ML23243B056

Supplemental Information to Application for Order Approving Indirect Transfer of Control of Licenses

ML23243B056
Person / Time
Site:	South Texas, 07201041
Issue date:	08/31/2023
From:	Harshaw K South Texas
To:	Office of Nuclear Material Safety and Safeguards, Office of Nuclear Reactor Regulation, Document Control Desk
Shared Package
ML23244A033	List: ML23243B056
References
NOC-AE-23003985, D43.01, 35507894, EPID L-2023-LLM-0004
Download: ML23243B056 (1)

Text

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INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A

~

Nuclear Operating Company South Texas Project Electric Generating Station P.O. Box 28}) Wadsworth, Texas 77483 -----------------~VVVv---

August 31, 2023 NOC-AE-23003985 10 CFR 50.80 10 CFR 50.90 10 CFR 72.50 10 CFR 2.390(a)(4)

D43.01 STI: 35507894 ATTN: Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 South Texas Project Units 1 and 2 Docket Nos. STN 50-498, STN 50-499, and 72-1041 Renewed Facility Operating License Nos. NPF-76 and NPF-80 Supplemental Information to Application for Order Approving Indirect Transfer of Control of Licenses (EPID: L-2023-LLM-0004)

Reference:

Letter; K. Harshaw (STP) to Document Control Desk (NRC); South Texas Project, Units 1 and 2, Docket Nos. STN 50-498, STN 50-499, and 72-1041, Renewed Facility Operating License Nos. NPF-76 and NPF-80 Application for Order Approving Indirect Transfer of Control of Licenses, June 12, 2023; (NOC-AE-23003968) (ML23163A176)

STP Nuclear Operating Company ("STPNOC"), acting on behalf of Constellation Energy Generation, LLC ("CEG") and NRG South Texas LP ("NRG South Texas") and its parent companies (the "NRG Entities") (collectively known as the "Parties"), submits this Supplemental Information regarding the Application in Reference 1 under review by the NRC Staff.

In reviewing pleadings filed regarding CEGs financial projections, CEG identified an error in its model used for generating those projections, which understated its O&M Non-Outage annual projections by approximately $7 million per year. The Reference letter included "Projected Income Statements for Constellation South Texas, LLC" in Enclosures 5 (Non-Proprietary Version) and 5A (Proprietary Version). The attached Updated Enclosure 5A includes revised projections that increases the O&M Non-Outage projections to correct for this identified error. An updated version of Enclosure 5 is also provided although no changes are reflected since this is a non-proprietary version.

INCLUDES PROPRIETARY INFORMATION -WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure SA NOC-AE-23003985 Page 2 In addition , CEG acknowledges that STPNOC has now approved plans for a 24-month refueling cycle. The related costs are also reflected in the O&M Non-Outage projections in the Updated Enclosure 5A. In light of the revisions to the financial projections, CEG has committed to increase the parental support proposed in Reference 1 to $95 million. The Reference letter also included a "Form of Support Agreement" in Enclosure 6. Accordingly, an updated Form of Support Agreement is provided in the Updated Enclosure 6 attached.

The financial information required by 10 CFR 50.33(f)(2) is provided by CEG in Updated A. The financial information in Updated Enclosure 5A is confidential commercial information that CEG requests be withheld from public disclosure pursuant to 10 CFR 2.390(a)(4). A redacted, non-proprietary version is provided in Updated Enclosure 5. An affidavit supporting the request for withholding Updated Enclosure 5A from public disclosure is provided as Updated Enclosure 4, which is the same enclosure as presented in the Reference letter.

In addition, NRG has identified a minor correction to Figure 1 (NRG Texas Holdings and its 80 .23% non-voting stock should have been NRG Generation Holdings, Inc., with

~80.15% non-voting stock) . An Updated Figure 1 is appended to this letter.

In the event that the NRC has any questions about this submittal, please contact Mr. Drew Richards , Regulatory Affairs Manager, at amrichards@stpegs .com on behalf of STPNOC or David Helker at david.helker@constellation.com on behalf of CEG .

