ML20079E058

Confirms Telcon of 780106 at Which Time Info Re Sale of Portion of Facility Was Requested.At Time of Closing,No Written Waivers Per Section 9.9 Were Executed by Any Party

ML20079E058
Person / Time
Site:	Fermi, Midland
Issue date:	01/11/1978
From:	Marquardt P DETROIT EDISON CO.
To:	Lieberman J NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD)
Shared Package
ML20079E051	List: ML20079E056 ML20079E058
References
NUDOCS 7906110357
Download: ML20079E058 (7)

Text

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,o..,.. chnsson er c. Neen n James u. $cnn.ider UO i! ..li s.n.., Ano,n., s Jaca u. Am.u. January 11, 1978 Thom.s P. singmen Jr. D.ved L C3.,a uorg.rel A. Coughlin J mes J. Des..loff John it. F:ynn uses.M c. ca.astone Jon . e.o.ts James Lieberman, Esq. [,, c fi,",,"," ** .,.2 of fice of Executive legal Director normond o.sturer wun dT*f',,,,,,,, U',',d Nuclear Regulatory Commission m A w cn.r. u ~ ~ Washington, DC 20555 si.n anom.,s

Dear Mr. Lieberman:

This letter will confirm our telephone conversation of January 6 at which time you requested certain informa-tion concerning the sale of a portion of the Enrico Fermi Atomic Power Plant Unit 2 to the Northern Michigan Electric Cooperative and the Wolverine Electric Coopera- .tive. Specifically, this will advise you that at the time of closing no written waivers pursuant to Section 9.9 were executed by any party. Further, it is the position of the Company that no written waivers were required and the provisions of Section 9.9.1 were satis-fled. It is the Company's opinion that the agreement provides that if any long-term financing or any extension of the interim financing arrangements are not timely obtained or if any required license or z.pproval is not obtained prior to commercial operation by the cooperatives from the NRC, the Company is obligated to repurchase the cooperatives' interests in the facility at the cost of their investment. I hope the above information is sufficient for your purposes. However, if you have any additional questions, please feel free to contact me. very truly yours, 7 q. Adf-Peter A. Marquardt i PAM/kla ,p."- s /j Xk 06 Il 0 30

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'Juued October 12, tyT7 - /l- .- l 4,000,000 Shares 1 i The. Detroit Edison Company n

. I COMMON S'ZOCK

], k ($50 par value) Ii . # l. 2~ The Company's outstanding Common Stock la listed on the New York Stock Exchange. ~ s I h THESE SECURMES HAVE NOT bEEN APPROVED GR DISAPPROVED BY THE SECURmE3 j AND EXCHANGE Co.\\tAtl5510N NOR HAS THE C0hthtlS$10N PASSED UPON THE 4 ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPREJENTATION 1 TO THE CONTRARY 15 A CRL\\ FINAL OFFESSE. E s Ii ~ 1 Price to Public-The pubilo ofering pries per share of the shares ofered hereby will be a Itxed 'y pdes determined by agreement among.1torgan Stanley { Co. Incorporated, E. F. Hutton f

• g Company ino. and the Company. Such public ofering price wat not be higkr than the reported y

last sais (regular way) or tU reported last asked pries of ik Common Stock of tM Company on the New York Stock Exchangs immedlately pdor to such determination, whichever is higher, J j plus S.30. The reported last sale pdes on October 11,1977 on the New York Stock Exchangs and } on ik Composite Taps was $16%. y' Underwriting Discounts and Commissions-The underwnting discounts and commisklons will be an amount per share determined by agreement among.1torgan Stanley & Co. incorporated, E. F. f Hutton f Company Inc. and the Company, not in exceu of To of the public ofering p-ies. l The Company has agreed to indsmnify the Underwriters against certain liabUities, including LlabattLu undar ths Secuntiu.tet of 1933. a 4, g Proceeds so she Company-The purchase pries per share to be paid by sk several Underwriters to 3 the Company wu! be an amount equal to the public cfaring price less ik undsrwriting dLsecunts ) i and commissions. Expensu payable by sk Company are uttmated at $223,000. s =, 5 s a ( The shares of Common Stock are ofered, subject to prior sais, wkn, as and if accepted by the i 1 UnderwHters, and subject to approval of their valldity by Whits f Cau, counsel for th E Underwriters, by I, son S. Cohan, Esq., Vice Pruident and General Counut of the Company, and 1 by Sullivan f Cromwell, special counsel for the Company. It is expected that delivery of the sharu was be made on or about November 3,1977 at ska often of.1(organ Stanley y Co. y y x incorporated,35 Water Street, New York, X. Y. against payment therefor in New York funds. 1 j I [ MORGAN STANLEY & CO. E. F. HUTTON & COMPANYINC. g

