ML20217J998
| ML20217J998 | |
| Person / Time | |
|---|---|
| Site: | Callaway  |
| Issue date: | 10/16/1997 |
| From: | NRC (Affiliation Not Assigned) |
| To: | |
| Shared Package | |
| ML20217J957 | List: |
| References | |
| NUDOCS 9710220336 | |
| Download: ML20217J998 (6) | |
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UNITED STATES y-j NUCLEAR REGULATORY COMMISSION
[, t WASHINGTON. D.C. 30646-0001 k* OV,/
LAFETY EVALUATION BY THE OFFICE OF NUCLEAR REACTOR REGULATION
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PROPOSED MERGER UNION ELECTRIC COMPANY CAllAWAY PLANT. UNIT 1 DOCKET NO. 50-483
1.0 INTRODUCTION
By letter dated February 23, 1996, as supplemented by letters dated April 24, 1996, and November 15, 1996. Union Electric Company (UEC) submitted an application for approval of the implementation of a merger agreement between UEC and Central Illinois Public Service Company. Incorporated (CIPSCO), under which UEC would become a wholly-owned subsidiary of a new company. Ameren Corporation (Ameren).
Ameren was formed to implement the merger agreement, and presently is owned equally by UEC and CIPSCO.
UEC is the holder of Facility Operating License No. NPF-30 for the Callaway Plant. Unit 1.
Ameren.
after becoming the parent company to UEC. would hold all common stock in UEC.
i UEC would continue to remain the owner /cperator of the single unit Callaway Plant. After the merger. UEC would remain an " electric utility" as defined in 10 CFR 50.2. engaged in the generation, transmission and distribution of electric energy for wholesale and retail sale.
Current UEC common stockholders would exchange their shares for Ameren common stock, and current CIPSCO shareholders likewise would exchange their common shares for Ameren common stock.
Pursuant to 10 CFR 50.80. no license for a production or utilization facility, or any_right thereunder, shall be transferred, assigned, or in any manner
. disposed of either voluntarily or involuntarily, directly or indirectly, through transfer of control of the license to any person, unless the Commission gives its consent in writing. The Commission may approve the transfer of control of a license, after notice to interested persons (61 FR 29434). Such action is contingent upon the Commission's determination that the licensee following the transfer of control is qualified to be the holder of the license and the transfer of such control is otherwise consistent with the applicable provisions of law, regulations, and orders of the Commission.
2.0 ANTITRUST CONSIDERATIONS Callaway Acolication UEC the sole owner and operator of the Callaway Plant. Unit 1. has entered into a merger agreement with CIPSCO which provides for UEC to become a wholly-owned subsidiary of the newly formed Ameren Corporation, a registered public utility holdin In addition. Central Illinois Public Service Company ("CIPS")(CIPgcompany.;CO's principal utility operating subsidiary) and CIPSCO oko2g0ggggfgggje3 M
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! Investment Company (CIPSCO's subsidiary for conducting non-utility businesses) will also become wholly-owned operating subsidiaries of Ameren.
a By letter dated February 23. 1996, as sup)lemented by letters dated April 24 1996, and November 15. 1996, the Nuclear Regulatory Commission (NRC) staff received an application from UEC requesting that the license be amended to reflect UEC's status as an operating company subsidiary of Ameren Corporation, and that consent be granted pursuant to 10 CFR 550 80.
After review of the filings in this proceeding the record and testimony developed in the related proceedings at the Federal Energy Regulatory Commission (FERC) and other public information the staff has determined that there are no antitrust concerns resulting from the changes pro)osed in the subject request.
Consequently, the Director of the Office of luclear Reactor Regulation has issued a post-operating license no significant antitrust change finding in connection witn UEC's request.
Previous NRC Antitrust Reviews The staff previously conducted antitrust licensing reviews of UEC at the Callaway construction permit and operating license phases. The review conducted for the operating license was completed on January 24, 1984, and concluded that there were no significant antitrust changes since the construction permit antitrust review and that a recond full antitrust review was not required.
The staff's conclusion stated in part:
Many changes with competitive im)lications have occurred in the applicant's service area since t7e initial antitrust review at the construction permit stage:
- 1) The applicant, at the suggestion of the Department of Justice, revised many of its wholesale power contracts with the effect of freeing up competitive options for wholesale customers: 2)
Anticipated growth in demand for electricity did not materialize and the high cost of money along with escalating construction costs all provided the impetus for cancellation of Unit 2 of the Callaway Nuclear Plant: 3)
State legislation provided the means for smaller municipal power systems to band together to form joint action agencies, thereby enhancing their bargaining positions in negotiating bulk power supply agreements throughout the State of Missouri: 4) Antitrust litigation involving the applicant was initiated; and 5) The ap)licant consummated an acquisition and initiated a merger involving its t1ree electric subsidiaries during the interim period since the initial antitrust review at the construction permit (CP) stage...