There are no commitments in this letter.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on ~*\ ~\ \ U1b KimberiyHatshaw Executive Vice President & Chief Nuclear Officer

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A NOC-AE-23003985 Page 3 UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION In the Matter of )

)

STP Nuclear Operating Company ) Docket Nos. 50-498

) 50-499 South Texas Project, Units 1 and 2 ) 72-1041 AFFIRMATION I, Frank Sturniolo, being duly sworn, hereby depose and state that I am Vice President, Governance and Oversight, of Constellation Energy Generation, LLC (CEG); that I am duly authorized to sign and file with the Nuclear Regulatory Commission the supplemental information, including Updated Enclosure 5A; that I am familiar with the content thereof; and that the matters set forth therein with regard to CEG and Constellation South Texas, LLC, including the projections in the Updated Enclosure 5A, are true and correct to the best of my knowledge and belief.

I declare under penalty of perjury that the foregoing is true and accurate.

Executed on August 31, 2023 Frank Sturniolo Vice President, Governance and Oversight

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A NOC-AE-23003985 Page 4 NRG Energy, Inc.

(DE) Updated Figure 1: Simplified 100% 100%

Organization Chart for NRG South Texas LP (Current)

NRG Generation Holdings, Inc.

(DE)

Voting Stock (100%)

Non-Voting Non-Voting Stock Stock

(~19.85%) (~80.15%)

Texas Genco Holdings, Inc.

(TX)

City Public Service Board City of Austin, Texas Of San Antonio (Austin Energy) 100% 100%

Texas Genco GP, LLC Texas Genco LP, LLC (TX) (DE) 1% 99%

NRG South Texas LP (TX) 44%

I 40% 16%

SOUTH TEXAS PROJECT UNITS 1 & 2

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A NOC-AE-23003985 Page 5

Enclosures:

Updated Enclosure 4 - 10 CFR 2.390(a)(4) Affidavit of Michael A. Kramer Updated Enclosure 5 - Projected Income Statement for Constellation South Texas, LLC (Non-Proprietary Version)

Updated Enclosure 5A - Projected Income Statement for Constellation South Texas, LLC (Proprietary Version)

Updated Enclosure 6 - Form of Support Agreement

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A NOC-AE-23003985 Page 6 cc: ((electronic distribution: w/ Enclosures, except Updated Enclosure 5A))

Regional Administrator, Region IV U.S. Nuclear Regulatory Commission 1600 E. Lamar Boulevard Arlington, TX 76011-4511 Dennis Galvin Project Manager U.S. Nuclear Regulatory Commission Office of Nuclear Reactor Regulation Division of Operating Reactor Licensing Licensing Project Branch 4 Leanne Flores Resident Inspector, South Texas Project U.S. Nuclear Regulatory Commission Robert Free, Texas Department of State Health Services (Distribution: w/ all Enclosures)

STPNOC Records Management

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A NOC-AE-23003985 Page 7 bcc: (without Updated Enclosure 5A)

Constellation Executive Vice President and Chief Executive Officer Constellation Sr. Vice President Constellation Energy Generation and Chief Nuclear Officer Constellation Chief Operating Officer Fleet Operations Constellation Sr. Vice President Fleet Services Constellation Sr. Vice President Engineering & Technical Services Constellation Vice President Strategy and Growth Constellation Vice President Governance and Oversight Constellation Sr. Vice President - Mid-West Operations - Cantera Constellation Sr. Vice President - Mid-Atlantic Operations Constellation Sr. Vice President - Northeast Operations Constellation Sr. Vice President - Midwest Operations Constellation Vice President Nuclear Security and Licensing Constellation Corporate Licensing Directors Constellation Corporate Licensing Sr. Managers Constellation Commitment Tracking Coordinators J. Zorn J. Matthews Constellation Records Management

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A UPDATED ENCLOSURE 4 10 CFR 2.390(a)(4) AFFIDAVIT OF MICHAEL A. KRAMER

INCLUDES PROPRIETARY INFORMATION -WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure SA 10 CFR 2.390(a)(4)

Affidavit of Michael A. Kramer I, Michael A. Kramer, Vice President of Finance - Growth and Projects, of Constellation Energy Generation, LLC ("CEG") do hereby affirm and state:

1. I am authorized to execute this affidavit on behalf of CEG.

2. CEG requests that Updated Enclosure SA, which is being submitted under separate cover and labeled "PROJECTED INCOME STATEMENT FOR CONSTELLATION SOUTH TEXAS, LLC (PROPRIETARY VERSION)," be withheld from public disclosure under the provisions of 10 CFR 2.390(a)(4).

