Ocecany Of New Hamosnire, and (ii) to the informa-tion in the Preliminary Safety Analysis Racert and in tne nearing recorc (N.3.,

Tr. 4069-4216), all of nich information sucportac the findings of the Atomic Safety and Licensing Board (see Initial Decision, pc. 21-23, 150-153 and 199) and none of wrich is in any way alterec by the proposed reallocations.

This is consistent with the License Acolication cocketed on July 9, 1973, wnich states "All particicants will execute a Joint Ownership, Construction, anc Operating Agreement wnich specifically delegates to the Puolic Service Company of New Hampsnire the sole rescensibility for tne design and construction of the Units anc for coeration and maintenance of the Units." On March 11, 1980, the New Hampshire Electric Cooperative, :nc., the only new owner orcocsed in Amendment 10 to tne Acolication, by signing an " Appointment of Agent and Signature of Aeolicant" acocintac ?ublic Service Company of New Hamosnire as its agent for its creccsed Ownersnio snare of the Seacrook Station.

4-Succorting information enclosed with the letter of Aoril 24, 1980 incluces a statement by the New Hamosnire Electric Cooperative, Inc. that the lace is not cwned, centrolled or acminated by an alien, foreign corporation or foreign government.

n ne - May 13, 1973 etter, Public Service Ccecany of New Hamosnire, no is i

authori:ed :y " Appointment of Agent and Signature of Acolicant" ferns to act as agent for eacn, states tnat ne Transferee-Acolicants agree tnat they vill

,c: :ermit any 'rcividual 1 ave access to.iestricted Data until the Nuclear

'equ:a:Ory : mmissi:n na. :e: ermined that sucn access will net encanger the

tmen cefense anc security.

The New Hamosnire Electric Coccerative, :nc.

previce: this authorization ty signing the ac ropriate form on Marca 11, 1980.

Genersi Analysis We e reviewed the acclication for Amencment No. 3 to Construction Permits 4

Nos. 0?PR-135 and CPPR-136 and conclude that since ? colic Service Comoany of New Hamesnire will retain full resconsibility for the cesign, construction, Inc coeration of Seacrock Station, Units 1 and 2, the proposed transfers of l

0-nersnio interests would not involve a significant hazards conside ation inasmuca as the transfers ce not involve an increase in the probability of an ac:' cant. In increase in the :Onsecuences of an accident, or a decrease in i

safaty targins.

We therefere c0cclude that tne activities authorized 0y tnase 1 encments cu'd 9ct :anstitute an unreasonable risk to the healtn anc safety of :ne cuali.

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5-Since the acplication for amendments states or demonstratas :nat the new partic-ipant is not owned, controllec or cominatac by an alien, foreign corporation, or a foreign government, and has agreed in writing to comply witn the require-ments of 10 CFR 50.37 regarcing the limiting of access to restricted data, we concluce from our review that the activities authorized by these amendments ocula not ce inimical to :ne common cefense anc security.

We have evaluated the financial qualifications of the new participant, the carticicants with a procosed increased cercent ownershio and two participants, Fiter.ourg '3as anc Electric Lignt Comcany and Montaup Electric Comcany, each of wnica wou!c excerience a net increase if agreements for transfers authorized by Amencment Nos. I to the construction permits are reacnec, and the transfers again 3 thori:ed, wnile the financial review in this Safety Evaluation remains acol' cable.

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3 Financial Analysis Introduction The Commission's regulations whica relate to financial data and information recuired to establish financial cualifications for an applicant for a facility construction permit are Section 50.33(f) of 10 CFR Part 50 and Appendix C to 10 CFR Part 50.

In accorcance with these requirements, we evaluate whetner tnere is reasonaole assurance that an applicant can obtain the necessary funds to cover its portion of the estimated construction and related fuel cycle costs for ne proposed facility.

Herein, we evaluate the financial qualifications of each of the applicants having increased or new interests in the Seacrook Station, Units 1 and 2, as a result of the amendments to the construction permit.

Our evaluation of the financial qualifications of eacn of :nese scoli-cants included consideration of the Commission's decision Public Service Comoany of New Hamoshire, et al., 7 NRC 1, at 18 (1979), (Seabrook Station, Units 1 and 2), which states "... the applicant must have a reasonable financing plan in lignt of relevant circumstances."

Consistent with the above recuirements, we recuire that investor-owned utility apolicants suomit pro-forma statements of sources 3rd uses of funds with under-lying assumotions and that non-investor-cwned util ty apolicants sucmit altarna-tive financial data and information.

