ML20155B795
| ML20155B795 | |
| Person / Time | |
|---|---|
| Site: | Portsmouth Gaseous Diffusion Plant, Paducah Gaseous Diffusion Plant |
| Issue date: | 10/27/1998 |
| From: | NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS) |
| To: | |
| Shared Package | |
| ML20155B790 | List: |
| References | |
| NUDOCS 9810300280 | |
| Download: ML20155B795 (8) | |
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UNITED STATES NUCLEAR REGULATORY COMMISSION f
WASHINGTON, D.C. 20555-0001 October 27, 1998 DOCKETS:
70-7001, 70-7002 CERTIFICATE HOLDER:
United States Enrichment Corporation Paducah Gaseous Diffusion Plant and Portsmouth~ Gaseous Diffusion Plant Paducah, Kentucky and Piketon, Ohio
SUBJECT:
COMPLIANCE EVALUATION REPORT: PRIVATIZATION OF USEC--ISSUANCE OF CONDITIONS OF TRANSFER BACKGROUND On April 26,1996, the President signed the U.S. Enrichment Corporation Privatization Act (the Act), which directs USEC to implement a privatization plan. USEC developed a privatization plan that contained two alternate n'ethods of privatizing: (1) a sale through an initial public offering or (2) a merger and acquisit;on. USEC, with the approval of the Secretary of the U.S. Treasury, was to select the alternative that best satisfies the requirements of the Act. The Act prohibits the issuance of a certificate of compliance by NRC to that entity if NRC determines that:
The entity is owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government; or issuance of a certificate of compliance would be inimical to the common defense and e
security of the United States; or 4
Issuance of a certificate of compliance would be inimical to the maintenance of a a
reliable and economical domestic source of enrichment services.
In January 1998, the U. S. Department of the Treuury authorized USEC to begin a dual-path process to privatize USEC through either a merger and acquisition or an individual public offering of stock.
NRC prepared, in consultation with the Executive Branch agencies, a Standard Review Plan (SRP) to ensure consistency in, and to formally document, the process that was to be used by the staff to make the foreign ownership, control or domination, common defense and security, and reliable and economical source of domestic enrichment services determinations required by the sta'ute. This SRP was used by the staff in making the required determinations.
Some of the documents, or portions thereof, related to the privatization transactions are considered proprietary and, therefore, are not available in the Public Document Room.
9810300290 981027 PDR ADOCK 07007001 C
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Q11CUSSION 8y letter dated May 28,1998, the Commission provided a Final Conditional Consent to Transfer the gaseous diffusion plant Certificates of Compliance to the privatized USEC following an Initial Public Offering (IPO) sale process. The NRC reviewed the privatized corporation's Foreign Ownership, Control, or Influence (FOCl) application, Standard and Poor's credit rating, and the USEC submission in response to NRC Information Notice 89-25,
" Unauthorized Transfer of Ownership or Control of Licensed Activities." Based on the review of those documents, supplemented by interaction with the High Enriched Uranium Oversight Committee on common defense and security requirements, the Commission determined that the proposed IPO privatization process and the resulting private corporation will meet all applicable NRC regulatory requirements, including those derived from the Act regarding foreign ownership, control, and domination; common defense and security; and the maintenance of a reliable and economical source of domestic enrichment services. The Consent to Transfer was conditioned upon eight items contained in the May 28,1998, letter signed by the Chairman. These items were:
1.
USEC and the Department of Treasury select the IPO process as the method of USEC privatization.
2.
The corporate structure that results from the IPO sale process is as described in, " Post Privatization Structure," of the May 1,1998, letter from George Rif akes to Carl Paperiello, re: " Request for NRC Consent to Transfer the USEC Certificates of Compliance Under the Initial Public Offering Option" (May 1,1998, USEC letter.)
3.
The transfer of the certificates is in accordance with the "Information Related to the Transfer of USEC-Government's Certificates of Compliance Pursuant to initial Public Offering," submitted as Enclosure 2 of the May 1,1998, USEC letter.
4.
The IPO transaction is such that the Standard and Poor's credit rating, transmitted by the April 28,1998, letter from James Miller to Carl Paperiello, remains valid; or, Standard and Poor's issues an estimated credit rating, for the actual IPO transaction, that is investment grade.
5.
