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{{#Wiki_filter:CONTAINS PROPRIETARY INFORMATION WITHHOLD UNDER 10CFR2. | {{#Wiki_filter:CONTAINS PROPRIETARY INFORMATION WITHHOLD UNDER 10CFR2.390 Jon A. FrankeSite Vice President PPL Susquehanna, LLC769 Salem Boulevard | ||
: Berwick, PA 18603Tel. 570.542.2904 Fax 570.542.1504 jfranke@ppiweb.com INAP 4 11.4 bi'tTM- ,pp1.$TcJAN 13 2015U.S. Nuclear Regulatory Commission Attn: Document Control DeskWashington, D.C. 20555-0001 SUSQUEHANNA STEAM ELECTRIC STATIONUPDATED INFORMATION RE: APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OFCONTROLPLA-7278Docket Nos. 50-38750-388and 72-28 | |||
==References:== | ==References:== | ||
: 1. PLA-7191, T S. Rausch (PPL Susquehanna, LLC) to U.S. NRC, "Request for OrderApproving 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 toRequest for Additional Information Re: Application for Approval of Indirect Transferof 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 forthe Susquehanna Steam Electric Station, Units 1 and 2 in accordance with Section 184 ofthe 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 mostrecent update to PPL Susquehanna's five-year business plan, finalized in late December.Specifically, the following updates are provided in the | : 1. PLA-7191, T S. Rausch (PPL Susquehanna, LLC) to U.S. NRC, "Request for OrderApproving 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 toRequest for Additional Information Re: Application for Approval of Indirect Transferof 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 forthe Susquehanna Steam Electric | |||
: Station, Units 1 and 2 in accordance with Section 184 ofthe 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 mostrecent update to PPL Susquehanna's five-year business plan, finalized in late December. | |||
Specifically, the following updates are provided in the | |||
==Enclosure:== | ==Enclosure:== | ||
" Updates to Attachments 4P and 4NP of Reference 1, which contained | |||
" Updates to Attachments 4P and 4NP of Reference 1, which contained proprietary and non-proprietary | |||
: versions, respectively, of PPL Susquehanna projected incomestatements and calculations of six-month fixed costs. These updates are providedherein as Attachments IP and 1NP to the Enclosure. | |||
" Updates to PPL Susquehanna's response to RAI 1 that was transmitted viaReference 2, which contained proprietary and non-proprietary explanations of theprojected income statements and cash flow statements. | |||
These updates areprovided herein as Attachment 2P and Attachment 2NP to the Enclosure. | |||
A b.lMIt SZ Document Control DeskPLA-7278Attachments IP and 2P contain confidential commercial and financial information. | |||
PPLSusquehanna therefore requests that this information be withheld from public disclosure pursuant to 10 CFR § 2.390 for the reasons described in the Affidavit provided inAttachment | |||
: 3. Attachments 1NP and 2NP provide redacted, non-proprietary versions ofthis information that are suitable for public disclosure. | |||
Based on the enclosed information, the projected net income and cash flow for eachSusquehanna (PPL Susquehanna now, to be renamed Susquehanna Nuclear upon closingof the Transaction) | |||
Unit continues to be positive in all years under the base case and thesensitivity cases with 10% reduced capacity factor and 10% reduced energy price. Theamount required to cover a six month outage based upon the five-year projected averageoperating 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 flowstatements, the information provided is based upon PPL Susquehanna's current businessplan unless otherwise noted below. A number of these inputs have changed, for thefollowing reasons:* The rated capacity of each Unit used in the current projections is now 1247 MWerather than 1260 MWe, based on the 2014 summer test, reducing PPLSusquehanna's 90% share of the rated capacity from 1134 MWe to 1122 MWe.However, because SSES produces more power than the summer rated capacityduring cooler months, the reduction in the summer rating is offset by an increasein 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 theProjected Income Statement are now based in the 2019 projections in the BusinessPlan, rather than the escalated 2018 values previously used." The number of planned outage days has changed slightly based on current plantplanning. | |||
