L-13-142, Response to Request for Additional Information on Parental Guaranty and Submittal of Amended and Restated Parental Guaranty

Response to Request for Additional Information on Parental Guaranty and Submittal of Amended and Restated Parental Guaranty

ML13169A262
Person / Time
Site:	Beaver Valley, Perry
Issue date:	06/18/2013
From:	Hainon G FirstEnergy Nuclear Operating Co
To:	Office of Nuclear Reactor Regulation, Document Control Desk
References
L-13-142
Download: ML13169A262 (12)

Text

FirstEnergy Nuclear Operating Company 76 South Main Street Akron, Ohio 44308 June 18, 2013 L-13-142 ATTN: Document Control Desk U.S. Nuclear Regulatory Commission Washington, DC 20555-0001 10 cFR 50.75

SUBJECT:

Beaver Valley Power Station, Unit No. 1 Docket No. 50-334, License No. DPR-66 Perry Nuclear Power Plant Docket No. 50-440, NPF-58

Response

to Request for Additional Information on Parental Guaranty and Submittal of Amended and Restated Parental Guaranty (TAC Nos. MF0401 and MF0403)

By letter dated Decemb er 17, 2012 [Agencywide Documents Access and Management System (ADAMS)

Accession No. ML12363A0371, FirstEnergy Nuclear Operating Company (FENOC),

on behalf of FirstEnergy Corp. (FE) and FirstEnergy Nuclear Generation Corp. (FENGenCo)

(now FirstEnergy Nuclear Generation, LLC), provided a

copy of a $9S million parental guaranty dated December 17,2012 to the Nuclear Regulatory Commlssion (NRC). This parental guaranty incorporated terms to comply with the new NRC regulations and reflected the new name of the licensee as described in the NRC's issuance of license amendments on October 2,2012 (ADAMS Accession No. M112221A413).

By letter dated March 28, 2013 (ADAMS Accession No. ML13086A244),

NRC staff requested additional information to complete its review.

The response to the request for additional information (RAl) is provided in the attachment.

By fetter dated March 25,2013 (ADAMS Accession No. ML13084A374),

FENOC submitted the decommissioning funding status reports for the Beaver Valley Power Station, Unit Nos. 1 and 2, the Davis-Besse Nuclear Power Station, and the Perry Nuclear Power Plant for the year ending December 31, 2012. FENOC recognized that a shortfall existed for FENGenCo for Beaver Valley Power Station, Unit No. 1, and Perry Nuclear Power Plant. To resolve the shortfall, FENOC obtained a $125 million amended and restated parental guaranty.

The existing

$95 million parental guaranty took effect on April 16,2A13, 120 days after the December 17,2012 notice (ADAMS Accession No. ML12363A037) was provided to the NRC. Underthe terms of Section 14 of the existing parental

guaranty, FE hereby provides the enclosed amended and restated parental guaranty to address both the

Beaver Valley Power Station, Unit No. 1 Perry Nuclear Power Plant L-13-142 Page 2 shortfall described above and the changes resulting from the RAI response. The amended and restated

$125 million parental guaranty replaces the existing

$95 million parental guaranty. The amended and restated $125 million parental guaranty will come into force effective 30 days after this written notice to the NRC.

A certification that FE meets the applicable financial test requirements for issuing a parental guarantywas provided as an enclosure to a letterdated March 29,2013 (ADAMS Accession No. ML13091A057).

The financial test was conducted based on FE's 2012 audited annual financial results, and these are the most recent audited annual financial results that are available.

There are no regulatory commitments contained in this letter. lf there are any questions or if additional information is required, please contact Mr. Thomas A. Lentz, Manager -

Fleet Licensing, at 330-315-6810.

Sincerely, Director, Fleet Regulatory Affairs

Attachment:

Response

to Request for Additional f nformation

Enclosure:

Amended and Restated Parental Guaranty cc: NRC Region lAdministrator NRC Region lll Administrator NRC Resident Inspector (BeaverValley Power Station, Unit No. 1)

NRC Resident Inspector (Perry Nuclear Power Plant)

NRR Project Manager (Beaver Valley Power Station, Unit No. 1)

NRR Project Manager (Perry Nuclear Power Plant)

Director BRP/DEP Site BRP/DEP Representative H. Halnon

Attachment L-13-142

Response

to Request for Additional Information Page 1 of 3 By fetter dated December 17,2012 [Agencywide Documents Access and Management System (ADAMS) Accession No. ML12363A0371, FirstEnergy Nuclear Operating Company (FENOC),

on behalf of FirstEnergy Corp. (FE) and FirstEnergy Nuclear Generation Corp. (FENGenCo)

(now FirstEnergy Nuclear Generation, LLC), provided a

copy of a parental guaranty dated December 17,2012 to the Nuclear Regulatory Commission (NRC). By letter dated March 28,2013 (ADAMS Accession No. ML13086A244),

the NRC staff requested additional information to complete its review. The response to the request for additional information (RAl) is provided below.