A decommissioning funding instrument is executed in accordance with the requirements of the Paducah Gaseous Diffusion Plant Compliance Plan, Issue 39, and the Portsmouth Gaseous Diffusion Plant Compliance Plan, Issue 38.
6.
NRC is notified, prior to the IPO closing date, of any material changes to the USEC, Inc. Certificates of Incorporation or By Laws, contained in Enclosure 1, " Updated FOCl Information," of the May 1,1998, USEC letter.
7.
NRC is provided, prior to the IPO closing date, a complete certified list of Owners, Officers, Directors and Executive Personnel that satisfies the Statutory Requirements and Tests and Presumptive Limits contained in Enclosure 1, " Updated FOCl l
Information," of the May 1,1998, USEC letter.
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8.
USEC consents to having three conditions added to the gaseous diffusion plant certificates of compliance. (The Chairman's letter listed the specific conditions which are discussed below.)
On June 29,1998, the USEC Board of Directors announced its decision to privatize USEC through an IPO of securities to the public. The Board concluded that the sale of USEC to the public through an IPO best met the statutory criteria, provisions, and requirements governing the sale. The decision was approved by the U.S. Treasury Department. TheIPO transaction involved the reorganization of USEC into a holding company with two wholly-owned subsidiaries. The holding company, USEC, Inc. was created and organized under the laws of the State of Delaware. The two wholly-owned subsidiaries were also organized under the laws of the State of Delaware and were named United States Enrichment Corporation (to be the NRC certificate holder) and USEC Services Corporation.
l By letter dated July 20,1998 (as supplemented by letter dated July 24,1998, to complete l
its response to Condition 7), USEC submitted the resolution of the eight NRC conditions on j
the privatization through an IPO. As discussed below, the conditions were met. Condition 1 was met because the IPO process for privatization was selected. The corporate structure will be as described in Condition 2. The transfer of certificates is in accordance with Condition 3, as supplemented by the USEC letter from James H. Miller to Carl J. Paperiello, GDP 98-0108, dated May 19,1998; the supplementalinformation is acceptable. In accordance with Condition 4, the Standard and Poor's credit rating is investment grade thus conforming with the SRP and meeting NRC requirements. USEC executed the decommissioning funding instruments in accordance with Condition 5. USEC provided Certificates of incorporation and By-laws for the three companies to reflect changes made and provided complete certified lists of Owners, Officers, Directors and Executive Personnel (OODEP) for the three companies prior to the IPO closing date in accordance with Conditions 6 and 7. Condition 8 was the consent to having conditions added to the gaseous diffusion plant certificates of compliance; USEC consented to the conditions.
In addition, as part of its FOCl review, by letter dated August 18,1998, the NRC indicated that it did not see any prohibition to granting FOCl approvals at this time. This finding was predicated on four items: (1) an acceptable review of USEC, Inc.'s loan agreement, (2) the new Board of Directors being processed for access authorizations and submission of Representative of Foreign Interest Statement forms for those Directors that hold a position with a foreign company, (3) the submission of a revised OODEP list for USEC Services Corporation that includes the Secretary, to be consistent with the USEC Services By-Laws, l
and (4) acknowledgment of the resolutions executed by the government-owned corporation by the new Board of Directors for USEC, Inc. and USEC-Private [USEC, the certificate i
holderl at their first Board of Directors meeting. While the August 18 letter did not specify
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a date by which these items needed to be complete, USEC has indicated, by letter dated j
October 8,1998, that they are substantially complete. In this letter, USEC provided its loan i
agreement and NRC and DOE are now reviewing it in accordance with item (1) above.
4 USEC also indicated that Board of Director access authorizations are being processed by DOE and that the Representative of Foreign interest Statement forms for the one Director that holds a position with a foreign company would be provided to NRC. USEC also submitted a revised OODEP list for USEC Services Corporation that includes the Secretary in accordance with item (3) above, and lastly indicated that resolutions earlier adopted by the i
Board of Directors for the three companies remain in effect for the newly-constituted Boards, thereby meeting the intent of item (4) above. Therefore, the staff concludes that there are no FOCl prohibitions which would preclude completion of this licensing amendment. The staff will continue to evaluate the appropriate resolution of the remaining minor items yet to be complete.
