ML20154D703
| ML20154D703 | |
| Person / Time | |
|---|---|
| Site: | Westinghouse |
| Issue date: | 09/28/1998 |
| From: | Briskman L CBS, INC./CBS NEWS |
| To: | |
| Shared Package | |
| ML20154D694 | List: |
| References | |
| NUDOCS 9810070303 | |
| Download: ML20154D703 (56) | |
Text
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APPLICATION FOR TRANSFERS AND AMEND 31ENTS OF SIATERIALS LICENSES September 28,1998 L INTRODUCTION This application for transfers and amendments of certain materials licenses, quality assurance program approvals and certificates of compliance arises from the sale of the assets and operations (with certain exceptions) of the nuclear and government services businesses of CBS Corporation (" CBS") to a consortium consisting of Morrison Knudsen Corporation (" MK") and BNFL USA Group, Inc. ("BNFL USA") (the " Purchasers").
CBS, formerly known as Westinghouca Electric Corpolation,l' is the holder of licenses, quality assurance program approvals and certificates of compliance issued by the Nuclear Regulatory Commission ("NRC")
pursuant to 10 C.F.R. Parts 30,40,70,71 and 72 (" licenses, approvals and certificates").F CBS requests that the NRC approve the transfers of the licenses, approvals and certificates listed on Exhibit "A" to Westinghouse Electric Company, LLC, a MK/BNFL Company, ("WELCO") a new limited liability company to be formed, and that the NRC approve the corresponding amendments to those licenses, approvals and certificates necessary to effectuate such transfers.
The proposed sale transaction requires the approval of other regulatory agencies in l'
Westinghouse Electric Corporation changed its name to CBS Corporation on December 1,1997.
F The change in the name of the licensee has already been reflected in the various licenses, approvals and certificates. On certain licenses, approvals and certificates, the name of the licensee reads " Westinghouse Electric Company, a division of CBS Corporation." On certain other licenses, approvals and certificates, the name of the licensee reads "CBS Corporation acting through its Westinghouse Electric Company division." On still other licenses, approvals and certificates the name of the licensee reads " Westinghouse Electric Corporation."
WELC04alumens App @ man 9810070303 980928 PDR ADOCK 07001151 PDR C
o addition to the NRC. Closing of the sale transaction cannot take pla:e until receipt of NRC and
, other regulatory approvals. Therefore, CBS requests the NRC to approve the transfers and amendments to be effective as of the Closing Date of the sale transaction. As it is currently anticipated that the Closing Date will be on or about December 1,1998, CBS requests that the NRC issue its approval prior to that date. CBS will keep the NRC informed of progress in obtaining other regulatory approvals and the timetable established for the Closing Date.
From and after the Closing Date, as discussed herein, WELCO will be technically and financially qualified to be the holder of the licenses, approvals, and certificates that are the subject of this Application for transfers and amendments and will fulfill the responsibilities of such a holder. As of the Closing Date, current CBS employees responsible for these licensed materials and activities that are the subject of this application, as currently described in the dockets for sw,h licenses, approvals and certificates, will become WELCO employees and will continue to be responsible for such activities after the transfers to WELCO. The transfers of these licensed activities will not affect the operational structure described in the licenses. There will be no changes in operating organizations, locations, facilities, equipment or procedures associated with the licensed activities, and there will be no changes in the use, possession, locations or storage oflicensed materials as a result of the sale transaction. Licensed activities will continue in their current form without interruption resulting from the transfers.
II. THE TRANSACTION The Purchasers will acquire (with certain exceptions described below) the nuclear and government services businesses of CBS. Included in the businesses and assets to be acquired are those operations currently located within the Energy Systems Business Unit ("ESBU") of CBS, the Government and Environmental Services Company (" Government Operations") of CBS and WILCOColwntpa App (Fmal) j
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the on-going nuclear-related research, development, and other operations conducted at the CBS
. Science and Technology Center (" STC").
MK is an international engineering and construction company, incorporated under the laws of Ohio. MK has annual revenues of over $1.6 billion, an order backlog of $3.7 billion and net assets of $343 million as of November 30, 1997. MK is listed on the New York Stock i
Exchange with an equity market value of over $600 million and employs 8,500 people. MK provides a wide range of engineering, construction and construction management services to j
customers worldwide in the nuclear remediation, heavy civil, industrial, power, mining and environmental maintenance and services markets. MK also provides scientific, engineering, construction and maintenance services to the U.S. Government, including the Department of Energy (" DOE"), which is its largest customer, and the Department of Defense ("DOD").
British Nuclear Fuels plc ("BNFL") is a global leader in the nuclear industry, operating across the entire nuclear fuel cycle. It also is a substantial generator of nuclear power in the United Kingdom ("UK"). BNFL, which is wholly owned by the UK Government, has annual revenues of approximately $2.5 billion, with an order backlog of around $20 billion. In the United States, BNFL operates through BNFL USA, its wholly owned U.S. subsidiary. BNFL USA is incorporated under the laws of Delaware. BNFL USA, in turn, operates through two wholly owned subsidiaries, BNFL Inc., and BNFL Nuclear Services Inc. ("BNFL Nuclear Services"). Each of these subsidiaries is incorporated under the laws of Delaware. BNFL Inc.
has approximately 800 employees (95 percent of whom are U.S. citizens) and an order backlog of $2.5 billion. BNFL Nuclear Services has been formed in connection with the sale transaction to own the BNFL interest in WELCO. BNFL Inc. has worked closely with Goventment Operations at a number of DOE facilities, including Savannah River (currently managed by wtLCoConwen App (Fmal)
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. Westinghouse Savannah River Company). BNFL and BNFL Inc. have a substantial relationship r
. with ESBU with respect to nuclear fuel manufacturing and other nuclear activities.
The Purchasers will form two new companics to operate the businesses and assets to be transferred as part of the sale transaction and to conduct related licensed activities. The first company, WELCO, will have transferred to it and will operate (with certain exceptionsf) the CBS commercial nuclear businesses now operated by ESBU. In addition, the ESBU-related operations at STC will be leased and operated by WELCO. It currently is contemplated that the second company, to be named Westinghouse. Government and Environmental Services LLC, a Delaware limited liability company ("GESCO"), will have transferred to it and will operate the CBS government service business currently operated by Government Operations and engaged in managing facilities under contract with the DOE and DOD. GESCO also will operate the CBS Electro-Mechanical Division ("EMD"), located in Cheswick, PA, and engaged in the manufacture and repair of reactor coolant pumps and related equipment for the U.S. Navy and 4
l' Excluded from the assets and operations to be transferred to WELCO as part of the sale transaction are those nuclear related assets and operations involving facilities currently owned by CBS that are inactive and are in the process of being decontaminated and decommissioned. CBS will continue to hold the licenses related to these operations and facilities and to be responsible for decontamination and decommissioning of such inactive operations. (The facilities and the associated licenses to be retained by CBS are:
License No. TR-2 associated with the Westinghouse Test Reactor, License No. 37-00497-15 for the Forest Hills Site and License No. 040-08976 associated with the former Westinghouse Lamp Manufacturing Facility in Bloomfield, NJ.) CBS is filing requests for amendment of tnese licenses with the NRC, as appropriate, to reflect its retention of these licenses. In addition, in accordance with the Asset Purchase Agreement (" APA")
reflecting the sale transaction, CBS will remain financially responsible for decontamination and decommissioning of certain aspects of other facilities whose licenses are the subject of a related application for transfers and amendments of licenses, approvals and certificates that is being filed concurrently with this Application.
WELCO Cohmees App geen
_3 commercial nuclear facilities.f' Upon the approval of the NRC (or applicable Agreement State) of the requests set forth in this and related applications, each of WELCO and GESCO also will i
have transferred to it the licenses, approvals and certificates associated with the businesses and operations to be transferred to it.
It currently is contemplated that MK will have a 60% ownership interest and that BNFL Nuclear Services will have a 40% ownership interest in both WELCO and GESCO. In addition 4
to the ownership interests of the Purchasers in the new companies to be formed, MK and BNFL also have agreed on an allocation of their respective economic interests in WELCO that differs t
from their equity ownership percentages.1' The contemplated structure of the companies and the transaction is depicted in a chart attached hereto as Appendix 1.
III. DESCRIPTION OF BUSINESSES TO BE TRANSFERRED The CBS businesses to be transferred supply services, fuel and equipment for the nuclear energy market, and management and related operating services at govemment-owned facilities.
ESBU.
The Energy Systems Business Unit of CBS, with approximately 6,000 employees, provides productr, and services to the nuclear utility industry, including nuclear fuel, l'
The organizational str acture of this aspect of the sale transaction is subject to continuing discussions with and teview by other United States government agencies, including the DOE and the DOD.
If these discussions result in any change to the currently contemplated structure, CBS promptly will conform this Application accordingly.
I' In terms of owneuhip, it is contemplated that MK will have a 60% equity interest and BNFL Nuclex Services will have a 40% equity interest in WELCO.
It also is conte..A.ica that the economic interest of MK in WELCO will be 6% and the economic interest of BNFL Nuclear Services in WELCO will be 94%. There is a possibility that in the future the equity ownership interest of BNFL Nuclear Services in WELCO may increase to 100%. The NRC will be informed of any such change and necessary approvals will be obtained from the NRC. With respect to GESCO, it currently is contemplated that MK will have both a 60% equity and 60% economic interest, and BNFL Nuclear Services will have a 40% equity and 40% economic interest.
WELCO Columbia App (Famen
operating and maintenance services, and repair and replacement parts and components. ESBU l
di
,a so es gns, ub ilds, upgrades, modemizes and decommissions nuclear power plants. In addition.
ESBU also provides marketing, design, technical, regulatory and licensing services for the CBS spent fuel cask business.
Govemment Ooerations.
CBS, through various divisions and subsidiaries of its Govemment Operations business, with approximately 17,000 employees, manages the operation of nuc' ear-related facilities for the DOE, including, among others, (i) the Savannah River Site in i
South Carolina (since 1989), (ii) the West Valley Demonstration Project in West Valley, New York (since 1971) and (iii) the Waste Isolation Pilot Project near Carlsbad, New Mexico (since 1985). The principal mission of these facilities is the temediation, waste management and safe
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management of the U.S. nuclear materials inventory. Government Operations also supports the l
U.S. Navy nuclear propulsion program, including through EMD. Govemment Operations also is currently managing the construction, operation and eventual decommissioning of the Anniston l
Chemical Agent Disposal Facility near Anniston, Alabama for the DOD and is involved in the manufacture of the new CBS multi-purpose, spent commercial nuclear fuel canister.
Science and Technolony Center (STC). Certain research and development functions I
located at STC primarily related to operations of the commercial nuclear businesses of CBS also will be transferred to WELCO as part of the sales transaction. WELCO will lease from CBS and operate the assets associated with these functions.
