ML20217J413
| ML20217J413 | |
| Person / Time | |
|---|---|
| Site: | Claiborne |
| Issue date: | 08/01/1997 |
| From: | Mcgarry J, Rowden M FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LOUISIANA ENERGY SERVICES, WINSTON & STRAWN |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#397-18420 ML, NUDOCS 9708140212 | |
| Download: ML20217J413 (8) | |
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I UNITED STATES OF AMERICA E
NUCLEAR REGULATORY COMMISSION D
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In the Matter of
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Docket No. 70-3070-ML
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LOUISIANA ENERGY SERVICES, LP. )
August I,1997
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(Claiborne Enrichment Center)
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APPLICANT'S RESPONSE TO THE COMMISSION ORDER OF JULY 8,1997 The Commission has requested that Applicant Louisiana Energy Services, L.P. ("LES")
inform it ofits evaluation of a request of Graystone Corporation ("Graystone") for unanimous consent of the LES partners to its withdrawal from the partnership. The Commission has also requested that LES explain the significance, if any, of this evaluation on the financial qualifications issue. As discussed below, the LES Partnership Agreement allows for a partner's withdrawal and a substantial record exists to support the ongoing vitality of LES's financial qualifications under such circumstances.
SUMMARY
The LES partners have not yet determined whether to grant unanimous consent for Graystone's withdrawal, as is required by Section 15,1(a) of the LES Agreement of Partnership, as amended ("the Agreement")? However, Graystone holds the smallest ownership interest of the four general partners, and could be allowed to withdraw without affecting the financial capability of the v
_Sgg Exh. I-DO-44. The Agreement was amended by the First Amendment (LES Exh. 22).
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i partnership or its ability to carry out the Financial Plan ("the Plan"). Sec LES Exh.12, Attachment D. Graystone's departure would not, therefore, materially affect LES's ability to finance construction and operation of the Claibome Enrichment Center. The financial qualifications of LES, as explained in LES's brief for review of the Second PID are not dependent on the financial resources of any single partner, nor does the Plan rely on equity committedin advance by any existing partner as proof of I
its financial qualifications.
DISCUSSION L
Graystone's withdrawal would have negligible impact on LES's financial qualifications.
A.
Graystone's small equity share is economically insignificant.
Graystone, whose ultimate parent is Northern States Power Company ("NSP"), is a general partner in the LES limited partnership. It is affiliated with Le Paz Incorporated, a limited partner i
whose ultimate parent is also NSP. Graystone owns.52 percent of the partnership; its afIlliate, Le Paz, owns 6.23 percent? Partner contributions to capital have always been sufficient to sustain the partnership's continued operation even when not all partners elected to add new capital. Seg First e
Amendment to Partnership Agreement. Indeed, LES has already addressed the Licensing Board's misapprehension of partner equity contributions, pointing out that the Agreement reflects only the current, not an immutable, allocation of equity interests and funding obligations. See Applicant's Briefin Support ofIts Petition for Review of LBP-96-25 ("LES Supporting Brief") at 27 n.27.
Should Graystone be permitted to depart, this circumstance would be no different financially
. than a partner declining to participate in new capital shares - a normal experience in new ventures 2'
It should be noted that Le Paz has not asked to withdraw. For the purposes.of this filing, however, it is presumed to seek withdrawal, should the partners agree to Graystone's departure.
and one already experienced and successfully resolved by the LES partners on several occasions.
After exhaustion of the initial contributions of capital by all founding LES partners, new equity has been raised as needed, and could continue to be available so long as the existing partners, or new partners, consider the investment worthwhile. As LES's financial expen explained, financial institutions will look to the collective capability of the partners and their parents in assessing the partnership's qualifications. In this respect, each of the existing partners, together with its respective parent, has considerable financial resources. LES Supporting Brief at 25-27 and nn. 25 and 28.
B.
Capital contributions by the partners are a flexible portion of project financing.
By design, the LES Financial Plan provides wide latitude in how the project shall be financed, and contemplates capital contributions through a mixture ofinvestor equity and outside financing, depending on what is most attractive economically at the time. LES Exh.12, Attachment D at 12?
