PLA-7278, Updated Information Application for Approval of Indirect Transfer of Control PlA-7278
| ML15016A050 | |
| Person / Time | |
|---|---|
| Site: | Susquehanna  |
| Issue date: | 01/13/2015 |
| From: | Franke J Susquehanna |
| To: | Document Control Desk, Office of Nuclear Material Safety and Safeguards, Office of Nuclear Reactor Regulation |
| References | |
| PLA-7278 | |
| Download: ML15016A050 (22) | |
Text
CONTAINS PROPRIETARY INFORMATION WITHHOLD UNDER 10CFR2.390 Jon A. Franke PPL Susquehanna, LLC Site Vice President 769 Salem Boulevard Berwick, PA 18603 Tel. 570.542.2904 Fax 570.542.1504 INA jfranke@ppiweb.com P 4 11.4 bi't JAN 13 2015 , TM-pp 1 .$Tc U.S. Nuclear Regulatory Commission Attn: Document Control Desk Washington, D.C. 20555-0001 SUSQUEHANNA STEAM ELECTRIC STATION UPDATED INFORMATION RE: APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OF Docket Nos. 50-387 CONTROL 50-388 PLA-7278 and 72-28
References:
- 1. PLA-7191, T S. Rausch (PPL Susquehanna,LLC) to U.S. NRC, "Requestfor Order Approving Indirect Transfer of Control and Conforming License Amendments,"
dated July 11, 2014.
- 2. PLA-7245, T S. Rausch (PPL Susquehanna, LLC) to U.S. NRC, "Response to Requestfor Additional Information Re: Applicationfor Approval of Indirect Transfer of Control, "dated October 24, 2014.
By letter dated July 11, 2014 (Reference 1), PPL Susquehanna, LLC (PPL Susquehanna) submitted an Application for Approval of Indirect Transfer of Control of the Licenses for the Susquehanna Steam Electric Station, Units 1 and 2 in accordance with Section 184 of the Atomic Energy Act of 1954, 10 CFR § 50.80, and 10 CFR § 72.50. On October 24, 2014 (Reference 2), PPL Susquehanna responded to a Request for Additional Information (RAI) from the NRC.
The purpose of this letter is to provide revised financial projections based on the most recent update to PPL Susquehanna's five-year business plan, finalized in late December.
Specifically, the following updates are provided in the
Enclosure:
" Updates to Attachments 4P and 4NP of Reference 1, which contained proprietary and non-proprietary versions, respectively, of PPL Susquehanna projected income statements and calculations of six-month fixed costs. These updates are provided herein as Attachments IP and 1NP to the Enclosure.
" Updates to PPL Susquehanna's response to RAI 1 that was transmitted via Reference 2, which contained proprietary and non-proprietary explanations of the projected income statements and cash flow statements. These updates are provided herein as Attachment 2P and Attachment 2NP to the Enclosure. A b.l MIt SZ
Document Control Desk PLA-7278 Attachments IP and 2P contain confidential commercial and financial information. PPL Susquehanna therefore requests that this information be withheld from public disclosure pursuant to 10 CFR § 2.390 for the reasons described in the Affidavit provided in . Attachments 1NP and 2NP provide redacted, non-proprietary versions of this information that are suitable for public disclosure.
Based on the enclosed information, the projected net income and cash flow for each Susquehanna (PPL Susquehanna now, to be renamed Susquehanna Nuclear upon closing of the Transaction) Unit continues to be positive in all years under the base case and the sensitivity cases with 10% reduced capacity factor and 10% reduced energy price. The amount required to cover a six month outage based upon the five-year projected average operating costs is essentially unchanged. Overall, projected net income has decreased while projected cash flow has improved.
As was done in the previously submitted projected income statements and cash flow statements, the information provided is based upon PPL Susquehanna's current business plan unless otherwise noted below. A number of these inputs have changed, for the following reasons:
- The rated capacity of each Unit used in the current projections is now 1247 MWe rather than 1260 MWe, based on the 2014 summer test, reducing PPL Susquehanna's 90% share of the rated capacity from 1134 MWe to 1122 MWe.
However, because SSES produces more power than the summer rated capacity during cooler months, the reduction in the summer rating is offset by an increase in utilization factor, so these changes have no net effect on projected generation.
" The business plan now extends through 2019. As a result, the 2019 values in the Projected Income Statement are now based in the 2019 projections in the Business Plan, rather than the escalated 2018 values previously used.
" The number of planned outage days has changed slightly based on current plant planning. This results in no change in 2015, two more planned outage days in 2016, six more planned outage days in 2017, two more planned outage days in 2018, and two more planned outage days in 2019.