IV. GOVERNANCE The majority of the members of the Boards of Directors of WELCO and GESCO will be i
j U.S. citizens. There will be five directors of WELCO, three selected by MK (two, including the current ESBU president, to be chosen from a list of U.S. citizens who are recognized industrial f
wtLCO<aiwntes Appdinen
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leaders recommended by BNFL USA and who are not employees of the BNFL group of
. companies) and two to be chosen by BNFL USA. The current Chief Executive Officer ("CEO")
of BNFL ple will serve as the Chairman of the WELCO Board of Directors.
GESCO also will have five directors, four of whom will be U.S. citizens. Three directors will be selected by MK. BNFL will nominate one director from BNFL plc and one from BNFL USA. The current CEO of MK, a U.S. citizen, will serve as the Chairman of the GESCO Board of Directors. There will be no common directors or principal executive officers between WELCO and GESCO.
1 The current president of ESBU, who is a U.S. citizen, will become President and CEO of WELCO. The current president of Government Services, who also is a U.S. citizen, will become President of GESCO. BNFL Nuclear Services will provide overall management of WELCO pursuant to a long-term management contract, which will become effective as of the Closing Date. The activities under the management contract will be implemented in accordance with business and financial plans approved by the WELCO Board.
V. INFORMATION REQUIRED FOR TRANSFER OF LICENSES, APPROVALS AND CERTIFICATES Set forth below is information in response to NRC regulations and Information Notice 89-25. Rev.1, dated December 7,1994, to support the transfers of the licenses, approvals, and certificates requested by this Application.
A.
Name of Transferee:
Westinghouse Electric Company, LLC, a MK/BNFL Company ("WELCO")
WELCO<elumen Appdent)
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l:
B.
The Address Will Be:
l Westinghouse Electric Company, LLC.
u P.O. Box 355 Pittsburgh, PA 15230-0355 j
C.
Organization and Management The names, addresses and country of citizenship of the complete list of directors and L
i officers of WELCO will be supplied later.
D.
Information provided pursuant to NRC Information Notice 89-25, Rev. 1, Attachment IF 1.
The new name ofthe licensed organization Westinghouse Electric Company, LLC, a MK/BNFL Company ("WELCO")
i 2.
~ The new licensee contact and telephone number (s) to facilitate communications.
The continuing contact for the licenses will be:
l Mr. A. Joseph Nardi, License Administrator 3
Regulatory Affairs Westinghouse Electric Company, LLC Telephone:
(412) 374-4652 Fax:
(412) 374-3357 E-Mail:
nardiaj@ westinghouse.com 3.
Any changes in personnel having control of licensed activities (e.g.
officers of a corporation) and any changes in personnel named in the license such as radiation safety opicer, authorized users, or any other persons identiped in previous license applications as responsible for radiation safety or use oflicensed material. The licensee should include information concerning the qualspcations, training, and responsibilities ofnew individuals.
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There will be no changes in personnel having control of licensed activities. The principal officers and the Board of Directors of WELCO will take the place of the current F
Information requested in the Information Notice is quoted in italics.
t WELC04alumebes App (Fuen
principal officers and Board of Directors of CBS. As the result of the transaction, there will be 1
.no changes in personnel named as responsible for radiation safety or use oflicensed material in l
the licenses being transferred herein. There is no issue of ownership, control or domination by-an alien, foreign corporation or foreign government under the Atomic Energy Act, inasmuch as i
no license for a production or utilization facility is involved. In addition, BNFL will not have access to either Restricted Data and/or other classified information or sensitive nuclear technology by virtue ofits interest as a purchaser. Moreover, the United Kingdom is a signatory l
to the Nuclear Non-Proliferation Treaty and has an agreement for cooperation with the United
' States. Thus, this transaction will not have an adverse effect on the common defense and security of the United States.
4.
An indication of whether the transferor will remain in non-licensed business without the license.
CBS will remain in businesses that are not related to NRC licensed activities after the Closing Date, in addition to continuing with certain nuclear activities discussed in footnote 3, above.
5.
A complete, clear description ofthe transaction, including any transfer of stock or assets, mergers, etc., so that legal counsel is able, when necessary to differentiate between name changes and changes ofownership.
(See discussion above, Su ah2 the audited financial statements of ESBU attached as Exhibit B.)
6.
A complete description of any planned changes in organi:ation, location facility, equipment, orprocedures (i.e. changes in operating or emergency procedures).
l There will be no changes in the operational organization, location, facilities, il' l
eqmpment or procedures as a result of the transfer.
l WF.LCMelunha App (Fnen
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A detailed description of any changes in the use, possession. location or storage ofthe licensed material.
There will be no changes in the use, possession, location or storage of the licensed material as a result of the transfer.
8.
Any changes in organi:ation, location, facilities, equipment, procedures or personnel that would require a license amendment even without the change ofownership.
See response to numbers 3 and 6 above.
9.
An indication of whether all surveillance items and records (e.g.,
calibrations, leak tests, surveys, inventories, and accountability requirements) will be current at the time of transfer. A description of the status of all surveillance requirements and records shouldalso beprovided.
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All licensed activities will continue on an ongoing basis without interruption. All 4
surveillance items and records will continue to be maintained in their existing state at the time of transfer in accordance with applicable requirements.
10.
Conprmation that all records concerning the safe and effective decommissioning of thefacility pursuant to 10 CFR 30.3S(g), 40.36(f), 70.2S(g) and 72.30(d);
public dose; and waste disposal by release to sewers, incineration, radioactive material spills, and on-site burials, have been transferred to the new licensee, iflicense activities will continue at the same location, or to the NRCfar license termination.
As part of the transfer of assets, all such records will be transferred on the Closing Date. Such transfer will not involve any physical relocation of any records.
11.
A description of the status of the facility. Specifcally, the presence or absence of contamination should be documented.
If contamination is present, will decontamination occur before transfer? Ifnot, does the successor company agree to assumefull liabilityfor [ decommissioning and the costs ofdecommissioning]?
On the Closing Date, the status of the licensed facilities, including but not limited to the status of decontamination and decommissioning activities, will be identical to their status
. prior to the Closing Date. Decontamination will not occur before the transfer. From and after the Closing Date, WELCO will assume liability for decommissionhg and the costs of
%1LCO.Cohansia App #inen a
- l I-decommissioning of all the facilities being transferred to WELCO that are the subject of this
, Application.
I2.
A description ofany decontamination plans, includingfinancial assurance arrangements of the transferee, as speciped in 10 CFR 30.35, 40.36 and 70.25. This should include information about how the transferee and transferor propose to divide the transferor's assets, and responsibilityfor any cleanup needed at the time oftransfer.
From and after the Closing Date, WELCO will assume responsibility for the current status and future cleanup of all licensed facilities that are the subject of this Application and request for transfers and amendments.
WELCO will establish a financial assurance mechanism necessary to comply with the regulations specified in 10 CFR 30.35,40.36 and 70.25, for the decommissioning financial assurance requirements for which it bears responsibility. By no later than the Closing Date, WELCO (or the Purchasers on behalf of WELCO) will obtain Standby Letters of Credit and an associated Standby Trust Agreement, in the form attached as Exhibit D hereto, to establish a financial mechanism in the amount necessary to fulfill WELCO's decommissioning financial assurance responsibilities for the facilities associated with the licenses being transferred as part of this Application.
Overall, the decommissioning financial assurance to be provided by WELCO will fully comply with all NRC requirements in this area for the licenses being transferred. Copies of the actual signed instruments from WELCO (or the Purchasers on behalf of WELCO) will be transmitted to the NRC as soon as they have been executed and in time for the NRC to approve this Application and the request for transfer of the licenses effective as of the Closing Date.
13.
Confirmation that the transferee agrees to abide by all commitments and representations previously made to NRC by the transferor. These include, but are not limited to:
maintaining decommissioning records required by 10 CFR 30.35(g); implementing decontamination activities and decommissioning of the site; and completing corrective actions for open inspection items and enforcement actions WILCO.Colurate App Winan
IVith regard to contamination offacilities and equipment. the transferee should confirm, in writing, that it acceptsfidt liabilityfor the site, and should provide evidence ofadequate resources tofund decommissioning; or the transferor shouldprovide a commitment to decontaminate thefacility before change ofcontrol or ownership.
IVith regard to open inspection items. etc., the transferee should confirm.
in writing, that it accepts full responsibility for open inspection items and/or any resulting enforcement actions; or the transferee proposes alternative measures for meeting the requirements; or the transferor provides a commitment to close out all such actions with NRC before license transfer.
Exhibit E is a draft letter to the NRC, to be executed by an officer of WELCO and submitted to the NRC prior to the Closing Date, confirming that WELCO agrees to abide by all commitments and representations previously made to the NRC by CBS for all facilities, licenses, certificates and approvals being transferred by this Application. The letter also confirms that, from and after the Closing Date, WELCO will agree to accept liability for decommissioning and decontamination of such facilities and sites. Exhibit E further confirms I
that, from and after the Closing Date, WELCO will accept responsibility for open inspection items and/or resulting enforcement actions.
14.
Documentation that the transferor and transferee agree to the change in ownership or control ofthe licensed material and activity, and the conditions oftransfer; and the transferee is made aware ofall open inspection items and its responsibilityfor possible resulting enforcement actions.
CBS agrees to the change in ownership and control of the licensed material and activity reflected in Exhibit A and the conditions of the transfer. Exhibit E documents the agreement of WELCO to the change in ownership and control of the licensed material and activities and the conditions of transfer associated with the facilities being transferred. Exhibit E also documents that WELCO has been made aware of the responsibility of WELCO for possible resulting enforcement actions.
CBS Corporation will make WELCO aware of all open
- T.LCO<eluatie App &mso
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inspection items as of the Closing Date and its responsibility for possible resulting enforcement L
. actions.
L i
l 1L A commitment by the transferee to abide by all constraints, condi.ons.
l.
requirements, representations and commitments identified in the existing license. Ifnot the transferee must provide a description ofits program, to ensure compliance with the license and l'
regulations.
p As set fonh in Exhibit E, WELCO will abide by all constraints, conditions.
l requirements, representations and commitments identified in the existing licenses, approvals and i
cenifications.
l VL CONCLUSION-For the reasons stated above, CBS Corporation requests that the NRC approve the i
l transfer of the licenses, approvals and certificates listed in Exhibit A and that the NRC approve the corresponding amendments to those licenses, approvals and cenificates to change the name of the holder of such licenses, approvals and certificates from CBS Corporation to Westinghouse i
Electric Company, LLC, a MK/BNFL Company, effective as of the Closing Date referenced above. As set fonh in Exhibit E, WELCO concurs in this request.
l l
l CBS Corporation i
i 1
I By:
LMis.). Bildman Executive Vice President and General Counsel k
WELCO<olwnke Asp &mel)
l l
1 l
REVISED ORGANIZATION CIIART September 25,1998 l
i APPENDIX 1 1
I
REVISED ORGANIZATION CHART September 25,1998 MK BNFL*
MK BNFL*
1 60 %
40 %
60 %
40 %
i Westinghouse Government and West.mghouse Electric Environmental Services Company, LLC, a MK/BNFL
-r Company, LLC, a MK/BNFL Company (WELCO)
Company (GESCO)
Commercial EMD Nuclear WIPP Business West Valley
- As explained in the Application, BNFL will l
Savannah River hold its interest in WELCO and GESCo Anniston through intermediate, wholly-owned i
subsidiaries established in Delaware.