To the extent that partner equity plays a role in the final financ% arrangements, general partner equity (and voting rights) would be frozen at the end of the venture period and "new infusions" would come from limitedpartners. E at 13. Graystone's withdrawal thus would have no impact on future capital requirements. The Plan already anticipates that post-venture equity would come from then-existing or new limited partners.-
The Plan does not presume that all founding limited panners would provide new equity. E at 13. As LES has explained, such capital commitments are necessarily postponed until the conclusion oflicensing! Clearly, dramatic changes can occur, both to the investors and the market, 3'
LES's financial expert explained that some combination of affiliated partners and the bond and equity markets would provide construction funding. &g LES Supporting Brief at 26-27.
Other activities that await licensing and must be concluded before financing include full commitment of capacity, satisfactory fixed price contracts for construction and centrifuges, J
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over the licensing of the project. The plan posits that the positive economics of the project at the time
- of financing the project will permit necessary funds to be raised even if certain partners or affiliates withdraw. S_qq LES Supporting Brief at 26 27 and nn. 24-28.
IL The Partnership Agreement has always anticipated partner withdrawal.
From inception, the LES partners have designed into their Agreement flexibility for admitting s partners to replace departing partners, with due consideration to licensing requirements. Exh, I DO-44 at Sections 12.1 4,15.2(a), (b) and (d), and 15.4(c)(i) and LES Exh. 22 at 115 and 10.
l The amended redemption provisions, for example, allow for utility afliliated partners, both general and limited, to " redeem" the fair market value of their partnership interests, under gecified conditions, once an NRC license is received.
The Agreement, however, precludes departure of general partners if adverse to issuance of the NRC license. Exh. I-DO-44 at Section 15.2(a) and LES Exh. 22 at j 10(a). LES does not siew Graystones departure, were it to be approved, as having an adverse licensing impact? Graystone has 8 votes out of 100, the smallest of any of the four general partners serving on the LES management -
i committee. Graystone's departure before receipt of the license - and therefore before redemption rights arise - could be handled by a redistribution of Graystone's small general partnership share among the other general partners so that the respective relationship of such partners one to each other and market conditions suitable for further investment. LES Exh.12, Attachment D at 13.
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_ With certain exceptions, such as issues affecting national security, voting strength is a function of ownership of the general partner in combination with any _ corporate affiliated limited partner (s). San Exh. I-DO-44 at Section 5.3(a) and Schedule B. On issues of national security, the Agreement limits all votes of Urenco Investments, Inc., the general partner affiliated with a foreign parent, to 20 percent regardless of ownership interest. Ist at Section 5.3(b). _
C would remain intact? Thus, control of all partnership matters affecting safety and national security would remain in the United States-owned general partner companies, Claiborne Energy Seivices, Inc.
and Claiborne Fuels, L.P., whose ultimate parents are Duke Energy Corporation and Fluor Corporation, respectively.
Implementation of the Plan has always been dependent on receipt of the license, the sine qua non ofinvesunent decisions by the partners and the fmancial community. As LES's financial expert testified, no pmdent investor or lender will commit resources to a project of this magnitude while it faces, as a prerequisite to its success, a licensing proceeding of uncertain duration and outcome. LES Supporting Brief at 39;itt Ah2 Doudiet at 8 9,31 fol. Tr. 563. Indeed, the conventional approach to ventures such as this is that there are no early commitments of capital beyond the venture period.I' LES Supporting Brief at 25. The wisdom of the financial community in this regard is borne out by I
the LES experience.
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In the event Le Paz seeks to withdraw, its share could be similarly redistributed.
I' Set LES Supporting Erief at 25. This is what LES has told the Commission all along,11, that "no irrevocable commitment to proceed has been made." Id. at 26. The NRC Staff acknowledged in testimony, for example, that LES and its associated partners will decide whether to proceed as the project reaches each ofits stages ofdevelopment 11 at 25-26.
This is, after all, a venture project, where the decision to go forward is constantly reassessed, and that is why investors and lending institutions do not commit in advance. "It takes but little experience in financial markets to realize that lending institutions will not lend a borrower large sums of money when the life of the underlying project is threatened by extensive litigation." Freehold Cogeneration Associates. LP. v. Board of Regulatory Commissiongn,44 F.3d 1178,1188-89 (3d Cir.1995). '
t III.
The duration and uncertainty of the hearing licensing process have alTected the viability of the project.
In the preceding discussion, LES has described those portions of the Agreement that accurately reflect the flexibility of the Partnership Agreement in addressing the withdrawal or potential withdrawal of a panner, and why the withdrawal of any partner (or Graystone in particular) would not affect the financial qualifications of the partnership. From the perspective of LES, therefore, the Commission can and should proceed apace to decide this issue on the factual record and bt.tCs before it. As discussed, LES's earlier briefs have, in large part, already addressed the issue posed by the Commission.
