ML21131A013

License Transfer from Pnm to SRP, 5-13-21 Pre-submittal Public Meeting Presentation Slides

ML21131A013
Person / Time
Site:	Palo Verde
Issue date:	05/13/2021
From:	Siva Lingam Plant Licensing Branch IV
To:	Arizona Public Service Co
Lingam S, 301-415-1564
References
Download: ML21131A013 (13)

Text

Pre-Submittal Meeting with NRC on May 13, 2021 Application for Transfer of Minority Interests in Palo Verde Nuclear Generating Station, Units 1 and 2 Subject to Expiring Leases Docket Nos. STN-50-528, 529 Renewed Operating License Nos. NPF-41, NPF-51 Independent Spent Fuel Storage Installation, Docket No. 72-44

Agenda

1. Introductions

2. Current PNM Leased Interests

3. Transaction Structure

4. Decommissioning Funding

5. Technical and Financial Qualifications

6. Requests and Next Steps

7. Questions 2

Introductions

• Arizona Public Service Co. (APS) o NRC Licensed Operator o NRC Licensed Owner

• Salt River Project Agricultural Improvement and Power District (SRP) o Current NRC Licensed Owner o Acquiror of Leased Interests in Units 1 and 2

• Public Service Co. of New Mexico (PNM) o Current NRC Licensed Owner o Current holder of Leased Interests in Units 1 and 2 3

Current PNM Leased Interests

• PNM has a 10.2% interest in Palo Verde Nuclear Generating Station (PVNGS) Units 1, 2, and 3 Shareholders NYSE*

• In 1985 and 1986, PNM received NRC approval for sale-leaseback transactions affecting some of its interests in Units 1 and 2 o License Conditions in Units 1 and 2 Licenses o All but five of the sale-leaseback transactions have ended with PNM PNM Resources, Inc.

acquiring the interests o Terms of leases structured so banks and institutional investors did not have control over PVNGS - PNM retains NRC control Public Service Company

• Unit 1 Leased Interests: Four leases (total 7.9333330%) of New Mexico of the undivided interests in PVNGS Unit 1 o All four Unit 1 leases expire January 2023

• Pending application of Avangrid to acquire PNM is unrelated to and does not

• Unit 2 Leased Interest: One lease (0.7933333%) of the impact this transaction.

undivided interests in PVNGS Unit 2 4

o Unit 2 lease expires January 2024

Why are we here today?

• SRP is planning to acquire PNMs leased interests in PVNGS Units 1 and 2 o SRPs ultimate acquisition of these ownership rights requires NRC consent under 10 CFR 50.80 and 72.50

• Acquisition of the leased interests will be accomplished through two separate sets of transactions:

o SRP purchases trusts holding the leases from banks and institutional investors in 2021 SRP will be non-controlling owner - steps into the shoes of banks and institutional investors License conditions only require notice for sale of leases o Leases expire with leased interests transferring to SRP and, at the same time, SRP purchases from PNM certain non-leased ownership interests (e.g., common facilities, nuclear fuel)

• Transactions are structured such that NRC control rights will flow from PNM to SRP without passing through the banks and institutional investors (not even for an instant)

• SRP requires NRC approval now to confirm efficacy of entering into the initial transactions with banks and institutional investors that will close in 2021

• Applicants request NRC issue an order consenting to the transfers by October 31, 2021 5

Transaction Structure

• Under terms of the leases, ownership of leased interests reverts to lessor (banks and institutional investors) at expiration of leases unless PNM purchases

• PNM has declined to purchase, and banks and institutional investors do not want to become NRC licensed owners

• Two integrated transaction steps

1. SRP purchases lessors interests from banks and institutional investors

2. SRP purchases from PNM corresponding non-leased interests

a. Non-leased common facilities

b. Nuclear fuel

c. Certain transmission facilities 6

Transaction Structure - Continued

• Step 1: SRP purchases leases from banks and institutional investors o Becomes owner of lessors trusts - obtains right to acquire ownership on lease termination o Prior NRC consent not required for SRP acquisition of lessors interests - license conditions require notice o Notice provided in License Transfer Application o Additional steps taken by SRP and PNM SRP entered into purchase agreements with the banks and institutional investors to acquire the lessors interests on April 29, 2021 PNM filed for required approvals with the New Mexico Public Regulation Commission on April 2, 2021 7

Transaction Structure - Continued

• Step 2: Leases expire o Unit 1 - January 2023 o Unit 2 - January 2024

• Leased interests revert to SRP upon respective lease expirations

• SRP purchases from PNM corresponding non-leased interests o Non-leased common facilities o Nuclear fuel o Certain transmission facilities

• PNM remains an NRC owner licensee for its remaining undivided ownership shares in PVNGS that are not part of this transaction 8

Ownership Percentages Before and After Transactions SRP PNM PVNGS Interest Transferred PNM/SRP UNIT from PNM to SRP Total Before After Before After 1 7.9333330% 17.49% 25.423333% 10.2% 2.266667% 27.69%

2 0.7933333% 17.49% 18.2833333% 10.2% 9.4066667 27.69%

3 0% 17.49% 17.49% 10.2% 10.2% 27.69%

9

Decommissioning Funding

• SRP and PNM have entered into a Decommissioning Agreement whereby PNM post-transaction:

o Will retain nuclear decommissioning trust funds (NDTs) o Will maintain decommissioning responsibility for the full 10.2% undivided interests in PVNGS

• NRC approval required for transfer of leased interests at expiration - requested in this Application for all remaining leases o SRP and PNM request that the NRC Order and associated Safety Evaluation recognize that PNM retains decommissioning obligations 10

Technical and Financial Qualifications

• APS will remain operator - no impact on Technical Qualifications to Operator of PVNGS

• Electric utilities are exempted from the requirement to submit financial qualifications information

• Both SRP and PNM each qualified as an electric utility as defined in 10 CFR 50.2

• Both SRP and PNM meet the prepayment method (10 CFR 50.75(e)(1)(i)) to provide reasonable assurance of decommissioning o Based on March 26, 2021 Consolidated Decommissioning Funding Status Report for PVNGS of funds as of Dec. 30, 2020 (ADAMS ML21085A877) o No material changes to NDT balances in 2021

• Both SRP and PNM are electric utilities for purposes of decommissioning funding assurance under 10 CFR 50.75(e)(1)(ii) 11

Requests and Next Steps

• Applicants request NRC issue an order consenting to the transfers by October 31, 2021 o Transactions are an integrated whole and NRC approval is needed by SRP and PNM as a condition to closing the initial transactions

• Acquisition of leases by SRP from banks and institutional investors expected to close in 4Q 2021

• SRP will not acquire NRC licensed responsibilities for the leased ownership interests until:

o January 2023 for Unit 1 Interests and o January 2024 for Unit 2 Interest Leases due to expire on a weekend or holiday - parties have agreed the transactions will close on the Friday before the lease expiration 12

Questions?

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