In general terms, pro-forma statements of sources and uses of funas are best described as financial plans.

From tne use of funas viewpoint, a financial plan shows total projected year-to year construction func ecuirements.

Total const uction fund requirements for any-

7-given year reoresent the sLc of all plannec construction expenditures, for all facilities uncer construction during that period, including the subject facility.

At the same time, a financial plan also snows sources of funds or, stated simoly, wnere the recuired capital is coming from. Generally, sources of funds for a r.clic utility consist of short-tarm borrowings, internal cash generation, and procaecs from additional sales of long-term cebt, preferred stock, and common ecuity securities.

From this perscective, and in consiceration of imcortant uncerlying assumptions to the financing plan, we cetermine tne imcact of sucn financing uoan significant financial parameters.

In this rescect, the reason-abieness of an applicant's financial projections is cetermined.

This reasonacle assurance stancard, however, must be viewed in lignt of the extenced period of time from the start of construction to commercial oceration.

Consecuently, one must necessarily make certain assumotions regarcing future conditions.

Two fundamental assumotions which have been incorporated in the analysis of the applicants' projected financing are that there will be rational regulatory policies in tne setting of ratas for utility service (for the investor-owned utility applicants) and that viaole capital markets will exist. The former assumotion imolies that rates will us set to at least cover the cost of servica, incluaing the cost of capital; the latter assumption imolies that capital will be avai'aole at some cost.

. Pate of Retur. on Common Ecuity Of'all facters consicered during the review of an investor-owned utility acoli-cant's financial projections in dttermination of its financial cualifications, the assumotions of its projected ates of return on,ccmmon ecuity during the perioc of construction are most significant.

Rate of return on common equity is best cescribed as earnings stated as a percentage of all the stocknciders' equity accounts, such as capital stock, cremiums, anc retained earnings in a corporation.

This is derived by first ceaucting frca gross cperating revenues the ccmoany's cperation and maintenance excenses, decreciation, interest cnarges, taxes, and preferred dividends.

This comoutation results in net income available to the common stockholder, the "bottem line of a comoany's ccerations.

Dividing this by tne total of investment collars crevicec by the ccecany's common stock-holders and accumulated retainec earnings results in per-unit return on common equity.

Restated on a percentage basis, this translates into the rate of return on common equity.

Of all investors providing capital (f.o., proceeds of long-and short-term dect, creferred stock, and common stock) to a company, snarehoicers of common stock cear the hignest risk. While capital costs attributable to a ccmcany Dy deot and preferred stock are fixed by coatract, and must be paid at the agreed rate, those dollars earned on common equity represent whatever remains after cayment of all other charges anc expenses.

By reason of its innerent risk, sic.ce nolcers of a company's common stock bear the lowest priority of payment to all otner obligations of that comoany, rate of return on common equity represents the

.g.

cest indicator of a company's profitability.

Scofitability is important in that it affects botn intarest coverage and the price of a company's securities, which bear upon the comoany's scility to successfully market its securities and maintain the fermation of a reasonable capital structure.

Since the investor-ownea acolicants are puolic utilities afforded monopoly status in their respective areas of servica, they are subject to regulation.

Accorcingly, their rates of return are set cy tne regulatory agencies naving jurisdiction over them througn tne rates they charge.

However, unlike utility base rates, nicn are fixed, the rate of return on common equity is only allowed to ce earned and is not guaranteed. While the concept of a fair rate of return on orcoerty used and useful in public utility service is deeply ingraineo in

uolic utility regulatory law and econcmics, tnere still exists no aosolute certainty as to a utility's future earnings.

Resultanti,", one is required to consider its current level of profitability and other relevant circumstances in assessing the reasonaoleness of a projected return on common equity.

We nave reviewed the resoective rates of return on common eouity for eacn of the investor-owned applicants having increased joint-ownersnio interests in tne Seabrook Station, Units 1 anc 2.

An indivicual summary financial analysis is provided within for eacn of these applicants whicn addresses the soplicant's respective rates of return on common equity in comoination with other facets of its finances.

s Internal Cash Generation In the meeting of an applicant's year-by year construction expenditures, the first item consicered is the level of internal cash generation.

This is because internal casn generation reduces tne level of external financing required.

By reason of certain ncn-cash exoenses (primarily ceoreciation and deferred inc0 e taxes) and the portion of retained earnings not attributable to allowance for funcs used during construction, a c;.:pany may generate funds internally.