Safety Management Solutions, Inc.
APPENDIX 1
APPLICATION FOR TRANSFER AND AMENDMENT OF MATERIALS LICENSE LNDEX TO EXHIBITS EXHIBIT NO.
DESCRIPTION A
Materials License to be Transferred to Westinghouse Electric Company, LLC B
Independent Auditor's Report - Energy Systems (a division of CBS Corporation) as of December 311997 and 19%
C
[Not Used]
D Form of Financial Assurance Documents for Decommissioning 1.
Continuing Certification of Financial Assurance 2.
Standby Trust Agreement 3.
Standby Letter of Credit E
Form of Letter from Transferee to the U.S.
Nuclear Regulatory Commission Confirming Agreements to Assume Commitments, Responsibilities and Liabilities
i e
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MATERIALS LICENSE TO BE TRANSFERRED TO WESTINGHOUSE ELECTRIC COMPANY, LLC, A MK/BNFL COMPANY Columbia Commercial Fuel Fabrication Facility j
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EXHIBIT A
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EXHIBIT A f
1 NIATERIALS LICENSE TO BE TRANSFERRED TO WESTINGHOUSE ELECTRIC CONIPANY, LLC, A AIK/BNFL CONIPANY t
l TABLE OF CONTENTS FACILITY DOCKET LICENSE TYPE OF FEE I
NUMBER NUMBER LICENSE l
Columbia Commercial Fuel Fabrication Facility License Commercial Fuel Fabrication 070-01151 SNM 1107 SpecialNuclear Full Cost Facility Material l
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Summary of License Information Facility Name Westinghouse Commercial Fuel Fabrication Facility License Number: SNM-1107 Docket Number:
070-01151 Type of License:
Special Nuclear Material Facility Address: BluffRoad Columbia, SC l
Current Operating Status:
This facility is currently licensed to fabricate low enriched Uranium Fuel for the commercial nuclear power plants. This is an major active facility and there is no current facility decommissioning activity associated with this license.
4 Current Decommissioning Funding Cost Estimate:
$50,780,000 Basis for Funding Estimate:
Prepared Engineering Cost Estimate Reference for Funding Approval Letter:
Westinghouse Ltrs. dtd. 2/20/98 & 7/10/98; NRC ltr. did. 7/23/98 l
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4 INDEPENDENT AUDITOR'S REPORT ENERGY SYSTEMS (A DIVISION OF CBS CORPORATION)
AS OF DECEMBER 31,1997 AND 1996 t
EXHIBIT B
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KPMG Peat Marwick LLP One Meden Banu Center
'e'ecnone 412 3313710
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. Pitts::urgn. PA 15219 Telex 7'C6642199.PMM & CO PGH J
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l Indeoendent Auditors' Reoort ne Board of Directors CBS Corporation-1
' We have audited the accompanying balance sheet of Energy Systems (a division of CBS Corporation) as of December 31,1997 and 1996, and the related statements of income and cash flows for the years then ended.
These fmancial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards.
Rose rtandards require that we plan and perform the audit to obtain reasonable assurance about whether the fmancial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall fmancial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the fmancial statements referred to above present fairly, in all material respects, the fmancial position of Energy Systems as of December 31,1997 and 1996, and the results ofits operations and its cash flows for the years then ended in conformity with generally sc.cepe accounting principles.
I AA A c n. LLP
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January 28,1998
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PrlCe IIIIter$10 hse Report ofIndependent Accountants To the Board of Directors and Shareholders of CBS Corporation In our opinion, the accompanying consolidated balance sheet and the related j
consolidated statements ofincome and of cash flows present fairly, in all material J
respects, the financial position of Energy Systems (the Company), a division of CBS Corporation (CBS)(formerly Westinghouse Electric Corporation), at December 31, 1995, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. These fmancial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
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financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
The Company is a business unit of CBS and, as disclosed in Note 3 to the accompanying financial statements, has engaged in various transactions and relationships with other CBS entities.
We have not audited the consolidated fmancial statements of the Company for any period subsequent to December 31,1995, iv.42 O L
Price Waterhouse LLP 600 Grant Street Pittsburgh, PA 15219-2794 February 6,1998
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ENERGY SYSTEMS STATEhENT OF INCONE (tn thousands)
Year Ended December 31 1997 1996 199$
Revenues S 691.998
$ 832,146
$ 995.367 Cost of goods sold (note 3)
(620,980)
(688,095)
(768,705)
Restructunng, liugation and other matters (note 15)
(11,077)
(458,598)
(309,677)
Marketing, admimstration and general expenses (note 3)
(129,078)
(138,606)
(162,125)
' Operating loss (69.137)
(453,153)
(245,140)
Other income and expenses, net (note 14) 1,891 (343)
(3,355)
Interest expense (14,163)
(4,7%)
(5,446)
Loss before income taxes and minority interest j
in income of consolidated subsidianes (81,409)
(458,292)
(253,94!)
income tax benefit (note 5) 28,904 177,960 96,884 Minonty interest in loss (income) of consolidated subsidiaries 76 (654)
(3,441)
Net loss 5 ($2,429)
$ (280,986)
$ (160,498)
The Notas to the Financial Si-are an inseyal pen af dness neannel sasemissam I
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ENERGY SYSTEMS BALANCE SHEET
,enu==re At Deccabar 31 1997 t996 l
ASSETSf Cash and cash equivalents S
8,738 18,875 Customer receivables, net of allowance for losses of $119 in 1997 and $753 in 1996 (note 6) i18,939 167,924 i
Inventories (note 7) 32,757 61,808 Costs and estimated earmngs over billings on uncompleted contracts (note 7) 75,112 90,406 Deferred income taxes (note 5) 110,283 122,94i Prepaid and other current assets (note 3) 10,667 9,563 Total current assets 356,496 471,517 Plant and equipment, net (note 8) 211,985 213,001 Intangible and other noncurrent assets (note 9) 340,541 438,706 Total assets 5 909,022
$ 1,123,224 LIABILITIES AND INVESTED EQUITY (DEFICIT):
Accounts payable 73,863 80,303 Billings over costs and estunated earmngs on uncompleted contracts (note 7) 66,202 81,456 Other current liabilities (notes 3 and 10) 230,322 291,690 Total current liabilities 370,387 453,449 Employee beneat obliganons(note 4) 184,158 220,913 Other noncurrent habihties (note 10) 663,015 768,239 Totalliabilities 1,217,560 1,442,601 Commitments and contingencies (notes 12 and 13)
Minority interest in equity of consolidated subsuhanes 843 72 Invested equity (de8 cit)(nots !1):
Minimum pennon liability a4;ustment (noes 4)
> (44,135)
(50,739)
Cumulative foreign cuntacy tranal=*iaa a(p*maata (2,149)
(1,959)
Invested equity (de6 cit)
(263,097)
(266,751)
Total dancit (309,381)
(319,449)
Totalliabilities and deSat
$ 909,022 5 1,123,224
3 3.
ENERGY SYSTEMS STATEMENT OF CASH FLOWS (e thousmis)
Yeat Ended December 31 1997 gg ggg3
. Cash flows from operating actiwues:
Net loss 3 ($2,429)
$ (280,986)
$ (160,498)
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
Depreciation and amortization 38,169 38,980 40,616 (Gains) losses on asset dispositions (2,800) 66,484 1,426 Changes in assets and liabilities, net of effects of -
business acquisition and divestitures:
- Customer receivables, net 35,657 35,374 (23,363)
Inventories 22.051 36,796 18,867 Progress payments net of costs on uncompleted contracts 3,039 (38,411)
(75,761)
Accounts payable (13,040)
(11,190)
(10,865)
Product warranty 17,926 (708)
(2,858)
Pension liability (10,004) 18,271 (5,330)
Deferred income taxes 77,433 (120,244)
(109,439)
Settlements (116.331) 177,790 305,035 Environmentalliabilities (16,070) 43,649 (628)
Accrued restructuring costs (29,902) 30,166 (10,490)
Liability for asset dispositions (45,000)
(9,802)
Other assets and liabilities 40,502 39,903 23,054 Cash provided (used) by operating activities (50,799) 26,072 (10,224)
Cash Dows from investing activities:
(18,000)
}
Business acquisitica Business divestitures 8,800 Capital expenditures (17,885)
(27,509) 0 0,793)
Cash used by investag activities (9,085)
(27,509)
(48,793)
Cash flows f! rom fla ia: activities:
Net increase (reduction) in short-term debt (1,736) 3,879 (2,807) -
(Disbursements to) receipts boat parent company, net of direct charges and allocations 51,483 (153) 38,891 Cash provided by financing actmties 49,747 3,726 36,084 Increase (decrease) in cash and cash equivalents (10,137) 2,289 (22,933)
Cash and cash equivalents at Waa'af of period 18,875 16,586 39,519 Cash and cash equivalents at end of period 8,738
$ 18,875
$ 16,586 Supplemental dia la.ms of cash flow information:
Interest paid
$ 14,483 4,634 5
5.387
- n. so
- m. r w s==== = = in.,.i p.a w e n-.a==.-n 4 i.d d. 4==,=== d.=== =
1 4
ENERGY SYSTEMS NOTES TO THE FINANCIAL STATEMENTS NOTE 1: DESCRIPTION OF BUSINESS Energy Systems (the Company), a dmsion of CBS Corporadon (CBS, formerly Westinghouse Electne
, Corporauon), scrws the domesuc and international electne power industry by supplying nuclear power plants, advanced nuclear plant designs and eqmpment fuel, and a wide range of other products and semces to the owTiers and operators of commeretal nuclear power plants.
In November 1997, CBS announced its intention to divest the Company.
NO'lT 2:
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES B ASIS OF PRESENTATION The accompanyirig Saancial estaments of the Company include the assets and liabilities and results of operauons of the Company's Commercial Nuclear Fuel Division, Nuclear Services Division, and Nuc! car Projects Dmsion.
Additionally, the financial esteinente include allocations from CBS of certain assets, liabdities and expenses directly related to the Compaar Unless otherwise indicated, 311 dollar amounts in these Saancial statements are presented in thousands. All material intercompany accoums and transactions have been elirnmated in combinance. Investments in joint ventures and other corapan= wiuch the Company does not control but has the abdity to exercise signi5 cant rnanagernent induesce o er operating and financial policies are accounted for by the equity method.