The NRC staff question is presented in bold type, followed by the FENOC response.

RAI No. I Item 10 of the proposed parental guaranty states that "[t]he Guarantor and FENGenCo agree that if the Guarantor fails to meet the financial test criteria at any time after this Guaranty is established, the Guarantor and FENGenCo shall send, within 90 days of the end of the fiscal year in which the Guarantor fails to meet the financial test criteria, written notice to the NRC using NRG's electronic information exchange. lf FENGenCo fails to provide alternative financial assurance as specified in 10 CFR Part 50, as applicable, and obtain written approval of such assurance from the NRC within 180 days of the end of such fiscal year, the Guarantor shall provide such alternative financial assurance in the name of FENGenCo or make full payment under the Guaranty to the existing standby trust established by FENGenCo."

Regulation at Section ll.C.2 of the Appendix A to 10 CFR Part 30 states:

lf the parent company no longer meets the requirements of paragraph A of this section, the licensee must send notice to the Gommission of intent to establish alternate financial assurance as specified in the Gommission's regulations. The notice must be sent within 90 days after the end of the fiscal year for which the year-end financial data show that the parent company no longer meets the financial test requirements. The licensee must provide alternate financial assurance within 120 days after the end of such fiscal year.

In addition, Section ll.B of the Appendix A to 10 CFR Part 30 states:

lTlhe licensee must inform the NRG within 90 days of any matters coming to the auditor's aftention which cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test.

Attachment L-13-142 Page 2 of 3 Based on the information provided in the letter, the NRC needs the following additional information to complete its review:

A. Update item 10 of the proposed parental guaranty to comply with the regulations stated above. Specifically, the licensee must provide alternate financial assurance within 120 days after the end of the fiscal year, instead of the 180 days in the proposed Guaranty, in which the Guarantor fails to meet the financial test criteria.

B. In addition to the notification to be sent to the NRC 90 days the end of the fiscal year which the Guarantor fails to meet the financial test criteria add the requirement that licensee will inform the NRC within 90 days of any matters coming to the auditor's attention which cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test.

Response

In the existing parental

guaranty, FENOC complies with the regulation and would provide alternate financial assurance within 120 days after the end of the fiscal year.

The 180 days indicated in ltem 10 of the existing parental guaranty includes time (60 days) for obtaining the written approval of such assurance from the NRC. Likewise, FENOC would comply with the regulation to inform the NRC within 90 days of any matters coming to the auditor's attention which cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test, without the specific requirement being stated within the parental guaranty. The existing parental guaranty follows the guidance provided in the example parent company guaranty in Regulatory Guid e 1.159, Ass uring the Availability of Funds for Decommissioning Nuclear Reacfors, Revision 2, dated October 201 1, as being acceptable for implementing the regulation. However, for additional clarity FENOC amended and restated ltem 10 as provided in the enclosed amended and restated parental guaranty.

RAI No. 2 Item 14 of the proposed parental guaranty states that "[t]he Guarantor agrees to remain bound under this Guaranty and financial test provisions for as long as FENGenCo must comply with the applicable financial assurance requirements of 10 CFR Part 50."

Section lll.G of the Appendix A to 10 CFR Part 30 states:

The parent company guarantee and financial test provisions must remain in effect until the Gommission has terminated the license, accepted in writing the parent company's alternate financial

Attachment L-13-142 Page 3 of 3 assurances, or accepted in writing the licensee's financial assurances.

Based on the information provided in the application the NRC needs the following additional information to complete its review:

A. Update item 14 torequire the Guarantor to remain bound under this Guaranty and financial test provisions until the Commission has terminated the license, accepted in writing the parent company's alternate financial assurances, or accepted in writing the licensee's financial assurance.