8 Jacorporated 3

i Cetober,1977 i -.e

A,* ". S CONSTRUCTION PROCRAM AND FINANCING Construction In an efon to conserve cash during a period of severe cash shonage the Company announced several j signi5 cant curtailments and deferr.Is ofits construedon program in 1974 and canecited proposed nucjest Unit No. 3 at its Enrico Fermi Plant in 1975. While these decisions resulted in reduced construcuen j e.xpenditures from 1974 through 1976 and some penalties and other cosu related to the cutbacks. the prinopal Anancsal effect wi!! be increased future construedon capenditures due to construction start-up costs and the efecss of cost esentadons and infladon. The Company's Anancial condidon has recently improved principall' as a result of rate increases, y favorable coun deosions permirdng. subject to possible refund, the co!!eedon of additional revenues and the recovery ofdeferred fuel costs, authorizadon by the Michigan Public Service Commission ("MPSC") of a purchased and net interchange power clause, increased idlowarthour iales, pardeularly to industrial @, ] customers, and the sale of a 20% undivided ownership interest in proposed'Enrico Fermi Unit No. 2 (see " Safe to Cooperatives"). As a resu!: of these favorable developmenu, the Company announced on F bruary 8.1977 resumpdon of general construedon ofits proposed Greenwood Unit No. I and Ertrico Fe'rmi Unit No. 2 and engineering for its proposed Bc!!c River Plant. Completion of these urdts as shown in the table below is expected to increase the current I.563 megawatts'of system summer net rated capability (see " Business-Electric Generating Plant and Interconnections") by approximately 3.000 megawatu by 198a. and ifcoruttueden is resumed and completed on the proposed Greenwood U ut Nos. 2 and 3. by an addidonal 2.400 merswatts upon their completion. The Company currendy plans no retiremenu of generadng units through the 1980's. The ability of the Company to complete iu major generating units depends upon the ayallability of substantial amounts of external funds and receipt of signiEcant addisonal rate increases from the MPSC. See " Financing"," Management's Discuuion and Analysis of the Consolidated Statement ofIncome"." Rates" and the " Consolidated Statement of Changes in Financial Posidon". Based oc revised lord growth forecasts and present capacity, the Company esdmates that its summer peak reserve generating capability will be approximately 15% in 1978 and 20% in 1979 if Greenwood Urut No.1 is completed and placed in operation as presently scheduled. The following table summarizes actual expenditures through June 30. 1977 and total esumated cJtpenditures (excluding nuclear fuel but including the allowance for funds used during construcuen ("AFDC")) for the major generating units that the Company proposes to construct. The Agures for E.arico Fermi 1: nit No. 2 reflect 100. ofits capacity and expenditures, including the 20'b interest of the i cooperadves (see " Sale to Cooperadves"). Es pendheres Assusi E.ssimsted Estlaned Throwt h Arter Lu m eed j fdom. mal Nes June 30. June 30 Eusassed Cea.ptn.on l Pises Cs onbilirt ts77 1977 Teset. Does l tMW) (Million4 Greenwood Uni No.1 (oil) 800 3177 $ 146 5 323 1979 l Ennco Fermi Unit No. 2 ( nuclear) 1.100 462 452 914 1930 Belle River Urut Nos. I and 2 (coal) 675 ca. 7 1.008' l.015' 1983 1981 Greenwood Unit Nos. 2 and 3 (nuclear) I.200 ca. 45 3.155' 3.200' 198719R9

• These esdtnates, which are preliminary and subject to condnuing review, have recently been ancreased over prior estimates primarily as a result ofinftstion, delays in construeden, and, in the case of Greenwood, costs related to additional nuclear regulatory requirements.