To socw an examole in a simolified fasnion, a company is allowed depreciation of its assets.

These amounts are reflectec cn the cocoany's income statement as an exoense.

However, since these funcs are not disbursed, the comoany may use them for its cwn needs. These dollars represent funds whicn the company can scoly to its capitAi recuirements, therecy reducing its need for externally

otained funds. Another example is when a comoany earns a profit, it shares that profit witn its stockholders in two ways.

First, it takes some of its net income and distributes that portion to its snareholders in the form of dividends.

After its dividends nave been oisbursed, the company keeos the balance of its net inccme and adds this amount to its retained earnings account.

Again, this represents additional funds availaole to a company for its capital needs.

As an incidental point, althougn the allowance for funds used during construc-tion portion of earnings is not an immediate source of casn to a ccmpany, investors co recogni:e it as a future source of cash, since wnen it is 'siti-mately placad into rate base (property used and useful in puolic utility service), it generates funds througn both earnings and depreciation.

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e e At the same time, retained earnings also benefit the sharenolders in nat these smounts increase the worth of tneir investment and further enabic the company to grow.

The overall level of a company's internal casn generation is likewise of significance to shareholders in that it provides cash coverage to dividends.

This is escecially important to investors of public utilities common stocks, ano generally own sucn securities because of their income cnaracteristics.

By a utility continuing to generate a sufficient amount of casn flow, its snare-hoicers mf common stock nave a higner confidence in the payment of future div4cercs.

This is, beneficial to the company as, in part, it continues to maintain tne attractiveness of its acuity securities.

In eaca of the incividual summary financial analyses of the applicants having increasec or new foint-ownershic interests in the Seacrook Station, Units 1 and 2, internal cash generation is reviewed both on a current and projectec basis.

Interest Coverace In order to meet their capital requirements during the construction of tne Seabrook Station, Units 1 and 2, the investor-owned applicants will, from time to time, enter the market for the sale of long-term deot securities.

These securities are mortgage boncs which are secured with a lien on the assets of the issuer.

In order to protect the assets mortgaged uncer a comoany's dect, a trust incenture agreement is mace between the company and the conchoicers.

Indentures of sucn mortgage conds contain provisions wnicn, in adcition to protecting the assets mortgaged, also cover the interest due to tne benchoicers.

. At the same time, to provide an adequate level of earnings cushion over ano acove the comoany's interest requirements, there generally exists in sucn mortgage and trust deed indentures an interest coverage test.

Inextricably related to earnings and interest charges, this provision crecludes the comoany from issuing additional debt should there not be satisfactory earnings coverage over its interest coligations.

Because of its significance, the interest

cverage ratio is a major criterion used by the financial community in making credit cecisions witn resoect to a comoany's deot.

In eacn of the individual summary financial analyses of the applicants having increased or new joint-ownership interests in the Seabrook Station, Units 1 and 2, interest coverage is further reviewed on botn historical and orojected bases.

Caoital Structure In order for a company to conduct a viable financing plan and preserve the attractiveness of its securities, it must maintain a reasonaoly balanced caoital structure.

The term capital structure refers to the comoosition of a comoany's caoitalization, that is, the procortion of deot, ecuity, and preferred stock wnich constitute capitalization. Capital structure is an imcortant consideration in corporate financial analysis in that it snows how mucn ecuity capital is available to protect the senior obligations, or in other words, how muca the owners are using their own caoital or relying on creditors' money.

. Sy maintaining a reasonaole and well-balanced capital structure, latitude will exist in a company's options of financing.

This will helo achieve borrowing reserve, allowing flexibility both in the timing and selection of securities to be issued to meet capital requirements. Most imcortant, under these circum-stances, its securities will maintain their attractiveness to investors by virtue of their lower risk, since capital structure affects interest coverage.

Generally speaking, investor-owned electric utilities have historically had capital structures composed of between 50 to 60 percent long-term deot, 10 to 15 percent creferred stock, and 30 to 40 percent common eQJity.

Ihese ranges of capital structure are considered reasonable by the financial community in that tney maintain a sufficient amount of equity caoital protection to the senior security holders and, from this viewooint, help protect the attractive-ness of the securities.

In each of the inoividual summary financial analyses of the applicants having increased or new joint-ownership interests in the Seabrook Station, Units 1 and 2, cacital structure is further reviewed on both historical and projected bases.