REVENUE RECOGNTf10N Sales are recorded primartly as products are shipped and services are rendered. The percentage-of-completion method of accounting is used for major nuclear fuel and related equipment orders.
Costs to obtain contracts are expensed as incurred. Estimates of costs to complete projects are reviewed periodically throughout the this of the contracts as events occur and as uncertatanes are resolved. When current contract estimates indicate a loss, prmision is made for the entire loss, which is charged against operations in the period in which such loss is desertmned.
AMORTIZATION OFINTANGIBLE ASSETS Goodwill and other acquired -i L assets are amortized using the straight line method over their estimated lives but not in excess of 40 pass for assets acquired prior to January 1,1994 and not in excess of 15 years for assets acquired after December 31,1993.
ENVIRONMENTAL COS13 Environmental expenditures that do not extend tLe servics lives of assets or otherwise benefit future years are expensed. The Company records liabilities when environmental me=***=*a's or remedial efforts are probable, and the costs can be reasonably esumssed. Such esumates are adjusted if necessary as new remediation requirements are denned or as mee informanos becomes available.
INCOME TAXES Historically, the resmits of the f
, s domesuc operations have been included in the consolidated United States income tax return dCBS.1he readts of the Company's foreign operations have been reported in their respeenve taxing juttsdiction along with the operances of other CBS afEliates. The income tax related information in these financial statements is presented based on the effe t of the Company's revenues, costs and expenses on the consolidated tax returns of CBS or other affilhtes. The recognition and measurement of income tax expense and deferTed income taxes requires certain assumptions. The Company's income tax expense is deternuned in accordance with the asset and liability inathad of accounting for income taxes.
For purposes of these financial statements, any current income tax liabilit are considered to have been paid by CBS and are recordrd through the imested equity account with CBS.
CASH AND CASH EQUIVALENTS The Company considers all investment secunues with a matunty of three months or less ahen acqmred to be : ash equivalents. All cash and temporary tmestments are placed with hJgh credit quahty financial msutuuons, and the amount of credit exposure to any one financial insutunon is linuted.
INVENTORIES Inventones are stated at the lower of cost on a first in, first-out (FIFO) basis, or market. The elements of cost included in inventones are direct labor, direct matenal, and certain overheads including factory depreciation.
Long-term contracts in process include costs incurred plus esumated profits on contracts accounted for using the percentage of completon metinod.
PLANT AND EQUIPMENT Plant and equipment assets are recorded at cost and depreciated over their esumated useful lives. Deprectacon is generally computed on the straight line rnethod based on useful lives of 27.5 to 60 years for buildings, 20 years for land improvements,3 to 10 years for office equipment, and 3 to 12 years for machinery and transportation equipment. Leasehold improvements are amortized over the terms of the respectrve leases. Expenditures for additions and improvements are capitahmi and costs for repairs and maintenance are charged to operations as incurred.
LEGAL COSTS When estimating the amount of probable loss to be recogmzad in connection with litigation matters, the Company includes estimated external legal costs through the expected date of settlement. All other legal costs are accounted for as period costs.
FOREIGN EXCHANGE The Company's foreign exchange policy includes matching purchases and sales in national cunencies when possible and hedging unmaschad transacuons when appropriate. In accordance with this policy, the Company enters into various foreign exchange agr==ents to hedge receivables or payables.
Gain: and losses on foreign currency contracts offset gains and losses resulting from cunency fluctuations inherent in the underlying transactions. Gains and losses on contracts that hedge specific foreign currency commitments are deferred and recosmzed in operations in the period in which the transaction is consummated.
Assets and liabilities of foreign operations are translated at the rate of exchange in effect on the balance sheet date; revenue and expenses are translated at the average exchange rates in effect dunng the year. Tbc resulting transtr. tion adjusunents are reflected in the cumulatrve foreign cunency translation adjustments in invested equity.
Firtancial results of foreign operations in countries with highly inflationary economics are translated using a combination of current and historical exchange rates, and any translation adjustments are meluded in earnings along with transaction gains and losses for the period.
ESTIMATES T1te preparanon of Anannel sta*=*=*a in conformity with generally accepted accounung principles requires management to make asamanas and nam =paans that affect the reported amounts of assets and liabilities, the disclosure of conungent assets and liabilities at the date of the Anannal statementa, and the reported amounts of revenues and expenses during the reporung period. Actual results could differ from t.bose estimates. On an ongoing basis, management reywws its esamatas, including those related to settlements, environmental liabihties, contracts, product warranty, pensions, and income taxes, based on currently available information. Changes in facts and circumstances may result in revised estimates.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF During the first quarter of 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No.
121 " Accounting for the impairment of Long Lived Assets and for Long Lived Assets to be Disposed Of." T11e adoption of SFAS 121 did not have a matenal effect on the results of operations.
l
i 6
Subsequent to the acquistuon of an intangible or other long Ined asset, the Company cenunually es 2.luates C eder later eseats and circumstances indacate the remauung esumated useful life of that asset may warrant revision or that the remauung carmng value of such an asset may not be recoverable. If defuutae cash flows are not available for a spectfic intangible or other long lived asset, the Company evaluates reemerabtlity of the specific busmess to w hich the asset relates. When factors mdicate that an intangible or other long-Ined asset should be evaluated for possible impairment, the Company uses an esumate of the related asset's undiscounted future cash flows over the remaimag life of that asset in measunng recoverability. If such an analysis tod2 cates that impairment has in fact occuned, the Company wntes down the book value of the intangible or other long-lived asset to its fair value.
Dunng 1996, the Company recognized a charge to operating profit of $66,204 for impaired assets. See note 15.
DISCLOSURE ABOtIT FAIR VALUE OF FINANCIAL INSTRUMENTS The carrytog amount of the Company's Samast instruments, consisting of cash and cash equivalents, and short-term debt, approximates fair value due to their short matunty and vanable interest rate features. The fair value of foreign exchange contracts is based on quoted market prices to terminate the contracts At December 31,1997 and 1996, the unrealized gain (loss) on these contracts was $627 and $(471), respecently.
NOTE 3: RELATED PARTY TRANSACTIONS The Company utilizes CBS' centralized cash management services in Nonh America. Under such service anangements, accounts receivable are collected and cash is invested centrally. Additionally, disbursements are funded centrally on demand. His arrangement will continue while the Company is afBliated with CBS.
De Company is charged directly for the cxist of certain services that CBS prmides to its bustness umts and subsidianes. These services can include information systems support and certaan other functions, such as transaction processing, legal services, environmental affairs and human resources. CBS centrally develops, negotiates, and amiainers the Company's insurance programs. The insurance includes broad all risk coverage for real and personal property and third-party liability coverage, employer's liability coverage, automobile liability, general product liability, and other standard liability coverage. CBS also maintaine a program of self-insurance for workers' compensation in the U.S. CBS charges its bustness units for all of the centrally administered insurance prognms based in part on claims history. Specific liabilities for general and product liability, automobile and workers' compensation claims are included in the Company's financial statemema.
All of the charges for the corporate services desenbed above are based on costs stisch directly relate to the Company or on a pro rata portion of CBS's total costs for the services provided, on a basis that management believes is reasonable. However, management believes it is possible that the costs of these transactions may differ from those that would result from transactions among unrelated parties. For the > tars ended December 31,1997, 19% and 1995, charges for such services were approxunately $41,399, $32,951 and $33,490, respectively.
Employees of the Company also perucipate in various CBS-sponsored employee bene 6t plans (see note 4).
In the normal course of business the Company enters into transactions with other CBS entities. Management believes such transactions are at anns length. Such transactions primanly include related party sales and purchasen. Total sales to and purchases from mNihmtem were approxunately $6,165 and $38,618, respecovely, for the year ended December 31,1997, $7,941 and $40,228, respectrvely, for the year ended December 31,1996, and
$ 13,957 and $65,213, respectrvely, for the year ended December 31,1995. Acrounts receivable from affiliates of
$7,974 and $6,013 at Daranher 31,1997 and 1996, respectively, are included in other current assets. Accounts payable to affiliates of $2,270 and $4,229 at December 31,1997 and 1996, respectn cly, are included in other current liabilitica.
CBS does not charge its divisions for the carrying costs related to its inveement in such units (invested equity).
Therefore, the Company's results of operations for each of the periods presented do not include any allocated interest charges from CBS, and no portion of CBS's debt is specifically related to the operations of the Company.
In addition, CBS does not charge its divisions for most corporate merhead functions, including tax and treasury On November 14,1997, CBS announced a definitive agreement to sell its Ponir Generation business. Effective December 31,1997, a Power Generation plant that manufactures the Company's steam generators was transferred to the Company. The plant is scheduled to be shut down dunng 1999. At December 31,1997, the net investment
_ _ - - _ _ =
in the plant approumated $4,600, consistmg onmanly of mientory of $5,000, Exed assets of $26. 00 and f.efer ed tax assets of $12,300 less accounts payable of S;0,600 and accrued restructunng for employee separanon costs of
$28,800.
NOTE 4: EMPLOYEE BENEFIT PLANS PENSIONS Substanually all the Company's employees are covered by denned benefit pension plans sponsored by CBS. Most plan benefits are based on either years of semce and compensation levels at the tune of reurement or a formula based on career earmngs. Pension beneSts are paid primartly from trusts funded by CBS and employ ee contnbutions. CBS funds its qualified U.S. pension plans at amounts equal to or greater than the mimmum funding requirements of the Employee Reutement income Secunty Act of 1974, as amended (ERISA).
Substantially all plan assets are invested in equity and fixed income secunties.
Included in the following tables are the net penodic pension costs and funded status of the plans covenng current and former employees of the Company, For purposes of prepan as these Snancial statements, estimmt,9 acre made of the assets and pensica ooligations for Company employees who participated in plans sponsored by CBS. The plan assets have been allocated on a method that managemeat believes would be in accordance mth appbcable ERISA requirements.