" The 60-month period used to calculate the Equivalent Unplanned Outage Factor (EUOF) now runs from June 2009 through May 2014, rather than June 2008 through May 2013. This changes the historical EUOF from 5.4% to 5.9%,
because the updated period includes more outages caused by turbine performance problems. However, consistent with the current business plan, the historical EUOF has been decreased by one percent for purposes of projecting generation from 2015 through 2019, based on the performance of the turbines subsequent to modifications completed in 2014. This one percent adjustment is considered
Document Control Desk PLA-7278 conservative because the turbine performance problems were contributing nearly four percent to the EUOF since the turbine issue arose in April 2011. In the five-year period prior to the turbine blade outages (2006 to 2010), the highest annual EUOF for the station was 4.5% with an average during that period of 2.0%.
" The net results of the above changes are small increases in projected generation in 2015, 2016, 2018 and 2019, and a small decrease in projected generation in 2017, and small changes in the projected capacity factors.
" The forecasted energy prices in all five years have decreased. Market and fundamental prices on which the Application was originally based were as of May 2014. The updated market and fundamental prices now used are as of September 2014. The forecasted energy prices remain conservative compared to the Cambridge Energy Research Associates (CERA) projections from August 2014 that were provided in the response to RAI 1. The projections previously provided remain the most current available from CERA.
" The decrease in forecasted energy price in each year results in a decrease in projected revenue for each Unit in each year.
- Other than a slight increase in the projected fuel expense (amortization) for Unit 1 in 2015, fuel expense decreases for each Unit in each year. The reduction in fuel expense is due to lower projected uranium prices along with strategic spot purchases of uranium completed in 2014.
" Direct O&M is sometimes slightly higher and sometimes slightly lower than previously estimated, reflective of current planning.
" Projected intercompany charges have decreased. This decrease is partly attributable to the lower corporate overhead that will exist following the closing of the Transaction. The allocation of intercompany charges1 to Susquehanna is conservative because it is expected that following closing of the Transaction, corporate overhead will be allocated only to Energy Supply (PPL Energy Supply now, to be renamed Talen Energy Supply upon closing of the Transaction) and not to Susquehanna or Energy Supply's other subsidiaries (and therefore is no longer included in the current business plan). Nevertheless, the current Projected Income Statement continues to include an estimate of allocable Intercompany Charges as a Susquehanna expense for consistency with the prior version of Attachments 4P and 4NP.
1 The projected intercompany charges also reflect 100% of the allocable overhead, rather than 90% corresponding to Susquehanna's ownership interest, based on a recent agreement relieving the joint owner of the Susquehanna units from this allocation in return for payment of a fixed management fee.
Document Control Desk PLA-7278 The projected depreciation expense has decreased for each Unit in 2015, 2016, and 2017, based on current projected work. The projected depreciation expense in 2018 and 2019 has increased. This increase is the result of an error in the previous projection for 2018, which in turn caused an error in the previous 2019 estimate.
Overall, projected net income for PPL Susquehanna has decreased in all five years of the projections primarily due to lower forecasted energy prices, but remains positive for each Unit for each year under the base case and both sensitivity cases. However, except for a slight decrease for Unit 2 in 2015, projected cash flow has increased for each Unit in each year despite the reduction in net income, primarily due to lower nuclear fuel costs. In addition, in 2015 and 2016 there was a significant improvement in cash flow due to higher tax depreciation (less tax earnings) resulting from an election not to take bonus depreciation in prior years. Non-fuel capital expenditures increased by only $4 million over the five year period; however expenditures have shifted between years.
There are no new regulatory commitments associated with this response.
In the event that the NRC has any questions on this response, please contact Mr. Rocco R. Sgarro at (610) 774-7552.
I declare under penalty of perjury that the updated responses to References 1 and 2 provided herein are true and correct.
Executed on: s13 [Z."5--
SJon A. Franke Site Vice President
Enclosure:
Revised Financial Projections Based on PPL Susquehanna's Updated 5-Year Business Plan cc w/o Attachments IP and 2P:
NRC Region 1 Mr. J. Greives, NRC Sr. Resident Inspector Mr. J. Whited, NRC Project Manager Mr. L. Winker, PA DEP/BRP
Enclosure to PLA-7278 Revised Financial Projections Based on PPL Susquehanna's Updated 5-Year Business Plan
Attachment 2NP to Enclosure of PLA-7278 PPL Susquehanna Updated Response to RAI 1 from PLA-7245, dated October 24, 2014 (Redacted, Non-Proprietary Version)
Table 1-1: Variance Explantion from 1999 Application to 2014 Application
$ in 000's 2000 2001 2002 2003 2004 CAGR 2015 2016 2017 2018 2019 Variance Explanation Fuel - Expense Unit I Largely driven by escalation in uranium Unit 2 prices and increase production due to Total SSES(90%) Extended Power Uprate (EPU) project.