3. Updated Enclosure SA contains confidential commercial information, the disclosure of which would adversely affect CEG.

4. This information has been held in confidence by CEG. To the extent that CEG has shared this information with others, it has done so on a confidential basis.

5. CEG customarily keeps such information in confidence, and there is a rational basis for holding such information in confidence. The information is not available from public sources and could not be gathered readily from other publicly available information.

6. Public disclosure of this information would cause substantial harm to CEG's business interests because such information has significant commercial value to CEG, and its disclosure could adversely affect other CEG transactions.

I declare under penalty of perjury that the foregoing is true and accurate.

Executed on August 31 , 2023 Michael A. Kramer Vice President of Finance - Growth and Projects

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A UPDATED ENCLOSURE 5 PROJECTED INCOME STATEMENT FOR CONSTELLATION SOUTH TEXAS, LLC (NON-PROPRIETARY VERSION)

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A Updated Enclosure 5 NOC-AE-23003985 Page 1 of 2 Constellation South Texas, LLC Projected Income Statement

($ in millions, rounded) 2024 2025 2026 2027 2028 Revenue Market Revenue ((

Nuclear "45U" Production Tax Credits3 Total Revenues Operating Expenses Purchased Fuel and Energy and Cost of Sales O&M Non-Outage O&M Outage Property Taxes Depreciation and Amortization Total Operating Expenses Pretax Income (Loss)

Income Taxes Net Income (Loss) ))

Notes

---1. Site financial projections are based on STPNOCs approved 2023-2028 business plan dated December 15, 2022, and information obtained from NRG and STPNOC by Constellation Energy Generation, LLC as part of due diligence activities. All amounts are at Constellation South Texas, LLC ownership of the South Texas Project nuclear plant of 44%. Annual capacity factors are based upon STP historical production over the last five years and planned refueling outages.

2. Market revenues for 2024-28 were calculated based upon the assumed capacity factors and using Constellations forward prices as of 4/28/23, based upon its proprietary view of future prices in the relevant market.

3. Nuclear "45U" Production Tax Credits are calculated using the forward market prices and information currently available in the Inflation Reduction Act and are assumed to be fully utilized based on the projected nuclear plant taxable income even in the projections with reduced market prices.

4. Property taxes are estimated based on current owner projections from 2024-2027 obtained by Constellation Energy Generation, LLC as part of due diligence activities and escalating for 2028 at 3%.

5. Projected fuel costs and projected depreciation and amortization exclude any potential non-cash impacts from purchase accounting because of the change in plant ownership.

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A Updated Enclosure 5 NOC-AE-23003985 Page 2 of 2 Constellation South Texas, LLC Projected Income Statement Assumes 10% Reduction in Market Revenue

($ in millions, rounded) 2024 2025 2026 2027 2028 Revenue Market Revenue ((

Nuclear "45U" Production Tax Credits3 Total Revenues Operating Expenses Purchased Fuel and Energy and Cost of Sales O&M Non-Outage O&M Outage Property Taxes Depreciation and Amortization Total Operating Expenses Pretax Income (Loss)

Income Taxes Net Income (Loss) ))

Notes

1. Site financial projections are based on STPNOCs approved 2023-2028 business plan dated December 15, 2022, and information obtained from NRG and STPNOC by Constellation Energy Generation, LLC as part of due diligence activities. All amounts are at Constellation South Texas, LLC ownership of the South Texas Project nuclear plant of 44%. Annual capacity factors are based upon STP historical production over the last five years and planned refueling outages.

2. Market revenues for 2024-28 were calculated based upon the assumed capacity factors and using Constellations forward prices as of 4/28/23, reduced by 10%, based upon its proprietary view of future prices in the relevant market.

3. Nuclear "45U" Production Tax Credits are calculated using the forward market prices and information currently available in the Inflation Reduction Act and are assumed to be fully utilized based on the projected nuclear plant taxable income even in the projections with reduced market prices.