In the 1984 finding of no significant antitrust changes, the staff expressed concern with the applicant's activities in one instance involving negatiations between Union Electric and its smaller wholesale power customers regarding wheeling services. The outstanding issues were subsequently resolved tnrough litigation and substantive negotiations between Union Electric and its smaller wholesale power customers.
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3-On March 12. 1992. UEC Jurchased the Missouri retail electric distribution properties of Arkansas Power and Light Company. This acquisition increased UEC's customers by 26.000 in 10 counties in southeastern Missouri adjacent to UEC's existing service territory.
In December 1992. UEC sold its Iowa retail and wholesale electric distribution properties to Iowa Electric Light & Power Company and its northern Illinois electric distribution properties to Central Illinois Public Service Company.
UEC served approximately 21.000 customers in the area sold.
Other Review Proceedinos In addition to the instant review.~ reviews of the proposed merger are in progress at the FERC. the SEC. the Missouri Public Service Commission, and the Illinois Commerce Commission.
Public Comments on ADolication Pursuant to 10 CFR S2.101 of the NRC's rules and regulations, the staff published in the Federal Reoister' notice of receipt of a request from UEC i
for approval of the transfer of control of the license for Callaway Plant.
Unit 1. that would result from the consummation of the proposed merger j
agreement between UEC and CIPSCO the subject of this Safety Evalution.
No comments have been received expressing concerns with the proposed merger agreement.
DeDartment of Justice Review By letter dated January 14. 1997, a draft copy of this document was forwarded to the Department of Justice (D0J) for review and comment.
By letter dated July 18, 1997, the DOJ replied inoicating that it concluded that the merger is
.unlikely to create competitive concerns that would violate the Clayton Act.
NRC Staff Findinos After reviewing Union Electric Company's application requesting approval under 10 CFR 550.80 of the transfer of control of the Callaway Plant. Unit 1 license, documentation submitted in related proceedings before the FERC, and other relevant public information, the staff has made the following findings:
The license amendment request would add a footnote after the words " Union Electric Company" in paragra)h 1.A of NPF-30 that identifies that following the merger. Union Electric will become a wholly-owned operating subsidiary of Ameren Corporation.
After the merger. UEC will continue to own and operate the Callaway Nuclear Plant. UEC will continue to be engaged principally in the generation, transmission, distribution and retail ano etolesale sale of electricity and in the distribution and 61 Fed. Reg. 29434. June 10. 1996.
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4 retail sale of natural gas in Missouri.
Based upon the information provided by the licensee, the proposed merger and restructuring will not adversely affect the operation of the Callaway facility nor the bulk power services market served by the Callaway l
facility.
For the most part, the transmission systems of UEC and CIPSCO do not overlap, so the merger for the most part would not eliminate one independent and potentially comp 'ing transmission alternative.
A1.so, the licensee has filed consolidated (one system) open access transmission tariffs, which make available all of the direct interconnections of both companies as receipt and delivery points. This has the potential to expand wholesale bulk power trading oppor unities in the region.
The single system open access transmission tariffs should make entry by new non-utility generators easier than before the merger, which :;hould-increase competition for long term generating capacity.
Market forces resulting from deregulation of the electric utility industry a) pear to be the driving force for the proposed merger.
In testimony ?efore the FERC, licensee representatives stated that the rationale for the merger was to reduce the combined operating costs of UEC and CIPSCO. Both companies have been aggressively pursuing cost reductions to remain competitive, and have reached the practical limits of that strategy. Without a fundamental change in their way of doing business, it would become increasingly difficult to continue reducing
- costs, By combining utility operations, both companies have an op)ortunity to achieve more cost efficiency than either company could aclieve independently, Conclusion Based on the above, the Director of the Office of Nuclear Reactor Regulation issued a post-OL no significant antitrust change finding in_ connection with
,UEC's request dated February 23, 1996, as supplemented by letters dated April 23, 1996.-and November 15, 1996.
3.0 TECHNICAL QUAllFICATIONS AND MANAGEMENT OF THE CALLAWAY PLANT. UNIT 1 OPERATION UEC stated iri its letter dated february 23, 1996, that the merger will have no effect on the operation of the Callaway D] ant, Unjt 1. or the provisions of the License. UEC will continue to own and operate Callaway after the merger, as required by the License.