Net Periodic Pension Cost Year edad December 31 1997 1996 1995 Service cost S 4,998
$ 7,640 5 6,860 Interest cost te projected benefit obligation 24,271 25,280 30,450 Amortuation of unr-a-ai'ad net transition obligation I,930 1,750 2,430 Amortuation of use:e* - i prior service benefit (1,261)
(1,580)
(2,260)
Amortuation of unt-^-ai'ad net loss 6,175 8,420 5.250 36,113 41,510 42,730 Return on plan assets:
Actual return on plan assets (31,142)
(21,600)
(33,700)
Deferred gain 13,891 4,300 14,470 R~^-ai'ad return on plan assets (17,251)
(17,300)
(19.230)
Net penodic pension cost S 18,862 524.210
$ 23,500 Significant Pension Plan Assumptions 1997 1996 1995 Discount rate Periodic penman cost 7.75 %
6.75 %
8.5%
Pension bene 6t obligation 7.25 %
7.75 %
6.75 %
Compensation increase rate 4%
4%
4%
1ms-term rete of return on plan assets 9.5%
9.5%
9 75 %
Based on the requirements of SFAS No. 87," Employers' Accounting for Pensions," the Company adjusts the discount rate to reflect current and expected 40-be available interest rates on high quality fixed income inwstments at the end of each year,
g The fol!cmng table sets forth the funded nants of the dc5ned benefit plans and amounts recogmwt :n the Company's balance sheet at December 31,1997 and 19%:
Funded Status-Pension Plans Al Decerriber 31 g991 i996 Actuanal present value of benefit obligauon:
Vested 5(275,574) 5(297,540)
Nonvested (30.475)
(19.0$0)
Accumulated benefit obliganon -
(306,049)
(316,590)
Effect of projected future compensabon levels (33,700)
(28.230)
Projected benefit obligation for sarnce rendered to date (339,749)
(344.820)
Plan assets at fair value 205.223 195.600 Projected benefit obligation in excess of pie assets (134,526)
(149.220)
UnrT=i net loss 108,794 113.360 Pnor service benefit not yet recognirad in net penodic pension cost (14.548)
(16,640)
Ui. i net transition obligation 7,354 9,570 Accrued pension cost (32,926)
(42,930)
Mnunum pension liability (67,900)
(78,060)
Pension liability included in balance shest
$(100,826) 5(120,990)
The Company participates in a CBS-sponsored none'M supplemental pension plan that provides additional benents to certain executsves. For naancial reporting purposes, this plan is treated as a non-funded pension plan.
De unfunded accumulated beneSt obliganon under this plan included in the table above at December 31,1997 and 1996 was $15,265 and $12,620, respecshely.
For Snancial reporting purposes, a peamos plan is considered unfunded wben the fair value of plan assets is less than the accumulated bene 61 obligation, Accordingly, the Company has recorded a rmnimum pension liability and a charge to invested equity, net of any tax effects.
At December 31,1997, a trununum penson liability of $67,900 was recogmaad for the difference between the unfunded amount of $100,826 minus the accrued pension cost of $32,926. A charge to invested equity of 567,900 was reduced to $44,135 due to deferred tax effects of $23,765. As a result of the year end 1997 remeasurement, invested equity was increased by $6,604 Don December 31,1996.
At December 31,1996, a muumum peamos liability of $78,060 was recogmaed for the difference between the unfunded amount of $120,990 nunus the accrued pension cost of $42,930. A charge to invested equity of $78,060 was reduced to $50,739 due to deferred tax effects of $27,321. As a result of the year end 1996 remeasurement, invested equity was increased by $64,201 Dom D=remher 31,1995.
OTHER POSTRETIREMENT BENEFITS The Company also participates in a CBS sponsored postretuement plan that provides defined medical, dental and life insurance bene 8ts for eligible retuses ami Wats.
Included in the following tables are the net periodic postretirement beneSt costs and funded status of the plans covertng current and former employees of the Company For purposes of these Saancial statements, estunates were made of the plan obligations of Company employees who participated in the CBS-sponsored plan.
The components of net penodac postretstement beacSt cost follow:
Net Penodic Postretirement Bene 6t Cost 4
Year ended December 31 1997 1996 1993 Semca cost
$ 1,380
$ 1,600
$ 2,000 Interest cost on accanulated postretirement benefit obligaban 6,361 7,100 8.300 Amortization of unrea-a* items, net (178)
(800)
Recognized return on plan assets (186)
(100)
(100)
Net penodic postreurement benefit cost S 7,377
$ 8.600
$ 9,400 The assumptions used to develop the net periodic postretirement benefit cost and the present value of benefit obligations are shown below:
Sigmficant Postrettrement Bene 6t Plan Assumptions M December 31 1997 i996 1995 Discount rate 7.25 %
7.75 %
6.75 %
1 Health care cost trend rates 9.5%'
10%*
10.5%*
Compensation increase rate 4%
4%
4%
Long-term rate of return on plan assets 7%
7%
7%
- n Desember 31,1997, the rus was assuand to domesse reably to 5.5% in 2005. damesse to 5.25% in 2006 and rumme a the level thmenner. M i
Desember 31,1996, the ress was assumed to desresas ressbly to 6*s in 2004, damesse to 5.75% is 2005 and remass a that level thartenar. M December 31,1995, the reis was assumed to dearenas resably to 5% in 2006, desimas to 4.75% e 2007 and rum.us a that level thereaAar Net periodic postretirement benefit cost is detem 2 4 M the mumptions as of the beginmng of the year. The funded status is determined using the assuny ':vu o cf vs W d ne year.
The funded status and amounts recosmzed it % 4:c,wp Mance sheet at December 31,1997 and 19% were as follows:
Funded Status-Postretirement Benefits a Duosmber r 1997 1996 j
Accumulated pstraturement baneSt obligation:
Retiress 3 (53,756)
$ (61.000)
Fully eligibic. xtive plan participants (2,448)
(5,500)
Other active plan participants (32.479)
(36.000)
Total accumulated postreurement beneGt obhgataca (88,683)
(102,500)
Unrecogmaad est loss 15,667 15,400 UnrT=a prior semco beneSt (5,223)
(6,300)
Plan asssts et ibir vales 3,270 1,200 Acensed p~
- benefit cost 3 (74.%9)
$ (92.200)
The funded assets conast prtmanly ofinterest-beanns securities. The effect of a 1% annual increase in the assumed health care cost trend rates would increase the secumulated adi. ;nt benefit obligation by i
approximately 51,950 and would increase not periodic postreusement beneat cost by approximately $210.
Certain of the Company's non U.S. subsidiaries have private and government sponsored plans for postretirement benefits. The cost for these plans is not significant to the Company.
u POS1 EMPLOYMENT BESHITS The Company provides certain postemployment benefits to former or inactive employees and their dependents dunng the ume penod following employment but before retirement. At December 31,1997 and 1996, the Company's liability for postemplo3 ment benents tctaled approximately 58,400 and $7,700, respecuvety.
' NOTE 5: INCOME TAXES ne components ofincome tax expense (beneSt) at December 31,1997,1996, and 1995 are as follows:
Components of Income Tax Expense (BeneSt)
Ye.at ended December 31 1997 1996 1995 Current Federal 5 (90,567)
$ (45,676)
$ 5,85i State (17,275)
(14,051)
(1,360)
Forei n 1,505 2,011 8,063 8
Total currer.t income tax (benefit) expense (106.337)
(57.716) 12.554 Deferred:
Federal 65,818 (102.207)
(93,022)
Stato 11,615 (18.037)
(16.416)
Total deferred income tax (benerat) ev====
77.433 (120.244)
(109,438)
Totalincome tax benefit
$ (28,904)
$(177,960)
$ (96.884)
In addition to the amounts in the table above, the deferred tax asset decreased $3,556 in 1997 and $34,569 in 19%,
and increased $12,432 in 1995 to reGect the change in the mmimum pension liability adjustment which was recorded in invested equity. See note 4. Also in 1997, deferred tax assets of $12,266 were transferred from Power Generation. See note 3.
Deferred income taxes result from U. S. temporary differences in the Snancial bases and tax bases of assets and liabilities. The types of differences that give rise to signiScant portions of deferred income tax liabilities are shown in the following tabp:
Deferred Income Taxes by Source At D+ 31 1997 8996 Deferred tax assets Provisions for expenses and losses
$ 365,734 5 420,837 Emplovee benefit oblisations 72.834 87,371 Total deferred tax assets 438,568 508.208 Deferred tax br.tmlitier Plant and equipmsat (28.219)
(29,095)
Other (1,194)
(1,235)
Total deferred tax liabdities (29.413)
(30.330)
Net deferred tax asset S 409.155 5 477,878 l
l l
l t
i l
The following table reconciles the " expected" incorne ta benefit, based upon a 35% statutory income ta rate, to i
the actual tacome tu benefit for each year-Reccociliation ofIncome Tax Benefit r
1
, Year mded December 31 1997 I996 199$
Federal mcome tax benefit at statutory rate
$ (28,493)
$ (160,402)
$ (38,879)
(Increase) decrease in tax benefit resultmg from:
I State mcome tax, net of federal effect (3,704)
(20,852)
(11,554)
Foreign rate difTerenual 3,500 3,635 3,700 Other difTerences. net (207)
(341)
(151)
Income tax benefit
$ (28,904)
$ (177,960) 5 (96,884) l l
NOTE 6: CUSTOMER RECEIVABLES Customer receivables at December 31,1997 included $4,490 representing the sales value of material under long-term contracts not billed to customers. Bdlings will occur upon shipment of major components of the contracts.
s Collection of these receivables is expected to be substantially completed within one year, NOTE 7: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS Inventories At h 3I I997 1996 Raw matenals S 9,185
$ 19,310 work in process 39,426 52,865 Finished goods 1,261 1,000 49,872 73,176 Long-term contracts in process 404,949 384,127 Progress payments to subcontractors 1,395 2,173 Recoverable engmeenng and development costs 13,360 12,657 Inventoried costs and estimated earnmss related to contracts with progress buting terms (436,819)
(410.325)
Inventories S 32,757 5 61,80s Costs and billings on uncompleted contracts At h 31 1997 1996 Costs and estunated earnags included in invensenes
$ 378,053
$ 308,395 i
Progress btllings on contracts (302,941)
(217,989)
Costs and eshmanad ammmes over bdlmss on uncompleted contracts S 75,112 1 90.406 Progress billings os contracts
$ 124,968
$ 183,386 Costs and estunated ammmas included in inventories (58,766)
(101,930)
Bt!!ings over estimated costs and earmngs on uncompleted contracts
$ 66.202
$ 81,456 Substantially all costs in long term contracts in process, progress payments to subcontractors, and recoverable engineering and development costs were contract related.
Inventories other than those related to long-term contracts are generally reahzed within one year.
5 a
J
- 2 In the Srst quarter cf 1997, the Company recognized a $27,000 reduction to both sales and cperaung prc5t for a change in cost esumates following a comprehensive reevaluauon of the work scope and costs to complete a complex mternauonal nuclear project begun tn 1993.
NOTE 8: PLANT AND EQUIPMENT Plant and Equipment j
At December 31 1991 1996 bad and buildmgs
$ 88,206 3 93,M5 Machinery and equipment 508.212 521,264 Construct 2on m progress 12,024 26,348 Plant and equipment, at cost 608,442 640,677 Accumulated depreciation (396,457)
(427.676)
Plant and equipment. net 3 211,985
$ 213,001 For the years ended December 31,1997,19%, and 1995, depreciation expense totaled $36,050, $36,509 and
$38,406, respecuvely. Of these amounts, $31,364,530,668 and $36,486, respectively, were included in cost of goods sold, and $4,686, 55,841 and $1,920, respectively, were included in marketing, administration and general expenses.