This results in no change in 2015, two more planned outage days in2016, six more planned outage days in 2017, two more planned outage days in2018, 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 2008through 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 tomodifications completed in 2014. This one percent adjustment is considered Document Control DeskPLA-7278conservative because the turbine performance problems were contributing nearlyfour percent to the EUOF since the turbine issue arose in April 2011. In thefive-year period prior to the turbine blade outages (2006 to 2010), the highestannual 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 in2015, 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 andfundamental prices on which the Application was originally based were as ofMay 2014. The updated market and fundamental prices now used are as ofSeptember 2014. The forecasted energy prices remain conservative compared tothe Cambridge Energy Research Associates (CERA) projections from August2014 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 inprojected revenue for each Unit in each year.* Other than a slight increase in the projected fuel expense (amortization) for Unit 1in 2015, fuel expense decreases for each Unit in each year. The reduction in fuelexpense is due to lower projected uranium prices along with strategic spotpurchases of uranium completed in 2014." Direct O&M is sometimes slightly higher and sometimes slightly lower thanpreviously estimated, reflective of current planning. | |||
" Projected intercompany charges have decreased. | |||
This decrease is partlyattributable to the lower corporate overhead that will exist following the closing ofthe Transaction. | |||
The allocation of intercompany charges1 to Susquehanna isconservative because it is expected that following closing of the Transaction, corporate overhead will be allocated only to Energy Supply (PPL Energy Supplynow, to be renamed Talen Energy Supply upon closing of the Transaction) and notto Susquehanna or Energy Supply's other subsidiaries (and therefore is no longerincluded in the current business plan). Nevertheless, the current Projected IncomeStatement continues to include an estimate of allocable Intercompany Charges as aSusquehanna expense for consistency with the prior version of Attachments 4Pand 4NP.1 The projected intercompany charges also reflect 100% of the allocable | |||
: overhead, rather than90% 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 fixedmanagement fee. Document Control DeskPLA-7278The projected depreciation expense has decreased for each Unit in 2015, 2016, and2017, based on current projected work. The projected depreciation expense in2018 and 2019 has increased. | |||
This increase is the result of an error in the previousprojection 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 theprojections primarily due to lower forecasted energy prices, but remains positive for eachUnit for each year under the base case and both sensitivity cases. However, except for aslight decrease for Unit 2 in 2015, projected cash flow has increased for each Unit in eachyear despite the reduction in net income, primarily due to lower nuclear fuel costs. Inaddition, in 2015 and 2016 there was a significant improvement in cash flow due tohigher tax depreciation (less tax earnings) resulting from an election not to take bonusdepreciation in prior years. Non-fuel capital expenditures increased by only $4 millionover the five year period; however expenditures have shifted between years.There are no new regulatory commitments associated with this response. | |||
In the event that the NRC has any questions on this response, please contactMr. Rocco R. Sgarro at (610) 774-7552. | |||
I declare under penalty of perjury that the updated responses to References 1 and 2provided herein are true and correct.Executed on: s13 [Z."5--SJon A. FrankeSite Vice President | |||
==Enclosure:== | ==Enclosure:== | ||
Revised Financial Projections Based on PPL Susquehanna's Updated5-Year Business Plancc w/o Attachments IP and 2P:NRC Region 1Mr. J. Greives, NRC Sr. Resident | |||
Table 1-1: Variance Explantion from 1999 Application to 2014 Application$ in 000'sFuel -ExpenseUnit IUnit 2Total SSES(90%)Spent fuel -D&DUnit IUnit 2Total SSES (90%) | Revised Financial Projections Based on PPL Susquehanna's Updated5-Year Business Plancc w/o Attachments IP and 2P:NRC Region 1Mr. J. Greives, NRC Sr. Resident Inspector Mr. J. Whited, NRC Project ManagerMr. L. Winker, PA DEP/BRP Enclosure to PLA-7278Revised Financial Projections Based on PPLSusquehanna's Updated 5-Year Business Plan Attachment 2NP to Enclosure of PLA-7278PPL Susquehanna Updated Response to RAI 1from PLA-7245, dated October 24, 2014(Redacted, Non-Proprietary Version) | ||