In order to add the conditions to the certificates of compliance, the staff must issue an amendment to each certificate. The staff recommended and USEC has consented to the addition of the following conditions to Certificates of Compliance GDP-1 and GDP-2.
The conditions will be numbers 14,15, and 16 for GDP-1 and numbers 13,14, and 15 for GDP-2.
If, at any time after the privatization date, the Corporation obtains information reasonably indicating changes described in the National Industrial Security Program Operating Manual, DOD 5520.22-_M, January 1995 (NISPOM),
Chapter 1, Section 3,1-302(h), to the information previously submitted to NRC, described in the NISPOM, Chapter 2, Section 3, 2-302b.(1) through (11), the Corporation shall notify NRC in writing within 15 days.
If the Corporation enters into negotiations for the proposed merger, acquisition, or takeover by a foreign person, the Corporation shall submit notification to NRC, in writing, within 15 days of the commencement of such negotiations. The submission shallinclude the type of transaction under negotiation (stock purchase, asset purchase, etc.), the identity of the potential foreign person investor, a plan to negate foreign ownership, control, or domination, and copies of any related loan, purchase and shareholder agreements, annual reports, bylaws, articles of incorporation, partnership agreements, and reports filed with other Federal agencies.
USEC, or its successors, as the Executive Agent for the United States for implementing the Russian HEU A<yeement, shall notify NRC in writing within 15 days, of any termination or material change in the provisions of the
" Memorandum of Agreement Botween the United States Acting By and Through the United States Department of State, and the United States Department of Energy and the United States Enrichment Corporation, for USEC to Serve as the United States Govemment's Executive Agent Under the Agreement Between the United States and the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons,"
entered into as of April 18,1997.
The Commission has already given its approval of the transfer, therefore this amendment l
action is merely an administrative action to impose the conditions. USEC, Inc. was formally l
privatized by the U.S. Treasury Department on July 28,1998. USEC has made the changes to the application documents that are necessary to support an IPO transaction in accordance with 10 CFR 76.68 and Safety Analysis Report Section 6.3. Therefore, those changes do not need NRC approval, a
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By letter dated July 27,1998, USEC provided copies of the executed Payment Surety Bond and Standby Trust Agreement. By letter dated September 16,1998, USEC provided originals of the Payment Surety Bond and Standby Trust Agreement that were executed to address the decommissioning funding liability for USEC post privatization. The instruments were effective July 28,1998. These documents replace the Board of Directors statement of intent that was previously in place. As a private corporation, the statement of intent is not a viable mechanism for decommissioning funding. Compliance Plan issue 39 for Paducah and Issue 38 for Portsmouth required USEC to submit funding instruments upon privatization. The funding is adequate for the first year and adequately covers the period 1
remaining before the F;rtificates of Compliance expire (December 31,1998). The funding set aside for decommissioning will be addressed as part of the ongoing renewal review.
ENVIRONMENTAL REVIEW lssuance of the administrative amendments to Certificates of Compliance GDP-1 and GDP-2 to add the conditions of transfer to the certificates is subject to the categorical exclusion provided in 10 CFR 51.22(c)(19). Therefore, neither an environmental assessment nor an environmentalimpact statement is required for the proposed action.
CONCLUSION The staff therefore plans to revise Certificates of Compliance GDP-1 for Paducah and GDP-2 for Portsmouth to include the following conditions, if, at any time af ter the privatization date, the Corporation obtains information reasonably indicating changes described in the National industrial Security Program Operating Manual, DOD 5520.22-M, January 1995 (NISPOWI),
' Chapter 1, Section 3,1-302(h), to the information previously submitted to NRC, described in the NISPOM, Chapter 2, Section 3, 2 302b.(1) through (11), the Corporation shall notify NRC in writing within 15 days, if the Corporation entors into negotiations for the proposed merger, acquisition, or takeover by a foreign person, the Corporation shall submit notification to NRC, in writing, within 15 days of the commencement of such negotiations. The submission shallinclude the type of transaction under negotiation (stock purchase, asset purchase, etc.), the identity of the potential foreign person investor, a plan to negate foreign ownership, control, or domination, and copies of any related loan, purchase and shareholder agreements, annual reports, bylaws, articles of incorporation, partnership agreements, and reports filed with other Federal agencies.