After the consummation of the merger. UEC will continue to operate and support Callaway using the existing organizational structure and personnel.
Based upon the above. the staff finds that the proposed merger will not adversely affect UEC's technical qualifications or management of the Callaway Plant,-Unit 1.
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. 4.0 FOREIGN OWNERSHIP. CONTROL. OR DOMINATION The licensee stated in its February 23. 1996. letter that the common shareholders of UEC and CIFSCO immediately prior to the merger (except for the holders of Union Electric Dissenting shares) will be common shareholders of Ameren immediately u)on the consummation of the merger.
By letter dated November 15.1996, t1e licensee stated that is of November 13. 1996, less than 1 percent of both UEC and CIPSCO common stock shares were registered to foreign holders.
In addition, the licensee stated that all officers and directors of UEC are U.S. citizens, and that new directors who will be installed when the merger agreement is consummated will all be U.S. citizens.
The staff does not know or have reason to believe that the proposed transaction will result in UEJ being owned, controlled, or dominated by alien, a foreign corporation, or a foreign government.
5.0 FINANCIAL QUALIFICATION ANALYSIS UEC proposes the implementatien of a merger agreement with CIPSCO under which Ameren would become the parent company to UEC and would hold all common stock in UEC upon completion of the merger. Ameren is a Missouri Corporation owned in equal shares by UEC and CIPSCO. and was formed to effect the transactions contemplated by the merger agreement. UEC would continue to remain the owner / operator of the single unit Callaway Plant. After the merger. UEC would remain an " electric utility" as defined in 10 CFR 50.2 engaged in the generation, transmission, and distribution of electric energy for wholesale and retail sale.
Current UEC common stockholders would exchange their common shares for common shares in Ameren, as would current CIPCSO common shareholders.
UEC indicates that, after the pro)osed merger, it will remain " committed to provide all funds necessary for t1e safe operation, maintenance. repair.
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. decontamination and decommissioning of Callaway in conformance with NRC
' regulations, subject to the same conditions, terms, and obligations of the License. After the merger. UEC's financial ability to fund the above costs will be equal to, or greater than, its ability without the merger. The merger will result in cost efficiencies to help maintain competitive rates."
(Attachment 1 to letter from UEC to the NRC dated February 23, 1996, p. 9)
UEC indicates that it will remain an " electric utility" as defined in 10 CFR 50.2. That is. UEC will continue to be engaged in the generation, transmission, and distribution of electricity and w1ll remain subject to the rate regulatory authority of the Missouri Public Service Commission, the Illinois Commerce Commission, and the FERC. The NRC concurs with this assessment. Thus, pursuant to 10 CFR 50.33(f). UEC is not subject to further financial qualifications review.
However, in view of the NRC's concern that mergers involving formation of holding companies can lead to a dimit.ution of assets necessary for the safe operation and decommissioring of a licensee's nuclear power plants, and pursuant to 10 CFR 50.33(f)(4), the NRC has sought to obtain commitments from
. its licensees that initiate such restructurings not to transfer significant assets from the licensee to an unlicensed corporate affiliate without notifying the NRC.
UEC has made such a co mitment:
UEC will provide the Director of the Office of Nuclear Reactor Regulation a copy of any application, at the time it is filed. to transfer (excluding grants of security interests or liens) from UEC to its proposed parent or to any other affiliated company. facilities or other assets for the produ: tion, transmission, or distribution of electric energy having a depreciated book value exceeding ten 3ercent (10%) of UEC's consolidated net utility plant, as recorded on JEC's books of account.
(UEC letter of November 15, 1996)
The staff believes such reporting is important to providing reasonable ~
assurance that UEC will continue to maintain ade decomission its Callaway Plant. Unit I safely. quate resources to operate and Based on the foregoing, the staff concludes that the implementation of the 3roposed merger agreement between UEC and CIPSCO will not adversely affect JEC's financial qualifications with respect to the Callaway plant.
6.0 CONCLUSION
Based on the above determinations, the staff concludes that the proposed transaction will not affect the qualifications of UEC as holder of the Callaway Plant. Unit I license, and that the transfer of control of the license, to the extent effected by the proposed merger, is otherwise consistent with the applicable provisions of law. regulations, and orders issued by the Commission pursuant thereto.
Principal Contributors:
M. Davis R. Wood K. Thomas
.Date:
October 16, 1997 5
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