* 24)/B]Unit 1Unit 2StationE EUOFF Utilization Factor*Unit 1Unit 2Station7G Generation (MWh) [A*B*(1-D-E)*F]Unit 1Unit 2StationH Potential GUnit 1Unit 2StationI Capacity. | Table 1-1: Variance Explantion from 1999 Application to 2014 Application | ||
Unit 1: Base Case ($thousands)2015 2016 2017 2018 2019Assumptions:Price Projection ($/MWh)Plant Capacity FactorRevenues:Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income) | $ in 000'sFuel -ExpenseUnit IUnit 2Total SSES(90%) | ||
Spent fuel -D&DUnit IUnit 2Total SSES (90%)Decommissioning Unit 1Unit 2Total SSES (90%)Direct O&M (90%)Unit 1Unit 2Total SSES (90%)Intercompany chargesUnit 1Unit 2Total SSES2000 2001 20022003 2004 CAGR 20152016 2017 2018 2019Variance Explanation Largely driven by escalation in uraniumprices and increase production due toExtended Power Uprate (EPU) project.Reflect 2014 DOE adjustment to rate permill for decommissioning Change in accounting principle withadoption of SFAS 143, Asset Retirement Obligations. | |||
Normal escalation in cost, plus certainadditional NRC requirements. | |||
Driven by increased support group cost,increase SSES cost and head count relativeto the rest of Energy Supply's fleet.Taxes other than incomeUnit IUnit 2_______________________ | |||
Total SSES (90%)Depreciation Unit 1Unit 2Total SSES (90%)Total ExpenseUnit IUnit 2Total SSES (90%)Normal escalation in cost, plus increase incapital expenditures for EPU ($355million) and other projects. | |||
1 Table 1-2: Support for Assumed Energy Prices, CERA vs PPL($MWh)1I PJM West Hub On-Peak _CERA* PPL Variance20152016201720182019I PJM West Hub Off-Peak I [PJM West Hub ATCCERA* PPL VarianceCERA** PPL Variance* LHS CERA Energy North American Power Market Outlook, Mid-Year Update, August 2014; Source: IHS Inc. Thiscontent is extracted from IHS Energy North American Power service and was developed as part of an ongoingsubscription service. | |||
No part of this content was developed for or is meant to reflect a specific endorsement of a policyor regulatory outcome. | |||
The use of this content was approved in advance by IHS. Any further use or redistribution of thiscontent is strictly prohibited without written permission by IHS. All rights reserved. | |||
**See PPL Susquehanna Response to RAI 1.b for explanation of how these values were derived.2 Table 1-3: Capacity Factor Assumptions BASE CASE2015 2016 2017 2018 2019A Capacity (MW)Unit IUnit 2StationB Period HoursC Planned Outage DaysUnit 1Unit 2StationD EPOF I(C | |||
* 24)/B]Unit 1Unit 2StationE EUOFF Utilization Factor*Unit 1Unit 2Station7G Generation (MWh) [A*B*(1-D-E)*F] | |||
Unit 1Unit 2StationH Potential GUnit 1Unit 2StationI Capacity.Fa Unit 1Unit 2Stationeneration (MWh) IA*BIctor IG/HIeneration (MWh) [A*B]ctor [G/HI* Utilization Factor is greater than 100% due to the units ability toproduce more than thesummer tested capacity on file with PJM during months with colder temperatures. | |||
3 Table 1-4: Historical Equivalent Unplanned Outage FactorSUSQISUSQ2SUSQISUSQ2SUSQISUSQ2SUSQISUSQ2Equivalent Unplanned Outage FactorJun-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-09Sep-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-10Dec-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-12Mar-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-1360 Month AverageSUSQISUSQ2 _ _ _ _ _ _ _STAITON4 Table 1-5: PPL Susquehanna Cash Flow Statement io a aNi (5OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation. | |||
Amortization, Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTTVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided | |||
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation. | |||
Amortization, Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVITIES Net cash flowprovided/ | |||
(used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents ni e Ii -IOn eu-i in a sic rnslt 00 Re net on Ga ad aOPERATING ACTiVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation, Amortization, Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVTITES Net cash flow provided | |||
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation. | |||
Amortization. | |||
Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided | |||
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents uciid i si 0 e c n2-PIOPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation. | |||
Amortization, Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided | |||
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation. | |||
Amortization. | |||