Spent fuel - D&D Unit I Reflect 2014 DOE adjustment to rate per Unit 2 mill for decommissioning Total SSES (90%)
Decommissioning Unit 1 Change in accounting principle with Unit 2 adoption of SFAS 143, Asset Retirement Total SSES (90%) Obligations.
Direct O&M (90%)
Unit 1 Normal escalation in cost, plus certain Unit 2 additional NRC requirements.
Total SSES (90%)
Intercompany charges Unit 1 Driven by increased support group cost, Unit 2 increase SSES cost and head count relative Total SSES to the rest of Energy Supply's fleet.
Taxes other than income Unit I Unit 2_______________________
Total SSES (90%)
Depreciation Unit 1 Normal escalation in cost, plus increase in Unit 2 capital expenditures for EPU ($355 Total SSES (90%) million) and other projects.
Total Expense Unit I Unit 2 Total SSES (90%)
1
Table 1-2: Support for Assumed Energy Prices, CERA vs PPL
($MWh) 1 I PJM West Hub On-Peak _ I PJM West Hub Off-Peak I [ PJM West Hub ATC CERA* PPL Variance CERA* PPL Variance CERA** PPL Variance 2015 2016 2017 2018 2019
- LHS CERA Energy North American Power Market Outlook, Mid-Year Update, August 2014; Source: IHS Inc. This content is extracted from IHS Energy North American Power service and was developed as part of an ongoing subscription service. No part of this content was developed for or is meant to reflect a specific endorsement of a policy or regulatory outcome. The use of this content was approved in advance by IHS. Any further use or redistribution of this content is strictly prohibited without written permission by IHS. All rights reserved.
2
Table 1-3: Capacity Factor Assumptions BASE CASE 2015 2016 2017 2018 2019 A Capacity (MW)
Unit I Unit 2 Station B Period Hours C Planned Outage Days Unit 1 Unit 2 Station D EPOF I(C
- 24)/B]
Unit 1 Unit 2 Station E EUOF F Utilization Factor*
Unit 1 Unit 2 7
Station G Generation (MWh) [A*B*(1-D-E)*F]
Unit 1 Unit 2 Station H Potential G eneration (MWh) IA*BI Unit 1 Unit 2 Station I Capacity.Fa ctor IG/HI Unit 1 Unit 2 Station eneration ctor [G/HI(MWh) [A*B]
- Utilization Factor is greaterthan 100% due to the units ability toproduce more than the summer tested capacity on file with PJMduring months with colder temperatures.
3
Table 1-4: Historical Equivalent Unplanned Outage Factor Equivalent Unplanned Outage Factor Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 SUSQI SUSQ2 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 SUSQI SUSQ2 Dec-10 Jan-ll Feb-l1 Mar-ll Apr-ll May-Il Jun-Il Jul-li Aug-l1 Sep-l1 Oct-ll Nov-ll Dec-li Jan-12 Feb-12 SUSQI SUSQ2 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 SUSQI SUSQ2 60 Month Average SUSQI SUSQ2 _ _ _ _ _ _ _
STAITON 4
Table 1-5: PPL Susquehanna Cash Flow Statement io a a Ni (5 OPERATING ACTIVITIES OPERATING ACTIVITIES Net Income Net Income Non-Cash Items Included in Net Income: Non-Cash Items Included in Net Income:
Depreciation. Amortization, Decommissioning and Taxes Depreciation. Amortization, Decommissioning and Taxes Net cash flow provided / (used in) operating activities Net cash flow provided / (used in) operating activities INVESTING ACTTVITIES INVESTING ACTIVITIES Construction Expenditures Construction Expenditures Nuclear fuel purchases Nuclear fuel purchases Net cash flow provided / (used in) investing activities Net cash flow provided / (used in) investing activities FINANCING ACTIVITIES FINANCING ACTIVITIES Net cash flow provided / (used) by financing activities Net cash flowprovided/ (used) by financing activities Net Increase (Decrease) in Cash &Cash Equivalents Net Increase (Decrease) in Cash & Cash Equivalents ni e Ii - IOn eu-i in a sic r nslt 00 Re net on Ga ad a OPERATING ACTiVITIES OPERATING ACTIVITIES Net Income Net Income Non-Cash Items Included in Net Income: Non-Cash Items Included in Net Income:
