ML20209E051
| ML20209E051 | |
| Person / Time | |
|---|---|
| Site: | Palo Verde  |
| Issue date: | 11/04/1985 |
| From: | Dircks W NRC OFFICE OF THE EXECUTIVE DIRECTOR FOR OPERATIONS (EDO) |
| To: | |
| Shared Package | |
| ML20209E048 | List: |
| References | |
| FOIA-86-592 SECY-85-350, NUDOCS 8609100006 | |
| Download: ML20209E051 (4) | |
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November 4, 1985 SECY-85-350 l
For:
The Commissioners From:
William J. Dircks Executive Director for Operations
Subject:
PUBLIC SERVICE COMPANY OF NEW MEXIC0'S PROPOSED SALE AND LEASE-BACK OF ITS OWNERSHIP SHARE OF PALO VERDE UNIT 1
Purpose:
To inform the Commissioners of the receipt of an application of first impression.
Discussion:
On October 18, 1985, an application was filed with the Commission seeking approval of a sale and leaseback transaction under which the Public Service Company of New Mexico (PNM), would sell its 10.2 percent interest in Palo Verde Un.it I to an owner-trustee for the benefit of equity-owner investors, and possession of the facility would simultaneously be leased back to PNM under a long-term lease. This is the first sale and leaseback transaction of a nuclear facility to come before the Commission. The purpose of the transaction is to allow investors to take advantage of provisions in the Internal Revenue Code and to spread the costs of the facility over a longer period of time.
PNM has advised that this transaction could result in substantial savings to its ratepayers. Under the terms of the proposed transaction, PNM would continue to be licensed to " possess" the facility and continue to have all rights responsibilities and obligations it now has under the license and the terms of the Arizona Nuclear Power Project Participatiori Agreement; however, the new equity-owner would not become-a licensee.
Indeed. the applicant has informed the Staff that it is essential for the success of the transaction that the owner-trustee not be named as,a co-licensee.
Contact:
E. Reis, ELD 49-28650 8609100006 860902 PDR FOIA YAFFE86-592 PDR j
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MEMORANDUM FOR:
Edwin Reis Assistant Chief Hearing Counsel FROM:
Lee Dewey
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Attorney, OELD
SUBJECT:
PUBLIC SERVICE COMPANY OF NEW MEXIC0'S PROPOSED SALE AND LEASEBACK OF ITS OWNERSHIP SHARE OF PALO VERDE UNIT 1 I.
BACKGROUND This memo discuss'es a proposed sale and leaseback of an ownership interest in Palo Verde Unit 1, a class 103 nuclear utilization facility which is subject to the jurisdiction of the Nuclear Regulatory Commission under the J
Atomic Energy Act of 1954, as amended (AEA), 42 U.S.C. 95 2011 et seq., and 10 C.F.R. Part 50. 1/ Basically, the Arizona Public Service Company (APS),
i the Licensee for Palo Verde, has requested that the NRC approve a transfer of '
l Public Service Company of New Mexico's (PNM) 10.2% share in the facility to an owner-trustee (The First National Bank of Boston) for commercial equity-owner investors. Application, at 1-2, 2/ It is further proposed that the license not be transferred and remain in PNM, who under a 281 year lease from
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On October 18, 1985, Arizona Public Service Co. filed in Docket No. STN l
50-528 (Palo Verde Nuclear Generating Station, Unit 1) an " Application Service Company of New Mexico" (hereinafter " Application")y Public in Respect of a Sale and Leaseback Financing Transaction b and a
" Memorandum" in support thereof (hereinafter " Memorandum").
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The owner-trustee proposes to borrow 70-80% of the purchase price from "First PV Funding Corporation" which will in turn borrow these amounts by issuing public debt securities that will be non-recourse as to the owner-trustee and the equity-owner investors. Memorandum at 11.
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, the owner-trustee would remain in possession and continue to have the same control over and responsibility for the facility as it now has, as long as it complies with the terms of the lease. Application at 1, 4-6, 9-12; Memorandum at 6-7, 9-10, 16. After 281 years, PNM has an option, but no obligation, to renew the lease. Memorandum at 9.
This is the first proposed use of a sale and leaseback transaction in the financing of a nuclear utilization facility to come before the Commission. 3/
In the Application, the Licensee APS requested the NRC to issue an order:
(1) authorizing the transfers of the Facilities through the sale and leaseback financing transactions, pursuant to Section 50.22 and 50.54fc) of the Commission's regulations (10 CFR 50.22 and 50.54(c)), subject to the conditions that:
(a) The rights acquired by the Owner Trustee and any equity investor and any successors and assigns (including any mortgagee or secured party of such Owner Trustee) in and to PVNGS Unit 1 may be exercised only in compliance with and subject to the same requirements and restrictions as would apply to PNM pursuant to the provisions of Facility Operating License No. NPF-41 (the License), the Atomic Energy Act of 1954, as amended (the Act), and the regulations issued by the Commission pursuant to the Act; and (b) Neither the Owner Trustee nor any equity investor nor any of their respective successors or assigns may take possession of any interest in PVNGS Unit 1 prior to either (1) the issuance of a license from the Commission authorizing such possession or (2) the transfer of the License authorizing PNM to possess an interest in PVNGS Unit I upon an applica-
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The professed purpose of this sale and leaseback transaction is to afford investors tax write-offs and to allow the cost of the facility to be capitalized over a longer period of time. Application at 3.
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tion for transfer of such License filed pursuant to 10 CFR 50.80(b);
and (ii) acknowledging that either the Owner Trustee nor any equity investor nor any of their respective successors and assigns is or shall become a licensee under the License unless and until the Commission shall have issued an amendment of the License authorizing such Owner Trustee, equity investor, successor or assign to take possession of an Interest in PVNGS Unit 1 or shall have approved a transfer of PNM's license to such Owner Trustee, equity investor, successor or assign.
(Application at 2-3)
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