USEC, or its successorr., as the Executive Agent for the United States for implementing the Russian HEU Agreement, shall notify NRC in writing within 15 days, of any termination or material change in the provisions of the
" Memorandum of Agreement Between the United States Acting By and Through the United States Department of State, and the United States Department of Energy and the United States Enrichment Corporation, for USEC to Serve as the United States Government's Executive Agent Under the Agreement Between the
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i United States and the Russian Federation Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Weapons," entered into as of l
April 18,1997.
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. The Region ill Inspection staff has no objection to this proposed action.
Princioal Contributor Merri Horn l
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l DISTRIBUTION Docket 70-7001, 70-7002 NRC File Center PUBLIC Rill KO'Brien, Rlli DHartland, Rlli NMSS r/f NMSS dir, ofc. r/f FCSS r/f FCOB SPB r/f PHiland, Rlll i
' *See previous concurrence l-CFC
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NAME MHorn:ij DHoadley YFaraz MGalloway rson DATE 10 /9 /98 10 / 9 /98 10/15/98 10/14/98 10/N /98 C = COVER E = COVER & ENCLOSURE N = NO COPY gAcerprivt.wpd OFFICIAL RECORD COPY l
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'6 Tiirough the United States Department of State, and the United States Department of Energ} nd t,he United States Enrichment Corporation, for USEC to Serve as the United
' States Go rnment's Executive Agent Under the Agreement Between the United States and the Russian ration Concerning the Disposition of Highly Enriched Uranium Extracted from Nuclear Wea ns," entered into as 'of April 18,1997.
The Region ill Inspectionh ff has no objection to this proposed action.
Princioal Contributor Merri Horn DISTRIBUTION:
Docket 70-7001, 70-7002 NRC File Center PUBLIC Rill KO'Brien, Rill DHar d, Rlli NMSS r/f NMSS dir. ofc. r/f FCSS r/f FCOB SPB r/f
- iland, Rlil
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SPB SPI NAME MHorn:ij DHoadley YFarazW ay R rson DATE 10 /9 /98 10 / 9/98 10/If98
/0 /k/98 h A /98 C = COVER E = COVER & ENCLOSURE -
N = NO COPY
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5 CONCLUSION he staff the~refore plans to revise Certificates of Compliance GDP-1 for Paducah and GDP-2 forsPortsmouth to include the following conditions.
, at any time af ter the privatization date, the Corporation obtains information re sonably indicating changes described in the National Industrial Security Pr ram Operating Manual, DOD 5520.22-M, January 1995 (NISPOM),
Chap) r 1, Section 3,1-302(h), to the information previously submitted to NRC,d cribed in the NISPOM, Chapter 2, Section 3, 2-302b.(1) through (11), the orporation shall notify NRC in writing within 15 days.
If the Corpora n enters into negotiations for the proposed merger, acquisition, or t (eover by a foreign person, the Corporation shall submit notification to NRO in writing, within 15 days of the commencement of such g
negotiations. The submission shallinclude the type of transaction under negotiation (stock purc ase, asset purchase, etc.), the identity of the potential foreign person i vestor, a plan to negate foreign ownership, control, or domination, and copies ny related loan, purchase and shareholder agreements, annual reports, laws, articles of incorporation, partnership agreements, and reports filed h other Federal agencies.
USEC, or its successors, as the Exe tive Agent for the United States for implementing the Russian HEU Agreenient, shall notify NRC in writing within 15 days, of any termination or material nge in the provisions of the
" Memorandum of Agreement Between the qited States Acting By and Through the United States Department of Statq,ichment Corporation, for and the United States Department of Energy and the United States Enr USEC to Serve as the United States Government'lh xecutive Agent Under the Agreement Between the United States and the Russ n Federation Concerning
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the Disposition of Highly Enriched Uranium Extracted m Nuclear Weapons,"
entered into as of April 18,1997.
The Region til Inspection staff has no objection to this proposed actio Princioal Contributor Merri Horn DISTRIBUTION:
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Docket 70-7001, 70-7002 NRC File Center PUBLIC Rlli KO'Brien, Rlli DHartland, Rlli \\
NMSS r/f NMSS dir. ofc. r/f FCSS r/f FCOB SPB r/f
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C = COVER E = COVER & ENCLOSURE N = NO COPY g:\\cerprivt.wpd OFFICIAL RECORD COPY