Depreciation, Amortization, Decommissioning and Taxes Depreciation. Amortization. Decommissioning and Taxes Net cash flow provided / (used in) operating activities Net cash flow provided / (used in) operating activities INVESTING ACTIVITIES INVESTING ACTIVITIES Construction Expenditures Construction Expenditures Nuclear fuel purchases Nuclear fuel purchases Net cash flow provided / (used in) investing activities Net cash flow provided / (used in) investing activities FINANCING ACTIVTITES FINANCING ACTIVITIES Net cash flow provided / (used) by financing activities Net cash flow provided / (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents Net Increase (Decrease) in Cash & Cash Equivalents uc i iid si 0 e c n2-PI OPERATING ACTIVITIES OPERATING ACTIVITIES Net Income Net Income Non-Cash Items Included in Net Income: Non-Cash Items Included in Net Income:
Depreciation. Amortization, Decommissioning and Taxes Depreciation. Amortization. Decommissioning and Taxes Net cash flow provided / (used in) operating activities Net cash flow provided / (used in) operating activities INVESTING ACTIVITIES INVESTING ACTIVITIES Construction Expenditures Construction Expenditures Nuclear fuel purchases Nuclear fuel purchases Net cash flow provided / (used in) investing activities Net cash flow provided / (used in) investing activities FINANCING ACTIVITIES FINANCING ACTIVITIES Net cash flow provided / (used) by financing activities Net cash flowvprovided/(used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents Net Increase (Decrease) in Cash & Cash Equivalents 5
to Enclosure of PLA-7278 Affidavit of Jon A. Franke (Request for Withholding)
Attachment 3 Affidavit of Jon A. Franke I, Jon A. Franke, Site Vice President, PPL Susquehanna, LLC, do hereby affirm and state:
- 2. PPL Susquehanna, LLC requests that the information provided in Attachmrents IP and 2P to the Enclosure of its letter PLA-7278, and labeled "CONFIDENTIAL INFORMATION SUBMITTED UNDER 10 CFR § 2.390", be withheld from public disclosure under the provisions of 10 CFR § 2.390(a)(4). Non-proprietary versions of Attachments IP and 2P, suitable for public disclosure, are provided in Attachments 1NP and 2NP, respectively, to the Enclosure.
- 3. Attachments 1P and 2P of PPL Susquehanna's letter PLA-7278 contain confidential commercial information, the disclosure of which would adversely affect PPL Susquehanna, LLC.
- 4. This information has been held in confidence by PPL Susquehanna, LLC. To the extent that PPL Susquehanna, LLC has shared this information with others, it has done so on a confidential basis.
- 5. PPL Susquehanna, LLC 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 the competitive position of PPL Susquehanna, LLC because such information has significant commercial value to PPL Susquehanna, LLC.
Jon A. Franke Site Vice President COMMONWEALTH OF PENNSYLVANIA Subscribed and sworn before me, NOTARIAL SEAL a Notary Public in and for the Laurie M.Minto. Notary Publicb an Salem Twp.. Luzerne County Commonwealth of Pennsylvania, My Commission Expire July 24, 2018s this((`day of--1a vnru, 2015. EIER. PE:kBLVAJMA ASSOCIAYOI OF1oTARIES
Attachment 1NP to Enclosure of PLA-7278 PPL Susquehanna Projected Income Statements and Calculations of Six-Month Fixed Costs (Redacted, Non-Proprietary Version)
Unit 1: Base Case ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
1
Unit 1: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
2
Unit 1: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
3
11 Unt1 acuaino Si-otFxe Ope ratin Cot ($thosands 5-Year 2015 2016 2017 2018 2019 Average Direct O&M Taxes (Non Income)
Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs 4
Unit 2: Base Case ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
5
Unit 2: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
6
Unit 2: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019 Assumptions:
Price Projection ($/MWh)
Plant Capacity Factor Revenues:
Revenue from Energy Revenue from Ancillary Services Revenue from Capacity Total Revenue:
Expenses:
Fuel Expense Decommissioning Accretion Expense Direct O&M Intercompany Charges Taxes (Non Income)
Depreciation Other Expenses Total Expenses:
Income Before Taxes:
Income Taxes:
Net Income (Loss):
7
1 Uni 2: Calulaio of Si-ot Fie Oprtn Css(to sans 5-Year 2015 2016 2017 2018 2019 Average Direct O&M Taxes (Non Income)
Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs 8