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. INDIVIDUAL

SUMMARY

FINANCIAL ANALYSES Central Maine Power Comoany Central Maine Power Company provides electric service to 375,000 customers in Southern and Central Maine.

Its operating revenues increased from 5208.2 million in 1978 to 5271.3 million in 1979, wnile net income was $29.6 million in both years. At Decemoer 31, 1979, its invested capital amounted to 5538.0 million ana consisted of a7.3 percent long-term deot,12.9 percent preferred stock-and 39.8 percent common equity.

This capital structure compares favoraoly with tne previously stated historical range of the electric utility incustry.

Con-currently, it provides a suostantial amount of equity capital protection to the holaers of -he eoany's senior obligations, thereby contributing to its

'inancial integrity.

During 1979, this applicant earned a 12.0 percent rate of return on average common equity, corr. pared with 13.4 percent realized in 1978.

Its long-term and total interest charges in 1979 were coverec by pretax earnings 3.3 and 2.6 i

l times, respectively, versus coverages of 3.2 and 2.9 realized in 1978.

This compares favoraoly with the Company's trust indenture requirement that its earnings be at least twice its interest cnarges, including annual interest t

charges associatec with a new deot offering, before it may issue acditional i

eot.

Cantral Maine Power Comoany's outstancing bonds are rated A" by Moocy's and "BBB clus" by Stancard and Poor's.

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Central Maine Pcwer Cem any plans to finance its 5.04173 percent joint-cwrerrsip interest in the Seabrcok Station, Units 1 and 2, tnrcugn tne use of internally generated cash and snort-term =crrewings anicn will be subsequently refinancea

.ith proceeds receised from issuances of additional first mortgage bonds, cre-ferrec stock, anc cot. con stock.

In 1979 it financed 559.3 million wnien was cerived from 517.4 million of internally generatec casn and $41.9 million fr:m external sources.

Internally generated funds financed 29.3 percent of its total f

construction excencitures for 1979.

At car recuest, Central Maine Pcwer Ccmoany secolied a projected sources of funds statement for the construction period of tne Seabrook Station, Units 1 and 2, with underlying assumptions, demonstrating how it mignt raise the ecuisite funds to construct the facility.

Internally generated casn over inis :erfoc is projected to be 43.9 percent of total construction expenditures ana will cover 160 percent of its expected outlays for tne Seabrook Station, Units 1 and 2.

7his projected level of internal cash generation is not unrea-sonaole in light of its nistorical exoerience. Moreover, this projectec financ-ing will result in a capital structure within the historical range of the electric utility industry wnile maintaining a level of interest coverage on a year-cy year casis during the period of the facility's construction in excess of its trust indenture requirements.

In lignt of the acove, our review of the financial projections of Central v ine a

Dewer Comoany leads us to concluce that tney are within tne cone of reasonacie-7ess anc that tney constitute a reasonable financing plan. Accordingly, we

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conclude that the Central Maine Power Ccapany is financially cualified to cesign i

l' anc construct one facility to tne extent of its jcint-ownersnio interest. This conclusion is predicated upon our cetarmination that there is reasonaole assurance tnat it can raise the funds necessary to cover its 6.04178 percent snare of f

4 the estimated costs to cesign and construct the Seacrook Station, Units 1 anc 2, inclucing related fuel cycle costs.

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. Fitchourg Gas and Electric Licht Ccmeany Fitr.heurg Gas and Electric Light Company provices electric anc gas service to several communities in North Central Massachusetts.

Its operating revenues increased from 329.1 million in 1978 to 334.3 million in 1979,. nile for the same years net income increased from'51.9 million to 32.3 million.

nvested capital at Decemoer 31, 1979, amounted to 333.4 million and consistec of 50.2 percer.: long-term ceot, 12.2 percent creferred stocx, and 37.6 percent common equity.

This capital structure compares favorably witn the previously stated historical range of the electric utility incustry.

Concurrently. it orovides a sufficient amount of equity capital protection to the holders of the Comoany's senior obligations, tnereby contriouting to its financial integrity.

Curing 1979, this acclicant earnec a 16.5 percent rate of return on average common equity, comoared with 15.3 percent reali:ed in 1978.

Its long-term interest and total interest cnarges in 1979 were coverec by pretax earnings 3.6 times and 3.0 times, respectively, versus coverages of 3.4 times and 2.9 times realized in 1978. These levels of long-term interest coverage comoare favorably with the Comoany's indenture requirement that its earnings be at least twice its interest cnarges, including interest associated with a new deot offering before it may issue additional deot.