4. Property taxes are estimated based on current owner projections from 2024-2027 obtained by Constellation Energy Generation, LLC as part of due diligence activities and escalating for 2028 at 3%.

5. Projected fuel costs and projected depreciation and amortization exclude any potential non-cash impacts from purchase accounting because of the change in plant ownership.

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A UPDATED ENCLOSURE 5A PROJECTED INCOME STATEMENT FOR CONSTELLATION SOUTH TEXAS, LLC (PROPRIETARY VERSION)

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A UPDATED ENCLOSURE 6 FORM OF SUPPORT AGREEMENT

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A SUPPORT AGREEMENT Between Constellation Energy Generation, LLC and Constellation South Texas, LLC THIS SUPPORT AGREEMENT, dated as of _______ __, 2023 between Constellation Energy Generation, LLC ("CEG") and Constellation South Texas, LLC ("Subsidiary Licensee").

WITNESSETH:

WHEREAS, CEG is the owner of the Subsidiary Licensee; WHEREAS, the Subsidiary Licensee holds NRC licenses for its 44% joint ownership interests in for the South Texas Project ("STP") Renewed Facility Operating License Nos. NPF-76 and NPF-80 (the "Licenses") respectively, and the general license for the Independent Spent Fuel Storage Installation (ISFSI) (the "Facility");

WHEREAS, CEG and the Subsidiary Licensee desire to take certain actions to assure the ability of the Subsidiary Licensee to pay its pro rata share of the approved expenses of maintaining the Facilities safely and reliably and of protecting the public health and safety (the "Operating Expenses") and to meet Nuclear Regulatory Commission ("NRC") requirements during the life of each Facility (the "NRC Requirements");

WHEREAS, CEG plans to provide the Subsidiary Licensee with adequate resources for approved working capital and other needs on an ongoing basis through various mechanisms such as capital contributions, member loans or advances, or other mutually approved funding mechanisms, if these funding sources, at any time, cannot meet those needs, then CEG agrees to provide credit to the Subsidiary Licensee, in the manner as described below, to allow the Subsidiary Licensee to meet its obligations to protect public health and safety.

NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows:

1. Availability of Funding. Upon the written request of the Subsidiary Licensee, CEG shall provide or cause to be provided to the Subsidiary Licensee such funds as the Subsidiary Licensee determines to be necessary to pay Operating Expenses or meet NRC Requirements; provided, however, that CEGs maximum liability to provide funding hereunder shall not exceed $95 million cumulatively over the life of this Support Agreement, unless, and to the extent that, advances of funds under this Support Agreement have been reimbursed in whole or part through Page 1 of 4

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A repayments by the Subsidiary Licensee to CEG. As such, the aggregate amount outstanding under this Support Agreement at any one time shall not exceed $95 million, and this shall be the maximum unreimbursed amount CEG is obligated to provide under this Support Agreement.

2. Request for an Advance. If the funding mechanisms provided by CEG, at any time, are not sufficient to allow the Subsidiary Licensee to meet its needs, the Subsidiary Licensee may submit to CEG a request for an advance of funds under this Support Agreement. Each request for an advance of funds under this Support Agreement shall be made not later than noon Eastern Time (USA) on the tenth business day prior to the proposed drawdown by notice from the Subsidiary Licensee to CEG (pursuant to procedures that may be changed from time to time by mutual agreement) specifying the amount of the advance and a certification that such advance is for the purpose specified in Section 6.

3. Substitution. CEG can terminate funding provided under this Support Agreement upon 45 days written notice to the Subsidiary Licensee if CEG has procured a substitute loan facility and/or letter of credit for the Subsidiary Licensee that is mutually agreed to by CEG and the Subsidiary and meets NRC Requirements.

4. Interest. Interest on any principal amount outstanding shall accrue daily at such rate, and shall be payable at such times, as established by CEG at the time of an advance under this Support Agreement. The interest rate applicable to any advance and the time of payment shall be noted in a note or other writing. Such notation shall be conclusive absent manifest error.