Decommissioning and TaxesNet cash flow provided | |||
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided | |||
/ (used in) investing activities FINANCING ACTIVITIES Net cash flowvprovided/(used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents 5 | |||
Attachment 3 to Enclosure of PLA-7278Affidavit of Jon A. Franke(Request for Withholding) | |||
Attachment 3Affidavit of Jon A. FrankeI, Jon A. Franke, Site Vice President, PPL Susquehanna, LLC, do hereby affirm and state:1. I am authorized to execute this affidavit on behalf of PPL Susquehanna, LLC;2. PPL Susquehanna, LLC requests that the information provided in Attachmrents IP and 2Pto the Enclosure of its letter PLA-7278, and labeled "CONFIDENTIAL INFORMATION SUBMITTED UNDER 10 CFR § 2.390", be withheld from public disclosure under theprovisions 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, tothe Enclosure. | |||
: 3. Attachments 1 P and 2P of PPL Susquehanna's letter PLA-7278 contain confidential commercial information, the disclosure of which would adversely affect PPLSusquehanna, LLC.4. This information has been held in confidence by PPL Susquehanna, LLC. To the extentthat PPL Susquehanna, LLC has shared this information with others, it has done so on aconfidential basis.5. PPL Susquehanna, LLC customarily keeps such information in confidence, and there is arational basis for holding such information in confidence. | |||
The information is notavailable from public sources and could not be gathered readily from other publiclyavailable 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. FrankeSite Vice President COMMONWEALTH OF PENNSYLVANIA Subscribed and sworn before me, NOTARIAL SEALa Notary Public in and for the Laurie M. Minto. Notary Publicban Salem Twp.. Luzerne CountyCommonwealth of Pennsylvania, My Commission Expire July 24, 2018sthis( (`day of--1a vnru, 2015. EIER. PE:k BLVAJMA ASSOCIAYOI OF 1oTARIES Attachment 1NP to Enclosure of PLA-7278PPL Susquehanna Projected Income Statements and Calculations of Six-Month Fixed Costs(Redacted, Non-Proprietary Version) | |||
Unit 1: Base Case ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):1 Unit 1: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):2 Unit 1: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):3 11 Unt1 acuaino Si-otFxe Ope ratin Cot ($thosands 5-Year2015 2016 2017 2018 2019 AverageDirect O&MTaxes (Non Income)Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs4 Unit 2: Base Case ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):5 Unit 2: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):6 Unit 2: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019Assumptions: | |||
Price Projection | |||
($/MWh)Plant Capacity FactorRevenues: | |||
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses: | |||
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses: | |||
Income Before Taxes:Income Taxes:Net Income (Loss):7 1 Uni 2: Calulaio of Si-ot Fie Oprtn Css(to sans5-Year2015 2016 2017 2018 2019 AverageDirect O&MTaxes (Non Income)Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs8}} |
Revision as of 06:23, 1 July 2018
ML15016A050 | |
Person / Time | |
---|---|
Site: | Susquehanna ![]() |
Issue date: | 01/13/2015 |
From: | Franke J A Susquehanna |
To: | Document Control Desk, Office of Nuclear Material Safety and Safeguards, Office of Nuclear Reactor Regulation |
References | |
PLA-7278 | |
Download: ML15016A050 (22) | |
Text
CONTAINS PROPRIETARY INFORMATION WITHHOLD UNDER 10CFR2.390 Jon A. FrankeSite Vice President PPL Susquehanna, LLC769 Salem Boulevard
- Berwick, PA 18603Tel. 570.542.2904 Fax 570.542.1504 jfranke@ppiweb.com INAP 4 11.4 bi'tTM- ,pp1.$TcJAN 13 2015U.S. Nuclear Regulatory Commission Attn: Document Control DeskWashington, D.C. 20555-0001 SUSQUEHANNA STEAM ELECTRIC STATIONUPDATED INFORMATION RE: APPLICATION FOR APPROVAL OF INDIRECT TRANSFER OFCONTROLPLA-7278Docket Nos. 50-38750-388and 72-28
References:
- 1. PLA-7191, T S. Rausch (PPL Susquehanna, LLC) to U.S. NRC, "Request for OrderApproving 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 toRequest for Additional Information Re: Application for Approval of Indirect Transferof 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 forthe Susquehanna Steam Electric
- Station, Units 1 and 2 in accordance with Section 184 ofthe 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 mostrecent 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 incomestatements and calculations of six-month fixed costs. These updates are providedherein as Attachments IP and 1NP to the Enclosure.