The Fitenburg Gas and Electric Lignt Comoany's long-term bonds are rated "Saa" by Moody's anc "SSS" by Stancard and poor's.

. The Fitenburg Gas and Electric Light Comoany plans to finance its 0.36519 per-cent joint-ownersnip interest in Seabrook Station, Units 1 and 2, tnrougn the use of internally generated cash and snort-term corrowings which will subse-quently be refinanced sith proceecs from issuances of new equity or deot securities.

In this respect, its sources of funcs in 1979 totaled 38.5 million and were := ivec from 54.0 million of internally generatec cash and 34.5 million fren external sources.

Internally generated casn financed 46.5 percent of its total construction excencitures for 1979.

At our request, Fitchourg Gas and Electric Light Company suoplied a projected sources of funds statement for the Seabrook construction period, with uncer-lying assumptions, cemonstrating how it might raise the recuisite funds to construct the facility.

Internally generated casa over this period is pro-jected to be 47.3 percent of total construction excencitures and will cover 100 percent of its expected outlays #or Seabrook Station, Units 1 and 2.

This projected level of internal cash generation is reasonable in light of its nistorical experience. Moreover, this projected financing will result in a caoital structure within the nistorical range af the electric utility incustry wnile maintaining a level of interest coverage on a year-cy year basis during tne period of the facility's c.onstruction ecual to or above its indenture recuirements.

n light of the aoove, our review of the financial projections of tne Fitencarg las and Electric Light Comoany leads us to concluce that they a e witnin the

ene of reasonaoleness anc tnat they constitute a reasonaole financing plan.

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Accorcingly, we conclude that the Fitchburg Gas anc Electric Lignt C :cany is l

financially qualified to cesign and construct tne facility to tne extent of its ownersnip share.

Inis conclusion is predicated upon our determination that there is reasonable assurance that it can raise the funds necessary to cover its 0.36519 percent share of the estimated costs to design and construct the 5eacreo< Station, Units 1 and 2, including relatea fuel cycle costs.

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o Montaue Electric Comoany all dect anc ecuity securities of the Mentauc Electric Company are owned by Blackstone Valley Electric Cc=pany and Eastern Edison Company which in turn are wnolly owned subsiciaries of Eastern Utilities Associates. The Montaup Electric Comcany is the Orincipal wnolesale scurca cf sucply of electricity to tne two Eastern Utilities Associates sucsiciaries, wnica jointly service several tcwns anc rural areas of Rhode Island anc Massachusetts.

Its operating revenues rose frca 3110.3 million in 1978 to 5138.2 million in 1979, wnile its net income rose frcm 37.1 million to 58.5 million.

Invested capital at Decencer 31, 1979, amounted to 3148.9 million and consistad of 50.3 ercent long-term cect, 1. 0 cercent preferrec stock, and 48.7 percent common equity.

7his capital structure cc.mcares f avoracly with the previously stated historical range of the electric utility incustry.

Concurrently, it provides a sucstantial amount of equity cacital protection to the holders of the Ccmoany's senior obligations, thereby contributing to its financial integrity.

During 1979, this acplicant earned a 12.7 percent rate of return on average common equity, compared with 11.3 percent realited in 1978.

Under tne provi-sions of the Montaue Decenture Bonas, there are no restrictions of issue related either to interest coverages or condaele procerty additions. As noted acove, the outstancing securities of Montaue Electric Ccmcany are privately held by its carent ccmcanies and, therefore, are not ratec.

7his relationsnio allows this acolicant sucstantial flexibility in its financing by not having sucn restrictions ucen tne issuance of its cent and my naving a reacy cuyer awaiting the purchase of its securities.

m The Montaup Electric C mcany plans to finance its 5.0 percent joint-ownersnio interest in :ne 5eacroc< Station, Units 1 and 2, primarily oy short-term bank corrowings wnica will de sucsecuently refinancea witn proceeds received frca

ne sale of its bancs ana common stock.

In this respect, tnis applicant's sources of funds in 1979 totalea $30.7 million anc were derived from $9.9 miicn of internally geners ed casa, a 313.5 million increase in notes :ay-aDie, and a 57.2 million increase in common stock.

Internally generated casa in 1979 financed 32.2 percent of total construction excenditures.

At our recuest, the Montaup Electric Comoany sucolied a projected sources of funds statement for the Seaorock construction period, with underlying asst: D-tions, demonstrating how it night raise the requisite ~ funds to design and construct the 5eacrook Station, Units 1 and 2, to one exte'nt of its joint-cwnersnip share.