Having presented what the record states, LES is obliged to poin6 out that the delay and uncertainty caused by the Licensing Board have created serious doubt among the partners as to the efficacy of this project. In fact, the frustration experienced by the partners has contributed directly to the proposal by Graystone to withdraw. This proceeding is therefore at a critical juncture - LES has demonstrated its fmancial qualifications and has met all ether licensing criteria, but the partners have become deeply troubled by the apparent ' ability of the licensing process to account for fairness, m
expediency and economic practicability.
Respectfully submitted, LOUISIANA ENERGY SERVICES, L.P.
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Marcus A. Rowden gMichaelMcGg,III(/ '
VRobert M. Rader FRIED, FRANK, HARRIS, Robert L. Draper Sh3IVER & JACOBSON WINSTON & STRAWN, ATTORNEYS FOR LOUISIANA ENERGY SERVICES, L.P.
Dated at Washington, D.C.,
this ist day of August,1997 g* {
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3 UNITED STATES OF AMERICA -
1 NUCLEAR REGULATORY COMMISSION 0
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BEFORE THE COMMISSION
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AUG - 1 1997 1
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In the Matter of
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Docket No. 70-3070-ML sec W
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LOUISIANA ENERGY SERVICES, L.P.
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August 1,1997 5
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(Claiborne Enrichment Center)
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CERTIFICATE OF SERVICE
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I hereby certify that copies of" Motion of Applicant Louisiana Energy Services for Leave to Exceed Page Limitation Specified in Commission Order Dated July 8,1997" and '? Applicant's -
Response to the Commission Order of July 8,1997" were served upon the following by deposit in the United States mail, first-class, postage prepaid, this 1st day of August,1997:
Administrative Judge Administrative Judge Thomas S. Moore, Chairman
- Richard F. Cole
- Atomic Safety and Licensing Atomic Safety and Licensing.-
Board -
Board.
-U.S. Nuclear Regulatory U.S. Nuclear Regulatory Commission Commission Washington, D.C. 20555 Washington, D.C. 20555 (2 copies)
- Administrative Judge Office of the Secretary
- Frederick J. Shon* -
U.S. Nuclear Regulatory Atomic Safety and Licensing Commission Board Washington, D.C, 20555 U.S. Nuclear Regulatory Attention: Chief, Rulemakings and Commission Adjudications Staff
-Washington, D.C. 20555 (Original plus 2 copies)
Office ofCommission Appellate
- Ann Hodgdon, Esq.
1 Adjudication *
- Richard Bachmann, Esq.*
U.S. Nuclear Regulatory Office of the General Counsel
- Commission U.S. Nuclear Regulatory Washington, D.C. 20555 Commission Washington, D.C. 20555
o n.
- Ronald Wascom, Deputy Assistant Joseph DiStefano, Esq.
Secretary * -
Quinn, Racusin & Gazzola Office of Air Quality &
1401 H Street, N.W.
Radiation Protection Suite 510 P.O. Box 82135 -
Washington, D.C. 20005 Baton Rouge, LA 70884-2135 Robert G. Morgan-WC26B Marcus A. Rowden Licensing Manager Fried, Frank, Harris, Shriver &
Duke Engineering & Services,.
Jacobsen Inc.
1101 Pennsylvania Avenue, N.W.
400 South Tryon Street Suite 900 South Charlotte, NC 28201-1004 Washington, D.C. 20004 Diane Curran
- Nathalie Walker
- Harmon, Curran, Gallagher &
Sierra Club Legal Defense Fund Spielberg 400 Magazine St.
2001 S Street, N.W.
Suite 401 Suite 430 New Orleans, LA 70130 Washington, D.C. 20009-1125-Adjudicatory File Roland J. Jensen Atomic Safety and Licensing Louisiana Energy Services, L.P.
- Board Panel 2600 Virginia Avenue, N.W.
U.S. Nuclear Regulatory Commission
' Suite 608 Washington, D,C, 20555 -
Washington D.C. 20037 =
Thomas J. Henderson, Esq.
- David S. Bailey, Esq.
- Lawyers' Commmittee for-Civil Rights Under Law 1450 G Street, N.W, Suite 400 Washington, D.C. 20555 LOUISIANA ENERGY SERVICES, L.P.
1 J. Michael McG III //
WINSTON &
- RAWN, ATTORNEY FOR LOUISIANA ENERGY SERVICES, L.P.
Via facsimile