" Updates to PPL Susquehanna's response to RAI 1 that was transmitted viaReference 2, which contained proprietary and non-proprietary explanations of theprojected income statements and cash flow statements.
These updates areprovided herein as Attachment 2P and Attachment 2NP to the Enclosure.
A b.lMIt SZ Document Control DeskPLA-7278Attachments IP and 2P contain confidential commercial and financial information.
PPLSusquehanna therefore requests that this information be withheld from public disclosure pursuant to 10 CFR § 2.390 for the reasons described in the Affidavit provided inAttachment
- 3. Attachments 1NP and 2NP provide redacted, non-proprietary versions ofthis information that are suitable for public disclosure.
Based on the enclosed information, the projected net income and cash flow for eachSusquehanna (PPL Susquehanna now, to be renamed Susquehanna Nuclear upon closingof the Transaction)
Unit continues to be positive in all years under the base case and thesensitivity cases with 10% reduced capacity factor and 10% reduced energy price. Theamount required to cover a six month outage based upon the five-year projected averageoperating 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 flowstatements, the information provided is based upon PPL Susquehanna's current businessplan unless otherwise noted below. A number of these inputs have changed, for thefollowing reasons:* The rated capacity of each Unit used in the current projections is now 1247 MWerather than 1260 MWe, based on the 2014 summer test, reducing PPLSusquehanna's 90% share of the rated capacity from 1134 MWe to 1122 MWe.However, because SSES produces more power than the summer rated capacityduring cooler months, the reduction in the summer rating is offset by an increasein 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 theProjected Income Statement are now based in the 2019 projections in the BusinessPlan, rather than the escalated 2018 values previously used." The number of planned outage days has changed slightly based on current plantplanning.
This results in no change in 2015, two more planned outage days in2016, six more planned outage days in 2017, two more planned outage days in2018, 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 2008through 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 tomodifications completed in 2014. This one percent adjustment is considered Document Control DeskPLA-7278conservative because the turbine performance problems were contributing nearlyfour percent to the EUOF since the turbine issue arose in April 2011. In thefive-year period prior to the turbine blade outages (2006 to 2010), the highestannual 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 in2015, 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 andfundamental prices on which the Application was originally based were as ofMay 2014. The updated market and fundamental prices now used are as ofSeptember 2014. The forecasted energy prices remain conservative compared tothe Cambridge Energy Research Associates (CERA) projections from August2014 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 inprojected revenue for each Unit in each year.* Other than a slight increase in the projected fuel expense (amortization) for Unit 1in 2015, fuel expense decreases for each Unit in each year. The reduction in fuelexpense is due to lower projected uranium prices along with strategic spotpurchases of uranium completed in 2014." Direct O&M is sometimes slightly higher and sometimes slightly lower thanpreviously estimated, reflective of current planning.
" Projected intercompany charges have decreased.
This decrease is partlyattributable to the lower corporate overhead that will exist following the closing ofthe Transaction.
The allocation of intercompany charges1 to Susquehanna isconservative because it is expected that following closing of the Transaction, corporate overhead will be allocated only to Energy Supply (PPL Energy Supplynow, to be renamed Talen Energy Supply upon closing of the Transaction) and notto Susquehanna or Energy Supply's other subsidiaries (and therefore is no longerincluded in the current business plan). Nevertheless, the current Projected IncomeStatement continues to include an estimate of allocable Intercompany Charges as aSusquehanna expense for consistency with the prior version of Attachments 4Pand 4NP.1 The projected intercompany charges also reflect 100% of the allocable
- overhead, rather than90% 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 fixedmanagement fee. Document Control DeskPLA-7278The projected depreciation expense has decreased for each Unit in 2015, 2016, and2017, based on current projected work. The projected depreciation expense in2018 and 2019 has increased.