Montaua Electric Company's internally generatec casn over this period is projected to be 14.1 percent of the total construction expendi-tures and 23.9 percent of its expected cutlays for the Seabrook Station, Units 1 and 2.

This applicant's projected level of internal cash generation is recuced as a result of its high dividend payout to the parent. However, during the cour'se of its financing of the Seacrook plant, its escital struc-ture vill remain stable to provice good equit; protection.

In lignt of the above, Our review of the financial projections of the Montaun Electric Comoany leads us o ccncluce that they are within the rene of reason-soleness and that tney constitute a reasonaole financing plan. Accorcingly,

.e concluce that the Montaup Electric C0 cany is financially cualified to

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OssiGa acc Construct the facility to the extent of its respective joint-OwnershiD interest. This c0nclusion is precicated ucen Our deter:sinaticn that there is -

a reasonacle assurance that it can raise tne ftnds necessary to cover its 5.0 percent snare of the estimatec costs to' design anc construct the Seabrook Station...

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e Town of Hudson. Massachusetts. Liont and Power Decartment The Town of Hudson, Massacnusetts, Light and Power Department is a municipally owned electric system supplying electricity to the Town of Hudson, Massachusetts.

Its operating revenues for the fiscal year encing December 31, 1979, were 35.6 mii' ion anc i.s net ;tility olant was 31.3 nillion.

The Town of Hucson, Massachusetts, Light and 3cwer Decar*, ment plans to finance its 0.07737 percent joint-ownersnip interest in the Seaccook Station, Units 1 snd 2, primarily through utilization of internal'y generated funcs.

Presently, it anticipates that no bond financing will be necessary to meet its snare of the excenditures required to construct the facility.

Review of its historical internal casn generation indicates that this applicant's projectec levels of internal cash generation are reasonable.

However, if borrowing is required, principal and interest due from such obligations wculd be funded from curren'.

ocerating funos derived from the sale of energy.

As all of its orevious long-term debt has been redeemed, it has none outstanding at present.

This con-stitutes 100 percent equity protection to its assets and allows for borrowing reserve.

The Town of Hudson, Massachusetts, Light and Power Department's rates are estaDlished and changed under Massachusetts laws and require the municipality to cnarge rates that are not less than the cost of operations.

Since its rates are not suoject to tne acproval of any regulatory suthority, it has unilateral authority o set reasonacle cates.

The foregoing acts as a mecnanism for the

1 acolicant to be aole to msintain its financial integrity, internally generate sufficient funcs, and attract caoital, wnen necessary, to cover its estimated construction expencitures during the facility's construction.

3ased on the above information, we-conclude that there is a reasonable assurance that tae Town of Hudson, Massachusetts, Light and Power Decartment can raise t.9e funds necessary to cover its 0.07737 percant snare of the costs to design and construct the Seacrook Station, Units 1 ano 2, including related fuel cycle costs. Accordingly, we nave determined that the 7own of Hudson, Massachusetts, Lignt anc Power Department i s financial y tualified to design and construct the Seacrook Station, Units 1 ana 2, to tne extent of its joint-ownership interest.

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. Massacnusetts Municioal Wholesale Electric Cemcany The Massacnusetts Municipal Wholesala Electric Company is a public corporatior anc political subdivision of the Commonwealth of Massachusetts and was estab-lished as a coordinating and planning agency for the development of its municipal memoers' bulk power stooly contracts.

Thirty-one Massachusetts municioalities nave tne accroval of :neir respective local political subdivisions autnorizing mercershio in the Massacnusetts Municipal Wholesale Electric Company.

To finance i s ;;.39340 percent joint-ownership interest in the Seabrook Station, Units 1 anc 2, tne Massachusetts Municipal Wholesale Electric Company will issue long-term cent in tne form of revenue bonds. As of December 1979, this acclicant had successfully issued 3560.87 million of such bancs. The ratings of its bonds are listed oy Moocy's as "A" and by Standard and ?cor's as "A+."

These bancs are 100 percent secured with "take or pay" life of unit Power Sales Agreements with its.memoer-municioal elect ^ic systems.

Since there is no agency exercising regulatory powers over it for power delivered, under the terms of the Power Sales Agreements, tne Massachusetts Municipal Wholesale Electric Ccacany has unilateral authority to enarge rates necessary to cover all of its costs, including interest charges ano debt recayment.