Response

FENOC complies with the regulation, and the existing parental guaranty follows the guidance provided in the example parent company guaranty in Regulatory Guide 1.159 as being acceptable for implementing the regulation. However, for additional clarity FENOC amended and restated ltem 14 as provided in the enclosed amended and restated parental guaranty.

Enclosure L-13-142 Amended and Restated Parental Guaranty (6 pages follow)

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AMEIYDED AITD RESTATED PARENTAL GUARANTY GUARAIITY, dated as of June !L,2013, made by FirstEnergy Corp., an Ohio corporation (the "Guarantor") to Guarantor's indirect, wholly owned subsidiary, FirstEnergy Nuclear Generation, LLC ("FENGenCo").

WIINE$$ErH:

WHEREAS, FENGenCo is an indirect, wholly owned subsidiary of the Guarantor and has a 100% undivided ownership interest in Beaver Valley Power Station, Unit No. I

("BVPS 1") and 87.42 % of the undivided ownership of the Perry Nuclear Power Plant

("Perry");

WHEREAS, the U.S. Nuclear Regulatory Commission ('\\IRC") has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations

("CFR'), Pd 50 which require that a holder of, or an applicant for, a license issued pr:rsuant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities; WHEREAS, the Guarantor receives substantial indirect benefits from owning its indirect subsidiary, FENGenCo (which benefits are hereby acknowledged),

and accordingly, desires to execute and deliver this Guaranty in order to provide financial assurance for FENGenCo's obligations for the decommissioning of BVPS I and Perry as required by 10 CFR Part 50; and WHEREAS, this Amended and Restated Parental Guaranty amends and replaces the

$95 million Parental Guaranty dated December 17,2012.

NOW, TIffiREFORE, in consideration of the foregoing and other benefits accruing to the Guarantor, the receipt and sufficiency of which are hereby acknowledged, the Grrarantor hereby makes the following representations and waranties to FENGenCo and hereby covenants and agrees as follows:

The Guarantor has full authority and capacity to enter into this Guaranty under its bylaws, articles of incorporation, and the laws of the State of Ohio, its state of incorporation.

Guarantor has approval from its Board of Directors to enter into this guaranty.

This Guaranty is being issued so that FENGenCo will be in compliance with regulations issued by the NRC, an agency of the U.S. Government, pursuant to the Atomic Energy Act of 1954, as amended, and the Energy Reorganiz-ationAct of 1974. The NRC has promulgated regulations in Title 10, Chapter I of the Code of Federal Regulations, Part 50, which require that a holder of, or an applicant for, a license issued pusuant to 10 CFR Part 50 provide assurance that funds will be available when needed for required decommissioning activities.

This Guaranty is issued to provide financial assurance for decommissioning activities for BVPS 1, Docket No. 50-334, License No. DPR-66, and Perry, License No. NPF-58, Docket No. 50-440, as required by 10 CFR Part 50. The decommissiotting costs for BVPS I and Perry are guaranteed in the amount of $ 125 million.

The Guarantor will meet or exceed the criteria from Financial Test II.A.2 from 10 CFR Part 30, Appendix A and agrees to notify FENGenCo and the NRC of any changes in its 3.

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ability to meet the Appendix A criteria in compliance with the notification requirements as specified in 10 CFR Part 50. Specifically, the Guarantor will possess:

(aXD A current rating of its most recent uninsured, uncollateralized, and unencumbered bond issuance of BBB-or higher as issued by Standard and Poor's, or Baa3 or higher as rated by Moody's; and (ii) Tangible net worth is at least $21 million and total net worth of at'least six times the amount of decommissioning funds being assr.red by this guarantee; and (iii) Assets located in the United States amountingto atleast 90 percent of its total assets or at least six times the current decommissioning cost or Guaranty amount.

The Guarantor has an indirect majority control of the voting stock of FENGenCo.

FENGenCo is located at 76 South Main Street, Akron, Ohio 44308. FENGenCo owns the BVPS I facility, License No. DPR-66 and has an 87.42 o/o interest in the Perry facility, License No. NFP-58.

The term "decommissioning activities" as used herein refers to the activities required by 10 CFR Pafi 50 for decommissioning of the facilities identified above.

The Nuclear Decommissioning Master Trust Agreement, entered into with Mellon Bank, N.A. (now, Bank of New York Mellon, a New York state bank having trust powers) on December 1, 2A05, was established to maintain funds for decommissioning.