This increase is the result of an error in the previousprojection 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 theprojections primarily due to lower forecasted energy prices, but remains positive for eachUnit for each year under the base case and both sensitivity cases. However, except for aslight decrease for Unit 2 in 2015, projected cash flow has increased for each Unit in eachyear despite the reduction in net income, primarily due to lower nuclear fuel costs. Inaddition, in 2015 and 2016 there was a significant improvement in cash flow due tohigher tax depreciation (less tax earnings) resulting from an election not to take bonusdepreciation in prior years. Non-fuel capital expenditures increased by only $4 millionover 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 contactMr. Rocco R. Sgarro at (610) 774-7552.
I declare under penalty of perjury that the updated responses to References 1 and 2provided herein are true and correct.Executed on: s13 [Z."5--SJon A. FrankeSite Vice President
Enclosure:
Revised Financial Projections Based on PPL Susquehanna's Updated5-Year Business Plancc w/o Attachments IP and 2P:NRC Region 1Mr. J. Greives, NRC Sr. Resident Inspector Mr. J. Whited, NRC Project ManagerMr. L. Winker, PA DEP/BRP Enclosure to PLA-7278Revised Financial Projections Based on PPLSusquehanna's Updated 5-Year Business Plan Attachment 2NP to Enclosure of PLA-7278PPL Susquehanna Updated Response to RAI 1from PLA-7245, dated October 24, 2014(Redacted, Non-Proprietary Version)
Table 1-1: Variance Explantion from 1999 Application to 2014 Application
$ in 000'sFuel -ExpenseUnit IUnit 2Total SSES(90%)
Spent fuel -D&DUnit IUnit 2Total SSES (90%)Decommissioning Unit 1Unit 2Total SSES (90%)Direct O&M (90%)Unit 1Unit 2Total SSES (90%)Intercompany chargesUnit 1Unit 2Total SSES2000 2001 20022003 2004 CAGR 20152016 2017 2018 2019Variance Explanation Largely driven by escalation in uraniumprices and increase production due toExtended Power Uprate (EPU) project.Reflect 2014 DOE adjustment to rate permill for decommissioning Change in accounting principle withadoption of SFAS 143, Asset Retirement Obligations.
Normal escalation in cost, plus certainadditional NRC requirements.
Driven by increased support group cost,increase SSES cost and head count relativeto the rest of Energy Supply's fleet.Taxes other than incomeUnit IUnit 2_______________________
Total SSES (90%)Depreciation Unit 1Unit 2Total SSES (90%)Total ExpenseUnit IUnit 2Total SSES (90%)Normal escalation in cost, plus increase incapital expenditures for EPU ($355million) and other projects.
1 Table 1-2: Support for Assumed Energy Prices, CERA vs PPL($MWh)1I PJM West Hub On-Peak _CERA* PPL Variance20152016201720182019I PJM West Hub Off-Peak I [PJM West Hub ATCCERA* PPL VarianceCERA** PPL Variance* LHS CERA Energy North American Power Market Outlook, Mid-Year Update, August 2014; Source: IHS Inc. Thiscontent is extracted from IHS Energy North American Power service and was developed as part of an ongoingsubscription service.
No part of this content was developed for or is meant to reflect a specific endorsement of a policyor regulatory outcome.
The use of this content was approved in advance by IHS. Any further use or redistribution of thiscontent is strictly prohibited without written permission by IHS. All rights reserved.
- 24)/B]Unit 1Unit 2StationE EUOFF Utilization Factor*Unit 1Unit 2Station7G Generation (MWh) [A*B*(1-D-E)*F]
Unit 1Unit 2StationH Potential GUnit 1Unit 2StationI Capacity.Fa Unit 1Unit 2Stationeneration (MWh) IA*BIctor IG/HIeneration (MWh) [A*B]ctor [G/HI* Utilization Factor is greater than 100% due to the units ability toproduce more than thesummer tested capacity on file with PJM during months with colder temperatures.
3 Table 1-4: Historical Equivalent Unplanned Outage FactorSUSQISUSQ2SUSQISUSQ2SUSQISUSQ2SUSQISUSQ2Equivalent Unplanned Outage FactorJun-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-09Sep-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-10Dec-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-12Mar-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-1360 Month AverageSUSQISUSQ2 _ _ _ _ _ _ _STAITON4 Table 1-5: PPL Susquehanna Cash Flow Statement io a aNi (5OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation.