This acts as a mecranism 'or tnis acpiicant to maintain its financial integrity and attract the caoital required to cover its estimated construction excenditures during the facility's construction.

1 Based u on the preceding information, we conclude that the Massachusetts

!!unicipal Wholesale Electric Company is financially qualified to design and construct the Seacrook Station, Units 1 and 2, to the extent of its 11.59340 percent joint-ownership interest.

This conclusion is precicated upon our determination that the Massacnusetts Municipal Wholesale Electric Company has cemenstrated a reasonable assurance that it can obtain. the necessary funcs to

over its share of the estimated costs to design and construct the facility, including related fuel cycle costs.

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. 3ancor Hydro-Electric Ccmoany 7he Sangor Hydro-Electric Company provides electric service to several counties in Eastern Maine.

Its operating revenues increased from 342.6 million in 1978 to $51.7 million in 1979, while for the same years net income increased from 33.4 milifen to 33.5 million.

Invested caoital at Cecemoer 31, 1979, amounted to 367.3 million and consisted of 47.7 percent long-term deot, 14.4 percent preferred stock, and 37.9 percent common ecuity.

7his capital structure com-pares #avorably with the previously stated historical range of the electrical utility industry.

Concurrently, it provides a sufficient amount of ecuity cacital protection to tne holders of the Company's senior coligations, thereby contributing to its financial integrity.

During ~_979, this applicant earnec a 11.5 cercent rate of return on average common equity, compared witn 12.9 percent reali:ed in 1978.

Its long-term and total interest charges in 1979 were covered by pre-tax earnings 2.7 times and 1.7 times, respectively, versus coverages of. 2 times and 2.8 times in 1978.

7his aoolicant's recent long-term interest coverage compares favorably with its trust indenture recuirement that its earnings be at least twice its interest enarges, including annual intarest charges associated with a new cect offering, oefore it may issue additional debt.

7he Bangor Hydro-Electric Cocoany plans to finance its 2.17391 percent joint-

wnersnip interest in tne 5eacrook Statio.1, Units 1 and 2, througn the use of internally generstad casn sna snort-term borrowings which sill sucsequent'y be

e s refinanced with proceeds from issuances of new equity or debt securities.

In this respect, its sources of funds in 1979 totaled $8.6 million and were derived from int 9rnally generated cash and from issuances of notes payable to banks, issuances of bonds, issuances of common and preferred stock, and other sources.

1 At our recuest, the Sangor Hydro-Electric Company supplied a projected sources of funds statement for the Seabrook construction period, with underlying assumo-tions, demonstrating now it might raise the requisite funds to construct the Seabrook Station, Units 1 and 2.

Internally generated cash over this period is projected to be 20.5 percent of total construction expenditures and will cover 220.3 percent of its expected outlays for the Seabrook Station, Units 1 and 2.

This projected level of internal cash generation is not unreasonable in 11gnt of its historical experience. Moreover, its projected financing will result in a capital structure within the historical range of the electric utility industry hile maintaining a level of interest coverage on a year-by-year basis during the period of the facility's construction in excess of incenture recuirements.

In light of the above, our review of the financial projections of the Bangor Hycro-Electric Comoany leads us to concluce that they are within the :ene of reasonableness and tnat they const tute a reasonable financing plan.

Accord-ingly, we conclude tnat the Sangor Sydro-Electric Company is financially aualifiec to design and construct :he Jacility to tne extent of its joint awnership interest. This conclusion is predicated upon our determination that there is r.asonaole assurance that it can raise the funds necessary to cover s

.. its 2.17391 percent snare of the estimated costs to design and construct ne 3eacroo< Station, Units 1 and 2, including related fuel cycle costs.

- Taunton Municioal Lighting Plant Commission The Taunton Municipal Lighting Plant is a municipally owned electric system supplying electricity to the Town of Taunton, Massachusetts.

Its operating revenues for the fiscal year ending Decemoer 31, 1979, were 529.7 million and its net utility plant was $30.7 million.

The Taunton Municipal Lighting ?lant Commission plans to finance its 0.43479 cercent joint-ownership interest in the Seabrook Station, Units 1 and 2, solely througn utili:ation of internally generated funds.

In this resoect, our review of its projected levels of internal cash generation to finance its construction expenditures during this facility's construction indicata tnat they are not unreasonacle in lignt of its ecent experience.

The Taunton Municipal Lighting Plant Commission's rates are established and changed under Massachusetts laws and require the municipality to charge ratas that are not less than the cost of operations.