This master trust agreement sets up the FE BVPS I Nonqualified Fund and the FE Perry Nonqualified Fund, which will serve as the "standby trusts" contemplated by the NRC's regulations for payment of funds under this guarantee.

For value received from FENGenCo and pursuant to the authority conferred upon the Guarantor, the Guarantor guarantees that if FENGenCo fails to perform the required decommissioning activities, as required by License No. DPR-66 and License No. NPF-58, due to lack of funds, the Guarantor shall:

(a) provide all funds necessary, up to the amount of this Guaranty to carry out the required activities; or (b) pay into the existing trust fund referenced in Paragraph 7 the amount of this guaranty for these activities.

The Guarantor agrees to submit revised financial statements, financial test data, and a special auditor's report and reconciling schedule to the NRC annually within 90 days of the close of the parent Guarantor's fiscal year.

The Guarantor and FENGenCo agree that if the Guarantor fails to meet the financial test criteria at any time after this Guaranty is established, the Guarantor and FENGenCo shall send, within 90 days of the end of the fiscal year in which the Guarantor fails to meet the financial test criteria, written notice to the NRC using NRC's electronic information exchange. Such written notice also should be made by FENGenCo within 90 days of any matters coming to the auditor's attention which cause the auditor to believe that the data specified in the financial test should be adjusted and that the Guarantor no longer passes the 8.

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test. If FENGenCo fails to provide alternative financial assurance as specified in 10 CFR Part 50, as applicable, whichmustbe submittedtoNRC within 120 days of the end of such fiscal yeat oi.tpott making notice that the Guarantor no longer passes the test, and obtain written approval of such assurance from the NRC within 60 days of the submittal, the Guarantor shall provide such alternative financial assurance in the name of FENGenCo or make full payment under the Guaranty to the existing standby trust established by FENGenCo.

Independent of any notification under paragaph 8 above, if the NRC determines for any reason that the Guarantor no longer meets the financial test criteria or that it is disallowed from continuing as a Guarantor for the facilities under License No. DPR-66 and License No. NFP-58, the Guarantor agrees that within 90 days after being notified by the NRC of such determination, an altemative financial assurance mechanism as specified in 10 CFR Part 50 as applicable, shall be established by the Guarantor in the name of FENGenCo wrless FENGenCo has done so.

The Guarantor as well as its successors and assigns shall remain bound jointly and severally under this Guaranty notwithstanding any or all of the following: amendment or modification of license or NRC-approved decommissioning funding plan for that facility, the extension or reduction of thg timi of perfonnance of required activities, or any other modification or alteration of an obligation of FENGenCo pursuant to 10 CFR Part 50.

The Guarantor agrees that it will be liable for all litigation costs incurred by FENGenCo or the NRC in any successful effort to enforce the agreement against the Guarantor.

The Guarantor agrees to remain bound under this Guaranty and financial test provisions for the previously listed facilities until the Commission has terminated the licenses, accepted in writing the parent company's alternate financial assurances, or accepted in writing the licensee's financial assurance, except that this Guaranty may be amended by the agreement of Guarantor and FENGenCo with 30 days prior written notice to the NRC, and except that the Guarantor may cancel this Guaranty by sending written notice to the NRC using NRC's electronic information exchange, such cancellation to become effective no earlier than 120 days after receipt of such notice by the NRC as evidenced by the return receipts. Guarantor shall also notify FENGenCo. If FENGenCo fails to provide alternative finansial assurance as specified in 10 CFR Part 50, as applicable, and obtain written approval of such assurance within 120 days after the sending of the above notice by the Guarantor, the Guarantor shall provide such alternative financial asstrance, or make full payment under the Guaranty to the existing standby tust established by FENGenCo.

The Guarantor expressly waives notice of acceptance of this Guaranty by the NRC or by FENGenCo. The Guarantor also expressly waives notice of amendments or modification of the decommissioning requirements and of amendments or modifications of the licenses.

The Guarantor files financial reports with the U.S. Securities and Exchange Commission (SEC), which are available to NRC and need not be submitted separately in accordance with l0 cFR s0.71(b).

The Guarantor agrees that if the Guarantor admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors, or any proceeding is 12.