The Company's revised 1977 cortstruction budget (including AFDC) is esdmated to require expenditures of 5430 mi!! ion including expenditures for construction at Greenwood Unit No. I and the Company's pordon of Enrico Fermi Unit No. 2: conversion of censin generating units from high sulphur to low sulphur coal: engineering, coal. handling facilitics and site preparadon work for the Be!!c Raver g ..:t

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. y_ . flant: transmission and distribudon facilides: and environmental control and proceedon facilides. Construedon expenditures were approximately 5400 million in 1974, 5241 million in 1975,5297 mi!! ion in, i 1976 and 5149 million for the six months ended June 30,1977. Construeden projecuans for 1978 and later years willinvolve increasing annual czpenditures signincantly in excess of the 5430 million budgeted for 1977. Assuming present esdmates of dming and expenditures, the Company's Ave year construedon projections for 1977 through 1981 contemplates capenditures approximating 53 billion. Construedon plans, schedules and budgeu, both for the units set forth in the table on page 4 and in respect of any addidonal generating capacity requirements, are subject to condnuing review and are j expected to be revised from time to time in light ofload forecasts, the availability and costs oflabor and materials, licensing and other regulatory delays. the necessity or advisability of converung units to diferent fuel, changing environmental standards, availabiliry of external Anancing at reasonable costs and the Company's Enancial condidon (including cuh flow, earnings and dming and adequacy of rate increases). ]~- To the extent construeden activity la not completed, or modincadons in construcdon plans involving the cancellation of one or more proposed units are made, related construedon czpenditures, which depending on the circumstancea could be substantial, might be charged against operations, and the reliability of i service for future requiremenu may be adversely afected. See Note 15 of, Notes to Consolidated Financial Statements concerning the cancelladon of proposed Enrico Fermi Urd No. 3. { ] I Sale to Cooperatives On February 8,1977, the Company sold a 20% undivided ownenhip interest in its Ennco Fermi Unit No. 2 to Northern Michigan Electric Cooperadve,Inc. and Wolverine Electric Cooperadve, Incorporated. l The cooperatives made an inidal payment of 587.4 mi!! ion to the Company and are obligated to make progress payments of 20% of subsequent construeden expenditures. Total payments of approximatesy 594 ~ mi!! ion have been received to date from the cooperatives. The agreements reladng to that sale provide, among other things, that the Company ws!l czercise control'over construeden and operation of the facility, the pardes will share electriory generated in propordon to their ownership interests and the Company will nave certain obligadons to provide replacement power to the cooperadves when the Unit is out of service. De cooperatives have Interim neancing arrangemenu, which have been extended until Februtry 7, 1978, to cover their contractual obligadens. It is expected that long-term Anancing from the Feders! Financing Dank, guaranteed by the Rural Elecm6 cation Administradon, will be obtained following amendment by the Nuclear Regulatory Comminion ("NRC") of the construeden penrut relating to Enrico Fermi Unit No. 2 to include the cooperatives. On September 22,1977, the NRC pubEshed notice in the Federal Register of" Proposed Issuance of Amendment to Construction Pernut" aEcrding interested pardes an opportunity to intervene in proceedings conducted to consider such amendment. While hearings are expected to commence before the end of 1977, Anal NRC aedon is not expected prior to the capirauen of present interim Saancing arrangements. If long term 6nancing and any catension of the intenm Anancing arrangements are not timely obtained orif any required license or approvalis nos obtained prior to commercial opera 6cn by the cooperadves from the NRC, the Company is obligated to repurchase the cooperadves' snierests in the faci:iry at the cost of their investment. On August 5,1977, the MPSC approved the cooperadves* long-term Anancing arrangements. On July 29,1977, a suit was Eled in the l U.S. District Court for the Western District of Michigan by severalindividuals in which the Company, the cooperadves and the NRC have been named as defendanta. The plaindfs have requested that the District Court enjoin the sale and declare it nu!! and void. De Company and the cooperadves Eled motions to dismiss the suit on August 29, 1977, and the NRC moved to distniss the suit on September 16, 1977 Several of the plaindEs were intervenors in the hearing before the MPSC which considered the cooperatives' Ansacing arrangements. De Company espects that the cooperadves will be ab!c to arrange long term anancing, but intends to proceed with the construeden of Enrico Fermi Unit No. 2 even if it becomes obligated to repurchase the cooperadves' interests. The Company is obligated promptly to complete construeden of Enrico Fermi Unit No. 2. If the Company delays construenon of Ennco Fermi Urat No. 2 because more economical sources of power are available or because the Company decides that it d es not then require the additional capacity. it would bc obligated to supply each cooperadve with its endtlement of electncity otherwise espected to have been 5 i

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of said operating license, 8 a t wisich t a=e. all righ t. title and interest in said r e a l p t =;ce t ty created by this conveyance shall autcmatically retert to CD;3C:3 L f* i $. ].. *. Its successors and assigns. the para h

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