Since its rates are not sub-ject to the approval of any regulatory agency, it has unilateral authority to set reasonable rates. This acts as a mechanism for this acplicant to maintain I

its financial integrity, thereby allowing it to internally generate sufficient fun'.

to cover its projected construction excenditures curing the construc-ion of Seabrook.

l Based on the acove information, we conclude that there is a reasonable assur-ance that the Taunton Municipal Lignting Plant Commission can raise the funds y

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Accorcingly, ne nave determined that the Taunten Municipal Lighting Plant Connission is financially qualified to cesign and construct the Seabrook Station, Units 1 and 2, to the extent of its joint-ownership intarest.

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- New Hamoshire Electric Cocoerative, Inc.

New Hampshire Electric Cooperative, Inc. is a rural electric distribution coooerative operating as a New Hampshire corporation.

Its memoer-customers are principally in New Hampshire with a smaller number in Vermont.

Its coerating revenues for 1979 were $19.1 million and its utility plant was S44.5 million.

New Hamosnire Electric Cooperative, Inc. plans to finance its 2.17391 owner-snip share in tne Seacrook Station, Units 1 and 2, from the proceeds of a loan guaranteed by the Rural Electrification Acministration.

The Cooperative has been an active, successful borrower from REA for 40 years.

It had $36.3 million of REA long-term deot outstanding at December 31, 1979.

Subsecuent to the issuance of this amencment, we require New Hampsnire Electric Cooperative, Inc.

to inform the NRC staff of any action by the REA on its pending loan request including, but not limited to, submittal of copies of the executed REA loan commitment notice.

Based upon the preceding information, we conclude that New Hamoshire Electric Cooperative, Inc. is financially qualified to design and construct the Seacrook Station, Units 1 anc 2, to the extent of its joint-ownersnip interest.

This conclusion is based on our determination that the New Hamoshire Electric Coccerative, Inc. has demonstrated a reasonaole assurance that it can raise the necessary funcs to cover its 2.17391 percent snare of the estimated costs to design and construct the Seacrook Station, Units 1 and 2, including related fuel cycle costs.

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3, w Conclusien Based u on the preceding analyses, we concluce that Central Maine Power Cemeany, Fitenburg Gas and Electric Light Cc=cany, Montauo Electric Ccmoany, Town of Hudson Lignt and ?cwer Oe:artment, Massachusetts Municical Wholesale Electric Ccm:any, 3angor Hycro-Electric Ccmcany, and Taunton Municical Lighting Plant Commission are financially cualified to increase their rescective joint-cwnersnio interests in the Seacrook Station, Units 1 and 2, as recuested.

Likewise,.e conclude that New Ham:snire Electric Coccerative, Inc. is financially qualifiec to assume its rescective cwnersnip interest in :ne 3eacrock Station, Units 1 and 2, as proposed in the requested amendment to the c:nstruction cermits. This conclusion is predicatec u:cn our cetermination tnat eaca of these apolicants has cemonstrated a reascnacle assurance of cotaining the funds necessary to su; port its rescective snare of tne costs necessary in the design and c:nstruction of the SeacrooK Station, Units 1 arc 2, incluaing nuclear fuel inventary for the first core.

Cur conclusion that the a ove acplicants are financially qualifiec to desiga ana construct the Seabrook Station, Units 1 and 2, to the extent of their rescective ownersnio interests is cased u on an assessment snat their financing

rojections constitute reasonacle financing plans.

de co not c:nsicer tnese projections to be a forecast of wnat will necessarily occur.

They need only cemonstrate one possible way by wnich the plannec construe fon excencitures, including tnose resulting from construction of tne sucject facility, mignt reasona ly be financed. We realistically ex:ect nat the financing plans will

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change over time to accommodate changing al industry practices and tne The proposed financing is in accord with generptible to preci t

assumptions being used, although not suscet one might expect u d

aosolute criteria, are in line with wna terized as reasonable, Since the financing projections can be cnarac fied.

ble assurance standard has been satis conditions.

we conclude that the reasona Submittal to the NRC staff ire:

Subsequent to issuance of the amencment we requRural El of (1) information on any action by theInc. pending loan reouest, including, i

on the New Hampsnire Electric Cooperat ve,t d Rural Electrificat tion but not limited to, copies of the execu ecuted joint-ownership agreement loan commit.:ent notice; (2) copies of the exef the orders aco among the participants; anc (3) copies o gencies.

of ownership issued by State regulatory a