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instituted by or against the Guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking dissolution, liquidation, winding-up, reor ganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for the Guarantor or for any substantial part of its property, or the Guarantor takes any action to authorize or effect any of the actions stated in this paragraph, the Commission may:

(a) declare that the financial assurance guaranteed by the this Guaranty is immediately due and payable to the existing trust referenced in Paragraph 7, without diligence, presentment, demffid, protest, or any other notice of any kind, all of which are expressly waived by Guarantor; or (b) exercise any and all of its other rights under applicable law.

The Guarantor agrees to notiS the NRC, in writing, immediately following the filing of a voluntary or involuntary petition for bankruptcy under any chapter of title l l @ankruptcy) of the United States Code, or the occrurence of any other event listed in ParagraphlT, by or against:

(a) the Guarantor; (b) FENGenCo; (c) an entity (as thatterm is defined in ll U.S.C. 101(15)) controlling FENGenCo or listing the license or FENGenCo as properfy of the estate; or (d) an affiliate (as that term is defined in 11 U.S.C. 101(2) of FENGenCo.

The notification required by Paragraph 18 must include the following:

(a) a description of the event, including major creditors, the amounts involved, and the actions taken to assure that the amount of funds guaranteed by this Guaranty for decommissioning will be transferred to the existing trust referenced in Paragraph 7 as soon as possible; (b) if apetition of bankruptcy was filed, the identity ofthe bankruptcy court in whichthe petition for bankruptcy was filed; and (c) the date of filing of any petitions.

This Guaranty and the rights and obligations of the FENGenCo and the Guarantor hereunder, shall be governed by and construed in accordance with the domestic laws of the State of Ohio without giving effect to any choice or conflict-of-law provision or rule (whether of Ohio or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than Ohio. The Guarantor and the FENGenCo each consent to the exclusive jurisdiction and venue of any state or federal court within the State of Ohio for adjudication of any suit, claim, action or other proceeding at law or in equity relating to this Guaranty, or to any transaction contemplated hereby. The Guarantor and FENGenCo each accept, generally and 19.

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unconditionally, the exclusive jwisdiction and venue of the aforesaid cowts and waive any objection as to venue, and any defense of forum non conveniens. The Guarantor hereby irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to the Guarantor at its address set fonh opposite its signature below, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of FENGenCo to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against the Guarantor in any other jurisdiction. The Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with the Guaranty brought in the courts referred to above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought itt aoy such court has been brought in an inconvenient forum.

All notices and other communications hereunder shall be made to FirstEnergy Corp.'s Chief Financial Officer and General Counsel at 76 South Main Street, Akron, Ohio 44308.

If it is ever determined that the Guaranty dated December 19, 2011, or any prior Guaranty, remains enforceable and not properly cancelled, revoked and rescinded with no further force and effect, than the amount of this Guaranty specified in Paragraph 3 hereof shall be reduced by the amount specified in such prior guaranty which remains in effect.

This Amended and Restated Parental Guaranty shall amend and replace the existing

$95 million Parental Guaranty dated December 17,20L2, which took effect on April 16, 2013, 120 days after the December 17, 2012 notice submitted to NRC, and which cancelled the prior Guaranty dated December 19, 20lL This Amended and Restated Parental Guaranty shall be effective 30 days after receipt by the NRC of written notice of these amendments, unless a written notice of objection by NRC is received within such 30 days.

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I hereby certiff that this Guaranty is true and correct to the best of my knowledge.

Eflective date:

FirstEnergy Corp.

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sAMA{rttA"lffioH1o NoTARY PuqTq

"-'R"*rded in tj$Hry zo:il My commiseion ex Steven R. Staub Vice President & Treasurer STATE OF OHIO COUNTY OF SUMMIT Subscribed and sworn to me, a Notary Public, in and for the City/County and State above named, this 11th day of June, 2013.

SAI,IANTIIA B. SARATI c1 CT-\\

A r-I NOTARy pUBgC. STATE OF OHIO lraL,vltarruDltA:6t lwt 4-h-Reoorded in Sununit County My commission expires Dc.21,2014 My Commission Expires:Dg=g. e\\. AO\\.{

FirstEnergy Nuclear Gengation, LLC By Rhonda S. Feffin Vice President & C STATE OF OHIO COUNTY OF SUMMIT Subscribed and sworn to me, a Notary Public, in and for the City/County and State above named, this gth day of June, 2013.

q* ffigf;*^^IO My Commission Expires: t\\ec. Al, ADltt Page 6