NOTE 9: INTANGIBLE AND OTHER NONCURRENT ASSETS Intangible and Other Noncurrent Assets
.4 Denumber 11 1991 1996 Goodwill
$ 18,711
$ 30,860 4
Defemd tax assets 298,872 354,937 Other intangible assets 2,242 6,930 Other 20,716 45,979 Intangible and other noncurrent assets S 340,541 3 438,706 Goodwill and other intangible assets are shown net of accumulated amortization of $9,697 at December 31,1997 and 59,997 at December 31,1996.
NOTE 10: OTHER CURRENT AND NONCURRENT LIABILITIES Other Current Liabilities
.u rw 3 t 3997 g996 Accrued employee compensatica 3 21,553
$ 21,595 Accrued product warranty 23,286 5,360 Liability for asset dispositions 5,000 Settlements (note 12)
I15,908 151,307 Short-term debt 4,736 Ennronmentalliabilities 21,523 15,603 Accrued restructunns costs (nots 15) 8,974 37,376 Other 39,078 50,713 Other current liabilities
$ 230,322 3 291.690
Il-
,)
Other Noncurrent Liabtitues At December 11 1997 9%
. Settlements (note 12) 5 543,870 5 624,302 Workers' compensauon
' 10,944 9.655 Accrued insurance clauns 2,974 2,451 i
Accrued rescucturing costs (note 15) 32,387 1,500 1
Environmentalliabiliues 31,719 51.609 l
Liability for asset disposiuons
. 40,000 Other 41,121 38.222 Other noncurrent liabtbues 5 663.015 5 768.239 l
l NOTE 11: INVESTED EQUTIY (DEFICTO Changes in Invested Equity (Deficit) 1997 1996 1993 Balance at Waaia of year s (319,449) 5 (103,829)
$ 39,937 Net loss (52,429)
(280,986)
(160,498) l-Muumum pensica liability adj=e-e 6,604 64,201 (23,088)
Cumulative translation adjustment (190) 1.318 929 Transfer ofinvestment in plant and related liabilities from Power Generation (note 3) 4,600 (Disbursements to) receipts from CBS, not 51,483 (153) 38,891 Balance at end of year 5 (309,381) 5 (319,449)
! (103,829)
NOTE 12: COMMITMENTS AND CONTINGENCIES LEGAL MATTERS URANIUM SETT1,EMENTS in the late 1970's, the Company provided for the estunated fbture costs for the resolution of all uranium supply contract suits and related litigation. The reserve balance at December 31,1997 is deemed adequate con.cdering all l
facts and circumstances known to management. The fbture obligations requus providing the remmnder of the fuel delivenes through 2013. De supply of equipment and services is essentially complete. Variances from esumates
[
that may occur are considered in determining if an adjustment of the liability is necessary, STEAM GENERATORS j
l The Company has been defendtag various lawsuits brought by utilities claumns a substantial amount of damages in connection with alleged tube degradatson in steam generators sold by the Company as components of nuc! car steam supply systems. Since 1993, a e'l*=*ae agreements have been entered resolvsag ten litigation clauns. Rese agreements generally requus the Company to provide certain products and service at prices discounted at ur3mg rates. Two cases were resolved in favor of the Company aAer trial or arbitranon. At December 31,1997, one steam generatorlawsuit remained, L
At December 31,1997, the Company was also a party to five tolling agrwments with unlities or unlity plant oners' groups that have asserted steam generator clauns. The tolling agreements delay initiation of any litiganon for various specified periods of time and permit the parties time to engage in discussions.
GENERAL Litigation is inherently uncertam and always difBeult to predact. Substannal damages are sought in the steam generator claims and, although management believes a si ah adversejudgment is unlikely, any such judgment could have a matenal adverse effect on the Company's results of operanons. However, based on its l
understanding and evaluation of the relevant facts and ctreurnannamn management believes that the Company has i
i
.. - - - -. - -.. ~. - _ _.
' 4 mentonous defenses to the hugauon desenbed above and that the Ccmpany has adequately prmided for :csts ansing from prevtous and potenual settlement of these matters wben m the best interest of the Company Management believes that the exisung liugauon should not have a matenal adverse effect on the financial condiuon of the Company.
. Company actions taken during 1996 and 1995 to resolve vanous legal matters resulted in charges to operstmg proftt of $298,191 and $294,359, respectively. See note 15. These charges pnmarily represent the Company's expected out-of pocket costs in excess of discounted sales pnces. At December 31,1997, accmed liabilices for previously settled and potential settlements oflegal matters totalled $659,778. These liabilices are expected to be satisfied over penods up to 30 years, with the majonty of the cash expenditures occumng over the next 10 years.
The Company's accrued liability for legal matters does not include amounts by which discounted sales pn:es exceed the Company's out of-pocket costs.
The Company is involved in various other litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of such maners will not result in judgments which, in the aggregate, would matenally affect the Company's financial position.
ENVIRONMENTAL MATTERS Compliance with federal, state, and local tan and regulations relating to the discharge of pollutams into the environment, the disposal of hazardous wastes, and other related activities affecting the envircament have had and will continue to have an impact on the Company. It is difBcult to esumate the timing and ultimate costs to be incurred in the future due to uncertainties about the status oflaws, regulations, and technology; the adequacy of information available for individual sites; the extended time periods over which site re=Mution occurs; and the identification of new sites. The Company has, however, recogmzed an estunated liability, measured in current dollars, for those sites where it is probable that a loss has been incurred and the amount of the Ices can be reasonably estimated. The Company recosmzes changes in aanmatas as new remediation requirements are defined or as more information becomes available.
In 19%, the Company and its external consultants completed a study to evaluate the Company's emironmental remediation strategies. Based on the costs assocated with the most probable alternative re=M=aan strategy for the above mentioned sites, the Company has an accrued liability of $53,242, of which $41,158 mis recogmzed in 19%. Depending on the remediation alternatives ultimately selected, the costs related to these snes could differ from the amounts cunently accrued. The accrued liability includes $51,151 for site investigation and remediation, and $2,091 for post closure and monitoring actmties. Management anticipates that the majonty of expenditures for site investigation and remediation will occur during the next three to five years. :i.genditures for post closure and monitoring activities will be nade during penods of up to 30 years.
OTHER The Company has or will have responabtlities for envuonmental closure activities or decomnussioning of nuclear licensed sites and equipment. The Company has estunated that the total potential costs to be incurred for these actions is approximately $89,900, of which $21,963 was accrued at December 31,1997. The Company's policy is to accrue these costs over the aanmatM lives of the individual facilities and equipment, which Ims are generally 5 years for equipment and not in excess of 20 years for facilities. The anticipated annual costs curremly being accrued are $8,800.
Capital expenditures related to envuonmental compliance in 1997,1996 and 1995 totaled $2,097, $4,701 and
$3,668, respectively. Operating expenses that are recurnng and :no:iated with managing hazardous waste and pollutants in ongoing operations totaled $2,749,54,223 and f 3,802 in 1997,19% and 1995, respectively.
Management believes, based on its estimate, that the Company has adequately provided for its present endronmental obligations and that complying with existing government regulations will not matenally impact the Company's financial position, liquidity, or results of operations.
---n-m n
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. _ _ _. ~ -.
.: 5 COMMITNGNTS In the ordinary course of business, standby letters of credit and surety bonds are issued on behalf of th At December 31,1997 the Company had $136,672 outstanding under such obliganons. Addadonally, the Company's comnutments for the purchase of plant and equipment at December 31,1997 totaled $2,135.
HEDGING The following is a schedule of the Company's foreign currency contracts, their matunues in U.S. dollar equivalents, and the unrealized gain on these contracts as of December 31,1997. Rese contracts are entered into with high credit quality financial institutions, at customary terms.
Nodonal Currency Amounts Matures in 1998 t!ntealized Omn Belgian Franc 7,827 7.827
$459 Japanese Yen 5,184 5,184 114 French Franc 2,446 2,446 32 l
Other 2,460 2,460 22 Total 17.917 17.917
$627 NOTE 13: LEASES ne Company has commitments under operating leases for certain machinery and equipment and facilities used in various operations. Rental expense in 1997,1996 and 1995 was $13,827, $13,367 and $12,741, respectrvely. These amounts include immaterial amounts for contingent rentals and sublease inconne.
Mirumum Rental Payments At Deesmber 31,1997 Laase Oblisanaus 1998
$ 12,535 l
1999 11,256 2000 13.264 2001 6,924 2002 8,739 Subsequent years 65.202 Mmunum rental payments
$I17.920 NOTE 14: OTHERINCOME AND EXPENSES, NET Year anded h 31 1997 1996 1995 Miscellaaan== interest income 507 953 5
699 Gain (loss) on dispositina of other assets, not 2,800 (280)
(1,426)
Foreign currency tr====ctu== and high inflation translation effect (541)
(1,066)
(3,270)
Other (875) 50 642 j
Other income and expenses, net 1,891 (343)
$ (3.355) i i
.3 NOTE 15 RESTFECTURING, LTTIGAT10N AND OT*rER MATTERS The Company has undertaken a number of acuons to dowTtsize sts business and resolve sanous hugauen and cit.cr
{
matters Certain of these acuans resulted in the recogninon of charges to operaung profit.
Restructunng, Lidgation and Other Matters Year Ended December 31 1997 1996 1995 Restructunn8
$ 11,077 5 53,045 s is.318 Litigauon matters 298,191 294,359 Enytronmental remed:auon activities
.t 1,158 Impattment of assets 66.204 Total 1 11.077 3 458,598
$ 309.677 i
In recent years, the Cornpany has restructured many ofits businesses in an esort to redum its cost structure and remain competitrve in its markets. Restructuring activities primartly inwht the separation of employees, the closing of facilities, the termination ofleases, and the exiting of product lines. Costs for restructunng acunues are limited to incremental costs that directly result from the restructunng activities and that prmide no future benc51 to the Company.
Generally, separated employees received beneSts such as layoffincome bene 6ts, permanent job separation beneSts, i
retraming and/or outplacement assistana. The amount included for these bene 6ts in the restrucrunng charge i
represents the inenmental cost of such bene 5ts over those amounts prmously accrued under SFAS No.112,
" Employers' Accounting for Postemployment Benefits."
Based on the Company's current estunates, summanzed below are the rescucturing charges to operations and the number of employee separations for 1997,19% and 1995, respectively:
Restructunng Costs and Employee Separations Year Ended December 31 1997 1994 1995 Number of employee separations I11 566 171 Employee separation costs
$ 11.077 5 53.04!
$ 15.318 The employee separations in the 1997 plan are expected to commence and be completed in 1999. The employee separations in the 1996 and 1995 plans were essentially competed at Deadw 31,1997. Emploge separanon costs generally are paid over a period of up to two years following their separation.