Amortization, Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTTVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation.
Amortization, Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVITIES Net cash flowprovided/
(used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents ni e Ii -IOn eu-i in a sic rnslt 00 Re net on Ga ad aOPERATING ACTiVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation, Amortization, Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVTITES Net cash flow provided
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation.
Amortization.
Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents uciid i si 0 e c n2-PIOPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation.
Amortization, Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVITIES Net cash flow provided
/ (used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents OPERATING ACTIVITIES Net IncomeNon-Cash Items Included in Net Income:Depreciation.
Amortization.
Decommissioning and TaxesNet cash flow provided
/ (used in) operating activities INVESTING ACTIVITIES Construction Expenditures Nuclear fuel purchases Net cash flow provided
/ (used in) investing activities FINANCING ACTIVITIES Net cash flowvprovided/(used) by financing activities Net Increase (Decrease) in Cash & Cash Equivalents 5
Attachment 3 to Enclosure of PLA-7278Affidavit of Jon A. Franke(Request for Withholding)
Attachment 3Affidavit of Jon A. FrankeI, Jon A. Franke, Site Vice President, PPL Susquehanna, LLC, do hereby affirm and state:1. I am authorized to execute this affidavit on behalf of PPL Susquehanna, LLC;2. PPL Susquehanna, LLC requests that the information provided in Attachmrents IP and 2Pto the Enclosure of its letter PLA-7278, and labeled "CONFIDENTIAL INFORMATION SUBMITTED UNDER 10 CFR § 2.390", be withheld from public disclosure under theprovisions 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, tothe Enclosure.
- 3. Attachments 1 P and 2P of PPL Susquehanna's letter PLA-7278 contain confidential commercial information, the disclosure of which would adversely affect PPLSusquehanna, LLC.4. This information has been held in confidence by PPL Susquehanna, LLC. To the extentthat PPL Susquehanna, LLC has shared this information with others, it has done so on aconfidential basis.5. PPL Susquehanna, LLC customarily keeps such information in confidence, and there is arational basis for holding such information in confidence.
The information is notavailable from public sources and could not be gathered readily from other publiclyavailable 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. FrankeSite Vice President COMMONWEALTH OF PENNSYLVANIA Subscribed and sworn before me, NOTARIAL SEALa Notary Public in and for the Laurie M. Minto. Notary Publicban Salem Twp.. Luzerne CountyCommonwealth of Pennsylvania, My Commission Expire July 24, 2018sthis( (`day of--1a vnru, 2015. EIER. PE:k BLVAJMA ASSOCIAYOI OF 1oTARIES Attachment 1NP to Enclosure of PLA-7278PPL Susquehanna Projected Income Statements and Calculations of Six-Month Fixed Costs(Redacted, Non-Proprietary Version)
Unit 1: Base Case ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):1 Unit 1: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):2 Unit 1: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):3 11 Unt1 acuaino Si-otFxe Ope ratin Cot ($thosands 5-Year2015 2016 2017 2018 2019 AverageDirect O&MTaxes (Non Income)Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs4 Unit 2: Base Case ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):5 Unit 2: Sensitivity Case (10% Reduction in Capacity Factor) ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):6 Unit 2: Sensitivity Case (10% Reduction Projected Price) ($thousands) 2015 2016 2017 2018 2019Assumptions:
Price Projection
($/MWh)Plant Capacity FactorRevenues:
Revenue from EnergyRevenue from Ancillary ServicesRevenue from CapacityTotal Revenue:Expenses:
Fuel ExpenseDecommissioning Accretion ExpenseDirect O&MIntercompany ChargesTaxes (Non Income)Depreciation Other ExpensesTotal Expenses:
Income Before Taxes:Income Taxes:Net Income (Loss):7 1 Uni 2: Calulaio of Si-ot Fie Oprtn Css(to sans5-Year2015 2016 2017 2018 2019 AverageDirect O&MTaxes (Non Income)Non-fuel Capital Expenditures Six months coverage of 5-year average operating costs8