ML20210G596

Provides Details of General Atomic Technologies Corp Request for Transfer of Control of Ga Technologies,Inc.Resources Adequate to Assure Safe Operation & Decommissioning of Licensed Facilities.Financial Info Encl

ML20210G596
Person / Time
Site:	General Atomics, 07000734
Issue date:	09/19/1986
From:	Ketzlach N NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
To:	NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS)
References
NUDOCS 8609250432
Download: ML20210G596 (7)

Text

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.e SEP 191986 fidTE TO FILES EVALUATION OF GENERAL ATOMIC TECHNOLOGIES CORPORATION'S (GATC)

REQUEST FOR TRANSFER OF CONTROL OF GA TECHNOLOGIES, INC. (GA)

LICENSED ACTIVITIES TO GATC Enclosed are details of the proposed transfer of control and a review of the financial qualifications of GATC by the Office of State Progra.ns. In summary, there are no changes in the technical specifications or the mar:ner in which' GA proposes to manage or operate the facilities. The only contemplated changes are in ownership of the GA stock, land, and buildings, and in the composition of the Board of Directors. As the facilities will. be operated in accordance with the existing technical specifications, there will be no safety considerations not heretofore reviewed.

GA reaffirmed the decommissioning costs of $13,515,000 in 1986 dollars provided in a July 25, 1986, update of the GA Decommissioning Plan originally dated July 1979. Agreements with Chevron & Shell (oil companies) and Public Service Company of Colorado (PSC) stipulate that those organizations will provide funds for decommissioning of the fuel fabrication facility, estimated to be $5,565,000 of the 13.5 million. This agreement, plus the assets of GA, appears to assure the availability of funds- for decommissioning, whenever it may occur.

Conclusion

1. GA has adequate funds to operate the reactors and other facilities in the complex.

2. GATC, in acquiring control of the facilities from the previous owner, Chevron U.S.A., Inc., has, as part of the transfer, an agreement from a consortium of Chevron Corporation and Royal Dutch Shell (known as Valley Pines Association) to fully fund the decommissioning of the Nuclear Fuel Fabrication Facility (NFF),

estimated to cost $5,565,000. The estimated cost for decommissioning all of the nuclear facilities is $13.5 million.

3. GATC has affirmed that sufficient funds are available from GA's assets to cover the decommissioning costs (see following paragraph).

The Office of State Programs indicates that the resources of GA are adequate for the future decommissioning with the inclusion of the funding obligations from the Valley Pines Association. Subsequent to the financial review made by the Office of State Programs, Mr. James N. Blue, President, GATC, by letter dated September 10, 1986, affirms that sufficient funds to cover the various decommis-sioning costs will be avcilable from GA's operating budgets, liquid i

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2 SEP 191986 assets, and associated reserves, in addition to the funds which will be available pursuant to the contract GATC has with PSC and with the-Valley Pines Association with respect to funding such decermissioning costs.

Section 50.33(f) 2 indicates that "... the applicant shall submit information that demonstrates the applicant possesses or has reasonable assurance (underlined for emphasis) of obtaining the funds necessary to cover estimated operating costs for the period of the license, plus the estimated costs of permanently shutting down and maintaining it in a safe condition."

The staff concludes that the sum total of resources of GA, PSC, and the Valley Pines Association is adequate to assure the safe operation and the safe decommissioning of the licensed facilities.

This review was prepared by H. Bernard, N. Ketzlach, and J. C. Peterson.

Enclosure:

SP Evaluation of Financial Qualifications of GA.

Original Signed by N.Xetzlach Norman Ketzlach Uranium Process Licensing-Section Uranium Fuel Licensing Branch Division of Fuel Cycle and Material Safety

Enclosure:

As stated DISTRIBUTION w/ enclosure FCUP r/f FC Central r/f FCUF r/f NKetzlach (2) VLTharpe GJohnson, 0GC HBernard,PBSS HNBerkow, PBSS Docket File;70-734i JCPeterson, SP JSaltzman, SP 50-163 PDR Region V 50-89 S_I!$!! N _________I[IS__IS h $ _[$ h g f_[$ k y&_[_$'l>_b.f;p__[_IS__

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Financial Qualifications  !

Docket Nos.50-089, 50-163, and 70-734 i

Introduction By application dated May 7, 1986 General Atomic Technologies Corporation (GATC) requested NRC approval of a proposed transfer of control of GA .

Technologies, Inc. (GA), and its licenses. The transfer of control would be accomplished by the acquisition of all 'of the outstanding GA stock by GATC, a Wyoming corporation. Under the plan a subsidiary of GATC would be merged into GA, with GA surviving the merger. The application indicates that GA would continue to be operated in the same manner as it has been operated in the past.

Nothing would change in the manner in which GA, the licensee, conducts its NRC-licensedoperations,accordingtotheapplication. The only changes contemplated are in the stock ownership of GA, its board of directors, and the ownership of GA land and buildings. At the staff's request, GA provided additional financial information in a submittal dated July 25, 1986. GA's submittal and the following analysis address the reorganized GA's financial qualifications to operate and decomission the licensed facilities. This is in accordance with the provisions of 10 CFR 50.33(f) and 10 CFR 70.23(a)(5).

Actual and Projected Results of Operations GA, the licensee, is a wholly-owned subsidiary of unevron U.S.A., Inc. (CUSA).

CUSA is a wholly-owned subsidiary of Chevron Corporation (Chevron), a major international oil company. At our request GA submitted financial statements

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showing its actual results for calendar years 1984 and 1985 and projected statements for 1986,1987, and 1988. The projected statements assume that the proposed merger is accomplished.