The following is a reconciliation of the restructunng liability:
Reconciliation of Restructuring Liability 19n 1996 1995 Balance at January 1 5 38,876 5
8,710
$ 19,200 Provision for restructanas 11,077 53,045 15,318 Transfer of accmed restructuring costs from Power Generation (note 3) 25,797 Cash expenditures (37,389)
(22,879)
(25.808)
Balance at December 31
$ 41,361 3 38,876 5
8,710
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[NOTUSED]
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4 EXHIBIT C
l l
l FORM OF FINANCIAL ASSURANCE DOCUMENTS FOR DECOMMISSIONING 1
l.
Continuing Certification of Financial Assurance 2.
Standby Trust Agreement 3.
Standby Letter of Credit l
l EXHIBIT D l
li-l l
1,
ATTACHMENT I CONTINUING CERTIFICATION OF FINANCIAL ASSURANCE Principal:
(insert Name of Entity Providing Certification)
Mailing address correspondence regarding this matter:
NRC license numbers, name and address of each facility:
See Attachment I, p. 2 -
l (List oflicenses covered by this certification) l Issued to:
US Nuclear Regulatory Commission i
l Washington DC 20555 I
This is to certify that (insert name of entity providing Certification] is licensed to possess a Production and Utilization Facility, and By product, Special Nuclear and Source Materials licenses; and that financial assurance in the amounts prescribed by 10 CFR Parts 30,40,50,51,70 and 72 has been obtained for the purpose of decommissioning. The list of licenses in Attachment I, page 2, identifies the specific licenses covered and the
]
amounts of financial assurance provided for each. The total financial assurance amounts to S
.000,an increase of S
.000 over previous financial assurance amounts.
Sincerely, l
Name:
Title:
l l
i l
4 i
ATTACH \\1ENT l. PAGE 2 LISTING OF NRC LICENSES FOR CERTIFICATION OF FINANCIAL ASSURANCE 4
1 I
O STANDBY TRUST AGREEMENT i
THIS STANDBY TRUST AGREEMENT (the " Agreement") is made and entered into l
as of the _, day of _
[the closing date},1998, by and between [ Insert Name of Grantor].
herein referred to as the " Grantor", and [ Insert Name of Trustee) incorporated in the State of the " Trustee".
l WHEREAS, the U.S. Nuclear Regulatory Commission (NRC) an agency of the U.S.
Government. pursuant to the Atomic Energy Act of 1954 as amended (AEA). has promulgated regulations in Title 10. Chapter I of the Code of Federal Regulations, Part 30,40,50, or 70.
These regulations require that a holder of, or an applicant for, a Part 30,40,50. or 70 license provide assurance that funds will be available when needed for required decommissioning activities; and WHEREAS, the Grantor has elected to use letters of credit to provide all of such financial assurance for the facilities identified herein; and WHEREAS, when payment is made under the letters of credit, this standby trust shall be used for the receipt of such payment; and WHEREAS, the Grantor, acting through its duly authorized officers, has selected the Trustee to be the trustee under this Agreement, and the Trustee is willing to act as trustee, NOW, THEREFORE, the Grantor and the Trustee agree as follows:
Section 1. Definitions. As used in this Agreement-i (a)
The term " Grantor" means the grantor, as or on behalf of the NRC licensee, who
)
enters into this Agreement for the benefit of the NRC and any successors or assigns of the Grantor.
(b)
The term " Trustee" means the trustee who enters into this Agreement and any successor Trustee.
Section 2. Costs of Decommissionine. This Agreement pertains to the costs of decommissioning the materials and activities identified in the attached Schedule A issued pursuant to 10 CFR Part 30,40,50, or 70.
Section 3. Establishment of Fund. The Grantor and the Trustee hereby establish a standby trust fund (the " Fund") for the benefit of the NRC. The Grantor and the Trustee intend that no third party has access to the Fund except as provided herein.
Section 4. Payments Constitutine the Fund. Payments made to the Trustee for the l
Fund shall consist of cash and Eligible Securities. The Fund is initially unfunded.
Payments made to the Trustee for the Fund shall consist of payments made by the issuer l
of the Irrevocable Letters of Credit pursuant to its terms, which are described in Schedule B attached hereto. Such property and any other property subsequently transferred to the Trustee are referred to as the " Fund", together with all earnings and profits thereon, less 1
i o.
l.
a l
L any payments or distributions made by the Trustee pursuant to this Agreement. The Fund shall be held by the Trustee. IN TRUST as hereinafter provided. The Trustee shall not be responsible nor shall it undertake any responsibility for the amount of, or adequacy of
)
the Fund, nor any duty to collect from the Grantor, any payments necessary to discharge any liabilities of the Grantor established by the NRC.
1 Section 5. Payment for Reauired Activities SDecified in the Plan. The Trustee shall i
make payments from the Fund to the Grantor upon presentation to the Trustee of the following:
A certificate duly executed by the Secretary of the Grantor attesting to the a.
i occurrence of the events, and in the form set forth in the Specimen Certificate
)
attached hereto as Schedule C, and i
i b.
A certificate executed by the Grantor attesting to the following conditions:
(t)(1) that decommissioning is proceeding pursuant to an NRC-approved plan.
(2) that the funds withdrawn will be expended for activities undertaken pursuant to that plan, and (3) that the NRC has been given 30 days' prior notice of the Grantor's intent to withdtr funds from the Fund.
No withdrawal from the Fund can exceed 10% of the outstanding balance of the Funds applicable to a particular license, without written approval from the NRC.
In the event of a default or inability to direct decommissioning activities, the l
Trustee shall make payments from the Fund as the NRC shall direct in wTiting, to provide for the payment of the costs of required activities covered by this Agreement. The Trustee shall reimburse the Grantor or other persons as specified by the NRC, or State agency, from the Fund for expenditures for required l
activities in such amounts as the NRC, or State agency, shall direct in writing. In addition, the Trustee shall refund to the Grantor such amounts as the NRC specifies in writing. Upon refund, such funds shall no longer constitute part of the Fund as defined herein.
Section 6. Trust Mananement.
The Trustee shall invest and reinvest the principal and income of the Fund and keep the Fund invested as a single Fund, without distinction between principal and income, in accordance with general investment policies and guidelines which the Grantor may communicate in writing to the Trustee from time to time, subject, however, to the provisions of this section. In investing, reinvesting, exchanging, selling and managing the Fund, the Trustee shall discharge its duties with respect to the Fund solely in the interest of the beneficiary and with the care, skill, prudence and diligence under the circumstances then prevailing which persons of prudence, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of a like character and with like aims; except that:
I
1 (a)
Securities or other obligations of the Grantor. or any other owner or operator of the facilities, or any of their af61iates as de6ned in the Investment Company Act of 1940, as amended (15 U.S.C. 80A 2(a)), shall not be acquired or held. unless they are securities or other obligations of the Federal or a State govemment:
1 (b)
The Trustee is authorized to invest the Fund in Eligible Securities as hereinafter defined. Eligible Securities shall be securities or other obligations of the Federal Government. i.e., GNMA, FNMA, and FHLM bonds and certificates or State and Municipal bonds rated BBB or higher by Standard & Poor's or Baa or higher by i
Moody's Investment Services.
l Section 7. Express Powers of Trustee. Without in any way limiting the powers and discretion conferred upon the Trustee by the other provisions of this Agreement or by law, the Trustee is expressly authorized and empowered:
(a)
To sell, exchange, convey, transfer, or otherwise dispose of any property held by it, by public or private sale, as necessary to allow duly authorized withdrawals or to reinvest in Eligible Securities at the direction of the Grantor.
(b)
To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (c)
To register any securities held in the Fund in the name of the Grantor, and to hold any security in bearer form or in book entry, to reinvest interest payments and funds from matured and redeemed instruments in Eligible Securities, to file proper forms concerning securities held in the Fund in a timely fashion with appropriate govemment agencies, or to deposit or arrange for the deposit of such securities in a qualified central depository, or to deposit or arrange for the deposit of any securities issued by the U.S. Govemment, or any agency or instrumentality thereof, with a Federal Reserve Bank in book entry form, but the books and records of the Trustee shall at all times show that all such securities are part of the Fund.
(d)
To compromise or otherwise adjust all claims in favor of or against the Fund.
Section 8. Taxes and Expenses. All taxes of any kind that may be assessed or levied against or in respect of the Fund and all brokerage commissions incurred by the Fund shall be paid from the Fund. All other expenses incurred by the Trustee in connection with the administration of this standby trust, including fees for legal services rendered to the Trustee, the compensation of the Trustee to the extent not paid directly by the Grantor, and all other proper charges and disbursements of the Trustee shall be paid from l
the Fund.
l l
Section 9. Annual Valuation. After payment has been made into the Fund, the Trustee shall annually, at least 30 days before the anniversary date of receipt of payment into the l
Fund, furnish to the Grantor and to the NRC a statement confirming the value of the 0
Fund. Any securities in the Fund shall be valued at market value as of no more than o0 days before the anniversary date of the establishment of the Fund. The failure of the Grantor to object in writing to the Trustee within 90 days after the statement has been furnished to the Grantor and the NRC, or State agency, shall constitute a conclusively binding assent by the Grantor, barring the Grantor from asserting any claim or liability against the Trustee with respect to the matters disclosed in the statement.
Section 10. Advice of Counsel. The Trustee may from time to time consult with counsel, who may be counsel to the Grantor, with respect to any question arising as to the construction of this Agreement or any action to be taken hereunder. The Trustee shall be fully protected, to the extent permitted by law, in acting on the advice of counsel.
Section 11. Trustee Compensation. The Trustee shall be entitled to reasonable compensation for its services as agreed upon in writing from time to time with the Grantor.
Section 12. Successor Trustee. Upon 90 days notice to the NRC, or State agency, the Trustee may resign; upon 90 days notice to NRC, or State agency, and the Trustee, the Grantor may replace the Trustee; but such resignation or replacement shall not be effective until the Grantor has appointed a successor Trustee and this successor accepts the appointment. The successor Trustee shall have the same powers and duties as those conferred upon the Trustee hereunder. Upon the successor Trustee's acceptance of the appointment, the Trustee shall assign, transfer, and pay over to the successor Trustee the funds and properties then constituting the Fund. If for any reason the Grantor cannot or does not act in the event of the resignation of the Trustee, the Trustee may apply to a court of competent jurisdiction for the appointment of a successor Trustee or for instructions. The successor Trustee shall specify the date on which it assumes administration of the trust in a writing sent to the Grantor, the NRC or State agency, and the present Trustee by certified mail 10 days before such change becomes effective. Any expenses incurred by the Trustee as a result of any of the acts contemplated by this Section shall be paid as provided in Section 8.