5. Optional Prepayments. The Subsidiary Licensee, at its option, may repay all or any part of the principal amount outstanding from time to time without penalty or premium, upon notice to CEG made not later than noon Eastern Time (USA) on at least the second business day prior to such prepayment (which notice, if oral, shall be confirmed promptly in writing); provided, however, that if the interest rate is SOFR based, a prepayment penalty may be assessed against the Subsidiary Licensee by CEG. CEG, at its option, may waive such notice requirements as to any prepayment.

6. Use of Proceeds. In order to provide financial assurance, any advance may be used by a Subsidiary Licensee only to meet its approved operating expenses and NRC Requirements, including payments for nuclear property damage insurance and a retrospective premium pursuant to Title 10, Part 140, Section 21 of the Code of Federal Regulations (10 CFR 140.21).

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INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A

7. No Guarantee. This Support Agreement is not, and nothing herein contained, and no action taken pursuant hereto by CEG shall be construed as, or deemed to constitute, a direct or indirect guarantee by CEG to any person of the payment of the Operating Expenses or of any liability or obligation of any kind or character whatsoever of the Subsidiary Licensee. This Agreement may, however, be relied upon by the NRC in determining the financial qualifications of each Subsidiary Licensee to hold the operating license for a Facility.

8. Waivers. CEG hereby waives any failure or delay on the part of the Subsidiary Licensees in asserting or enforcing any of their rights or in making any claims or demands hereunder.

9. Amendments and Termination. This Agreement may not be amended or modified at any time without 30 calendar days prior written notice to the Director of NRR.

This Agreement shall terminate at such time as CEG is no longer the direct or indirect owner of any of the shares or other ownership interests in a Subsidiary Licensee. This Agreement shall also terminate with respect to the operating expenses and NRC Requirements applicable to the Facility whenever the Facility permanently ceases commercial operations and certification is made as to the permanent removal of fuel from the reactor vessels; provided, however, that this Agreement may be extended for successive periods of two years each upon the mutual agreement of the parties.

10. Successors. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

11. Third Parties. Except as expressly provided in Sections 3 and 6 with respect to the NRC, this Agreement is not intended for the benefit of any person other than the parties hereto, and shall not confer or be deemed to confer upon any other such person any benefits, rights, or remedies hereunder.

12. Governing Law. This Agreement shall be governed by the laws of the State of Maryland.

13. Dispute Resolution. In the event of any dispute arising out of or in connection with this Support Agreement, executives of CEG and the Subsidiary Licensee will exercise good faith efforts to resolve the dispute in a timely manner. In the event that the executives of CEG and the Subsidiary Licensee are unable to reach a resolution, the dispute, including any dispute regarding the existence, termination or validity of this Support Agreement, each Party shall have the right to have recourse to and shall be bound by the pre-arbitral referee procedure of the Page 3 of 4

INCLUDES PROPRIETARY INFORMATION - WITHHOLD UNDER 10 CFR 2.390(a)(4)

Unrestricted Upon Removal of Updated Enclosure 5A applicable rules of the American Arbitration Association. All disputes arising out of or in connection with this Support Agreement (including as to existence, termination and validity) shall be finally settled under the applicable rules of the American Arbitration Association (the Rules) by three arbitrators appointed in accordance with said Rules. The place of the pre-arbitral referee procedure and of the arbitration procedure shall be Baltimore, Maryland, United States of America. The proceedings before the arbitral tribunal (including with respect to the Pre-Arbitral Referee Procedure) shall be governed by the Rules. The rules of law to be applied by the arbitral tribunal to the merits of the dispute shall be the rules of law of the State of Maryland. The language of the arbitration shall be English. Evidence shall be provided in English and pleadings shall be done in English. The arbitral tribunal shall render its decision within six months from the date of signature of the terms of reference. Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding.

The parties waive to the extent permitted by applicable law any rights to appeal or to review of such award by any court or tribunal. The parties agree that the arbitral award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found and that a judgment upon the arbitral award may be entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective officers thereunto duly authorized as of the day and year first above written.

ACKNOWLEDGED AND AGREED Constellation Energy Generation, LLC Constellation South Texas, LLC By: By:

Name: Name:

Title:

Title:

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