The actual results reflect all of GA's licensed activities including operation of a high enriched nuclear fuel fabrication facility, a hot cell, two Triga research. reactors and a low enriched nuclear fuel fabrication facility. GA has been in business for over thirty years; it indicates that there has always been adequate funding to operate the NRC-licensed facilities. The costs of operating the licensed facilities are fully reflected in the financial statements and projections, according to GA's submittal.

The historical statements show profitable operations, indicating that facility operating costs have been covered by revenues. GA had income before income taxes of $7.1 million in 1984 and $2.6 million in 1985. (GA's operating results are included with Chevrd'n-'before preparation of Chevron's consolidated income tax return.) The projections show a net loss before income taxes of

$2.9 million in 1986 as the result of a one-time non-cash provision for early retirement costs of $7.7 million. Thus, income before this unusual non-cash item is projected at $4.8 million for 1986. Net income before income taxes for 1987 and 1988 is projected at $7.6 million and $8.0 million, respectively.

Decomissioning Cost Estimates and Sources of Funds GA's July 25, 1986 submittal provided updated cost estimates for decommissioning each facility and an explanation of the anticipated sources of funds. The cost estimates are included in GA's "Decomissioning Plan, June l

1979 (revised July 1986)," which is labeled " Private Data." Accordingly, the I l

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'l specific estimates are not revealed in this financial review. NRR is reviewing the estimates to determine if they are reasonable given the characteristics of the facilities.

The 1982 reorganization of Valley Pines Association (VPA) resulted in the formation of the current licensee, GA. VPA was known as General Atomic Company prior to the reorganization. GA entered into a Services Agreement with VPA at the time of the reorganization. VPA retained certain of its assets and liabilities after the reorganization and in the Services Agreement contracted to have GA perform certain tasks for it. In turn, VPA retained the obligation to decommission the high enriched nuclear fuel fabrication facility-(the "NFF facility"). The NFF facility has the highest estimated decomissioning cost of GA's licensed facilities. VPA's obligation to pay the full cost of the NFF facility decomissioning is to be reaffirmed upon GATC's acquisition of GA

, through an amendment to the Services Agreement. If GA elects to keep any portion of the NFF facility opemfor its own business reasons after it receives notice of VPA's desire to shut the facility down, VPA is relieved of the responsibility to fund the decomissioning of such portion. GA indicates that it intends to shut down all portions of the NFF facility requiring decommissioning within a time period that would result in VPA funding the full cost thereof.

In view of the above, we recommend that GA be required to submit copies to NRC of the Services Agreement with VPA promptly after it is amended. This is expected to occur concurrently with GATC's acquisition of GA, as noted above.

We also recomend that GA be required to inform NRC at any future time when changed circumstances would relieve VPA of responsibility for funding any

I portion of decomissioning costs of the NFF facility, and indicating GA's alternate plan for funding such costs.

VPA is a partnership of CUSA and Scallop Corporation, a subsidiary of the Royal Dutch /Shell Group. As noted above, CUSA is a wholly-owned subsidiary of Chevron Corporation. CUSA has formerly known as Gulf 011 Corporation. CUSA and Scallop are jointly and severally liable for the obligations of VPA. In addition, VPA has a contract with Public Service Company of Colorado pursuant to which the utility is to reimburse VPA approximately 80 percent of the cost of decommissioning the NFF facility, subject only to the conditions described above with respect to VPA's obligation.

The two VPA partners are each owned by a very large industrial group of companies whose annual revenues and income, and, assets, are in the billions of dollars. For example, Che/ron Corpora' tion's l'984 total revenues and net income were $29.2 billion and $1.5 billion, respectively. Cash generated by operations during the year totalled $4.0 billion. Chevron's total assets at December 31, 1984 were $36.4 billion including $1.4 billion in cash and marketable securities. Shell Oil Company's (of Royal Dutch /Shell) 1984 total revenues and net income were $20.7 billion and $1.8 billion, respectively.

Cash generated by operations during the year totalled $3.9 billion. Shell's total assets at December 31, 1984 were $23.7 billion including $464 million in cash and marketable securities. GA has demonstrated that YPA has the resources behind it (including its parents' resources and the contract with Public Service Company of Colorado) to provid; reasonable assurance that funding will be available to decomission the NFF facility.

GA expects that internally generated funds will provide for decomissioning of 1

the hot cell, the two Triga research reactors and the low enriched nuclear fuel fabrication facility. Costs are estimated to be significantly lower than that for the NFF facility. Funding should be within GA's capability given its recent and projected operating results as discussed above. In addition, approximately one-half of these costs is expected to be recovered under the terms of ongoing U.S. Department of Energy contracts. GA indicates that no post-decomissioning maintenance or surveillance of any of the facilities will be required due to the type of decomissioning contemplated.

Conclusion and Recomendations In view of the above analysis and the contemplated GA/GATC merger, we conclude that GA has demonstrated reasonable assurance that it can obtain the funds to operate its NRC-licensed facilities and to permanently shut the facilities down and maintain them in a safe condition'(decomissioning). Accordingly, GA is financially qualified to pursue Jhese activities under the provisions of 10 CFR 50.33(f) and 10 CFR 70.23(a)(5).

In addition to the above conclusion, we recomend that the following requirements be placed on GA: -(l) to submit to NRC copies of the GA/VPA Services Agreement after it is amended to reaffirm VPA's obligation to pay the full cost of the NFF facility decomissioning; and (2) to inform NRC at any future time when changed circumstances would relieve VPA of responsibility for funding any portion of decomissioning costs of the NFF facility, and indicating GA's alternate funding plan for such costs.

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