Section 13. Instructions to the Trustee. All orders, requests, and instructions by the Grantor to the Trustee shall be in writing, signed by such persons as are signatories to this Agreement or such other designees as the Grantor may designate in writing. The Trustee shall be fully protected in acting in accordance with such orders, requests and instructions. If the NRC or State agency issues orders, requests or instructions to the Trustee, these shall be in writing, signed by the NRC, or State agency, or their designees.
and the Trustee shall act and shall be fully protected in acting in accordance with such orders, requests and instructions. The Trustee shall have the right to assume, in the absence of written notice to the contrary, that no event constituting a change or a termination of the authority of any person to act on behalf of the Grantor, the NRC, or State agency, hereunder has occurred. The Trustee shall have no duty to act in the absence of such orders, requests, and instructions from the Grantor and/or the NRC. or State agency, except as provided for herein.
Section 14. Amendment of Anreement. This Agreement may be amended by an instrument in writing executed by the Grantor, the Trustee and the NRC, or State agency.
i
or by the Trustee and the NRC ar State agency, if the Grantor ceases to exist.
Section 15. Irrevocability and Termination. Subject to the right of the parties to amend this Agreement as provided in Section 14. this trust shall be irrevocable and shall continue until terminated at the written agreement of the Grantor, the Trustee. and the NRC or State agency, or by the Trustee and the NRC or State agency. if the Grantor ceases to exist. Upon termination of the trust, all remaining trust property less tinal trust administration expenses, shall be delivered to the Grantor or its successor.
Section 16. Immunity and indemnification. The Trustee shall not incur personal liability of any nature in connection with any act or omission, made in good faith, in the administration of this trust. or in carrying out any directions by the Grantor, the NRC or State agency, issued in accordance with this Agreement. The Trustee shall be indemnified and saved harmless by the Grantor or from the Fund, or both, from and against any personal liability to which the Trustee may be subjected by reason of any act or conduct in its official capacity, including all expenses reasonably incurred in its defense in the event the Grantor fails to provide such defense.
Section 17. This Agreement shall be administered, construed, and enforced according to the laws of the State of Section 18. Interpretation and Severability. As used in this Agreement, words in the singular include the plural and words in the plural include the singular. The descriptive headings for each section of this Agreement shall not affect the interpretation or the legal efficacy of this Agreement. If any part of this Agreement is invalid,it shall not affect the remaining provisions which will remain valid and enforceable.
l IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective officers duly authorized and the incorporate seals to be hereto affixed and attested
)
as of the date first wTitten above.
ATTEST:
[ INSERT NAME OF GRANTOR]
By:
Title:
ATTEST:
[ INSERT NAME OF TRUSTEEj 1
By:
j
Title:
.s.
...._... - ~ _ _ _.._. -. _.. _...-.. -. -.._-._._-.. _ __. _.. -....._. _.. _ _. _ _ _ _-
s I:
- SCHEDULE A TO STANDBY TRUST AGREE.\\ LENT LISTING OF NRC LICENSES FOR IINSERT NA.\\lEOF GRANTORI l
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SCHEDULE B TO STANDBY TRUST AGREEMENT LISTING OF LETTERS OF CREDIT l
l Date Entered (1)
Issuing Institution of irrevccable Letter of Credit
- Amount l
I i-TOTAL S
.00
- Beneficiary of Letter of Credit is NRC (1) Automatically renew aRer 12 months unless prior notice is given.
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SCHEDULE C TO STANDBY TRUST AGREEMENT SPECIMEN CERTIFICATE OF EVENTS
[ Insert Name and Address of Trusteel Attention: Corporate Trust Department Gentlemen:
In accordance with the terms of the Agreement with you dated
,1998.I.
General Manager of[ insert name of Grantor], hereby certify that the following events have occurred:
1.
[ Grantor] is required to commence the decommissioning ofits facility located at [ insert location of facility] (hereinafter called the decommissioning).
2.
The plans and procedures for the commencement and conduct of the decommissioning have been approved by the United States Nuclear Regulatory Commission, or its successor, on (copy of approval attached).
3.
The Board of Directors of [ Grantor] has adopted the attached resolution authorizing the commencement of the decommissioning.
By:
Name Title Date Secretary (SEAL]
i l
2
4 s
SCHEDULE C(CONT.)TO STANDBY TRUST AGREEllENT CERTIFICATE OF RESOLUTION I,
, do hereby certify that I am Secretary of
[ Grantor), a Corporation, and that the resolution listed below was duly adopted at a meeting of Grantor's Board of Directors on
.19 In WITNESS WHEREOF, I have hereunto signed by name and affixed the seal of this Corporation this day of
, 19 Secretary RESOLVED, that this Board of Directors hereby authorizes the Chairman, or such other employee of the Company as he may designate, or such other employee of the Company as he may designate, to commence decommissioning activities at [ insert name of facility] in accordance with the terms and conditions described to this Board of Directors at this meeting and with such other terms and conditions as the Chairman shall approve with and upon the advice of Counsel.
)
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.._. _ ~.,.. _ _ _ _. _. _. _. _ _....._.-. _ _. _- - _ _ _ _ _
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[ FORM OF STANDBY LETTER OF CREDIT l IRREVOCABLE STANDBY LETTER OF CREDIT NO.
l l-Expiry:
l
- U.S. Nuclear Regulatory Commission ("NRC")
Decommissioning and Regulatory Branch l.
Washington, D.C. 20555
- Attention: Group Chief '
Dear Sir or Madam:
We hereby establish our Irrevocable Standby Letter of Credit No.
in your favor, at l
the request and for the account of up to the aggregate amount of U.S. Dollars and 00/100 available upon presentation of:
1) your sight draft, bearing reference to the Letter of Credit No.
and 2) your signed statement reading as follows: I certify that the amount of the draft is payable pursuant to regulations issued under the authority of the U.S. Nuclear Regulatory Commission.
This Letter of Credit is issued in accordance with regulations issued under the authority of the NRC, an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974. The NRC has promulgated regulations in Title 10, Chapter 1 of the Code of Federal Regulations Parts 30,40,50 or 70, (the " Applicable L
Regulations") which require that a holder of, or an applicant for, a license issued under the Applicable Regulations, provide assurance that funds will be available when needed for decommissioning.
This Letter of Credit is effective as of 1998 and shall expire on
, but such expiration date shall be automatically extended for a period of at least 1 year on and on each successive expiration date, unless, at least 90 days before the current expiration date, we notify both you and
, by c-l-
certified mail, as shown on the signed return receipts.
I 2?9422.1. DRAFT 9/2198 (1019PM) l i.-
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If is unable to secure attemative financial assurance to replace this letter of Credit within 30 days of notification of cancellation. the NRC may draw upon the full value of this Letter of Credit prior to cancellation.
The (Letter of Credit Bank] shall give immediate notice to and the "NRC" of any notice received or action filed alleging (1) the insolvency or bankruptcy of the
[ Letter of Credit Bank}, or (2) any violations of regulatory requirements that could result in suspension or revocation of the [ Letter of Credit Bank's] charter.
The [ Letter of Credit Bank) also shall give immediate notice if, for any reason, it beccmes unable to fulfill it's obligations under the Letter of Credit No.
Whenever this Letter of Credit is drawn on under and in compliance with the terms of this Letter of Credit, the (Letter of Ctedit Bank] shall duly honor such draft upon it's presentation to us within 30 days, and we shall deposit the amount of the draft directly into the Standby Trust Fund of in accordance with the NRC's instructions.
Each draft must bear on it's face the clause: " Drawn under Letter of Credit No.
dated
,1998 and the total of this draft and all other drafts previously drawn under this Letter of Credit does not exceed S This Letter of Credit is subject to the Uniform Customs and practice for Documentary Credits (1993 Revision, International Chamber of Commerce, Paris, France, Publication No. 500).
[ LETTER OF CREDIT BANK]
BY:
2?9422 !. DRAFT 9/2198 (10.19PM)
FORM OF LETTER FROM TRANSFEREE TO U.S. NUCLEAR REGULATORY COMMISSION CONFIRMING AGREEMENTS TO ASSUME COMMITMENTS, RESPONSIBILITIES AND LIABILITIES EXHIBIT E
1
,o-EXHIBIT E FORM OF LETTER FROM TRANSFEREE TO THE NRC Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555 Gentlemen:
This letter is in funherance of and a part of the Applications for Transfers and Amendments of Materials Licenses, Quality Assurance Program Approvals and Certificates of Compliance of CBS Corporation ("CBS")(the " Applications") filed with the NRC on September _,1998 related to the transfers and amendments of the licenses, approvals and certificates referenced in the Applications. The need for the requested transfers and amendments arises from the sale (with certain exceptions) of the assets and operations of the nuclear and govemment services businesses of CBS as more fully described in the Applications. As provided by the NRC regulations and NRC Information Notice 89-25, Revision 1, dated December 7,1994, to support the transfers of the licenses, approvals and certificates requested by the Applications, the following statements and representations are made:
1.
I am (officer] of Westinghouse Electric Company, LLC, a MK/BNFL Company
("WELCO") and am authorized to file this letter with the NRC on behalf of WELCO.
2.
After the closing of the sale transaction discussed above, WELCO will become the licensee and holder of the licenses, approvals and certificates set forth on Exhibit A of the Applications.
3.
_WELCO agrees to the transfer and amendment of the licenses, approvals and certificates issued by the NRC and currently held by CBS and to the change in ownership and control of the licensed activities and the conditions of the transfers and those contained in the licenses in accordance with the Applications.
4.
CBS has made WELCO aware of all open NRC inspection items and the responsibility of WELCO for possible resulting enforcement actions. WELCO understands that CBS will make it aware of all open inspection items as of the Closing Date of the sale transaction, and WELCO accepts the responsibility for possible resulting enforcement actions.
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WELCO agrees to abide by commitments and representations previously made to the NRC by CBS for all facilities, licenses, certificates and approvals being transferred by the Applications, including: maintaining decommissioning records required by 10 C.F.R. sj 30.35(g),40.36(f) and 70.25(g); implementing decontamination activities and decommissioning of the sites, as discussed in the Applications; and completing corrective actions for open inspection items and enforcement actions.
6.
WELCO agrees to accept responsibility for decommissioning and decontamination of the facilities and sites being transferred and will provide evidence of resources to fund decommissioning as required by the NRC as set forth in the Applications, except that CBS will undertake certain responsibilities as set forth in Exhibit C to the Applications. As of the Closing Date, WELCO will provide adequate resources to fund decommissioning for which it is responsible through appropriate mechanisms, as described in the Applications.
7.
WELCO agrees to abide by all other constraints, conditions, requirements, representations and commitments identified in the existing licenses, approvals and certificates issued by the NRC.
We would be pleased to respond to any further questions that the NRC may have with regard to this letter.
Sincerely,
[WELCO Officer]
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