ML17300A332

Clarifies & Modifies Info in 860415 Application for Sale & Leaseback Transactions by Util

ML17300A332
Person / Time
Site:	Palo Verde
Issue date:	08/13/1986
From:	Toy T EL PASO ELECTRIC CO., MUDGE, ROSE, GUTHRIE, ALEXANDER & FERDEN
To:	Knighton G Office of Nuclear Reactor Regulation
References
NUDOCS 8608150136
Download: ML17300A332 (12)

Text

I'EQULATORY INFORNATION DISTRIBUTION SYSTEN (R IDB)

ACCESSION NBR: 8608150136 DOC. DATE: 86/08/13 NOTARIZED: NO DOCNET Unit 2> Av izona Publi 05000529 I

FACIL: STN-50-529 Palo Vev'de Nucleav Station>

AUTH. NANE AUTHOR AFFXLIATION TOY> T. N. Nudge> Rose> Quthrie> *lexander 8c Fev den TOY> T. N. El Paso Electv'ic Co.

RECIP. NANE RECIPXENT AFFILIATION NNIQHTON> Q N PNR Pv oject Div'ectorate 7

SUBJECT:

ClariFies Zc modiFies inFo in 860415 application Fov sale 5 leaseback tv.ansacti ons bg util.

DISTRIBUTION CODE: Y002D COP I ES RECEI VED: LTR ENCL S 1 ZE:

TITLE: Di stv'ibution For Atypical 50 Dkt Nateria NOTES: Btandardi zed plant. 0 500052'P RECIPIENT I COP EB RECIPIENT COPIES ID CODE/NANE LTTR ENCL ID CODE/MANE LTTR ENCL PNR-B ADTS 09 PAR-B PD7 LA 08 PNR-B PD7 PD 07 LICITRA> E 01 ICNIQHTON> Q. N. 06 INTERNAL ACRB 20 A ELD/HDB3 16 FIL 04 RQN5 I/NIB 17 EXTERNAL: LPDR 03 NRC PDR 02 NSXC 05 I

TOTAL NUNBER OF COPIEB REQUIRED: LTTR 4 ENCL

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MUDGE ROSE GUTHRIE ALEXANDER R FERDON I60 MAIDEN LANE 2I2I K STREET. H W.

WASH INO TON, D. C. 20037 NEW YORK. N. Y. IOO36 202 429 '358 2I2- SIO 7000 SUITE 2020

$ 3$ SOUTH OR*NO AVENUE CASLC ADDRESS.'ALTVCHINS NEW YORK LOS ANOELCS. CALIF. 9007I TCLCXI WV 703729I WU I27889 2 I3 8 l3 I II2 TELEOOPIERI 2I2 ~ 2Ae. 2eSS I2. RVC DC LA PAIX 7BOO2 PARIS. FRANCL 28 I 87 7I August 13 F 1986 Director of Nuclear Reactor Regulation Attention: Mr. George W. Knighton, Project Director PWR Project Directorate 07 .

Division of Pressurized Water Reactor Licensing-B Nuclear Regulatory Commission Washington, D.C. 20555 Re: Application in Respect of Sale and Leaseback Transactions by El Paso Electric Company Dated April 15, 1986 Palo Verde Nuclear Generating Station Unit 2 (Docket No. STN 50-529)

Dear Mr. Knighton:

Reference is made,.to the following .letters, and submissions with respect to the above-captioned application (the Application): the letter of the under-signed dated June 3, 1986 with respect to certain decom-missioning matters; the letter of the undersigned 'dated July 30, 1986 with respect to matters raised at the meeting with the staff on July 24, 1986; the letter of the undersigned dated August 7, 1986 with respect to the f inal equity investor list (also enclosing (i) supplemental financial information with respect to El Paso Electric Company (El Paso) and the prospective equity investors and (ii) a revised El Paso estimate of the reduction of ratepayer revenue requirements, etc.); p9 and the letter of the undersigned August 7, 1986 with 1021.700.2898 13:2Sb0813 SbOS15013b PDR ADOCK 05000529 PDR

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respect to the duration of the basic lease term.

Following are certain clarifications of or modifications to the information presented in the Application:

Page Hmahm

• h the transactions described in the trans-actions described in this Application are to the transactions entered into by PNM with respect to the Unit 1 Facilities... ~"

lEmphasis added.)

The phrase "similar in all significant respects" was intended to refer only to

.the description of the proposed Unit 2 transactions, thereafter set forth in the Application. ,This phrase does not mean that the. terms of the transaction docu-ments, as finally negotiated and exe-cuted< for the proposed El Paso transac-tions will be'1 the same as the terms of the PNM Unit documents.

If requested, we will supply you with a description of the material differences between the two sets of transaction docu-ments after the El Paso documents have been finally negotiated and executed.

The fair market value of El Paso's 15.8%

interest in Unit 2 and the related por-tion of PVNGS common facilities is approximately $ 680 million.

El Paso has the option, at the end of the basic termi to renew all (but not fewer than all) thC'eases at a rental payment equal to 50 percent of the average rent on the final two rent payments dates, for a renewal term of up to the maximum fixed rate renewal term permitted by Federal tax law without disqualifying the Leases as true leases f'r Federal tax purposes.

The Leases will not provide for renewals at fair market rentals.

1021.700.2898.13:2

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On this page statements are made whichf if taken out of context, may be subject to the construction that the Lessors< the Equi ty Investors and their respective successors and assigns have no control of, or ability to realize the value of, their respective interests except as pas-sive owners of such interests under the leases. These statements were not intended, nor should they be construed, to relate to rights of the Lessor and the Equity Investors, in the residual values of the Unit 2 Facilities after termina-tion of the leases. Rather, these state-ments were intended to describe the rights of such persons during the term of the leases, when the Lessor and the Equity Investors are neither licensees of

'the Commission nor Participants under the

-ANPP Participation Agreement. Upon (i) the termination of the Lease, (ii) the issuance of a license or a license amendment by the Commission and (iii) the qualification of the Lessor or its successor as a Participant under the ANPP Participation Agreement in respect of the Unit 2 Facilities, or any part thereof, such person would have full rights in respect of such Unit 2 Facilities and could then realize all values which'ay be derived therefrom.

The Application is not meant to preclude such person, in appropriate circumstances and subject to due compliance with the Commission's regulations, from realizing the residual values of the Unit 2 Facilities.

One or more lessors may borrow up to 80%

of the purohase price of the Unit 2 Facilities. The sale and leaseback transactions will be closed with non-recourse interim debt financing provided by banks. El:Paso intends to refinance such interim debt with public debt as described in Section 3.9.

19 The proposed sale and leaseback transactions can occur subsequent to 1021.700 '898.13:2

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such property ~

August 18, 1986 but only at the risk of constituting "transition property" as defined in the House tax bill (H.R. 3838, 99th Congress) . One consequence of not being transition property is a possible adverse impact on the tax benefits available to the Equity Investors under the proposed transactions.

None of the clarifications set forth above and modifica-tions alter the representations made in Section 13 of the Application (pages 21-23); i.e. the representations and conditions that are material to the Commission's action<,on the Application, including< specifically, the acknowledgment by the Lessors and the Equity Investors that none of them may take possession of their respec-tive interests in the Unit 2 Facilities upon termination of the lease for any cause until the Commission's licensing requirements have been met. At such time any Lessor, Equity Investor or a transferee or assignee of any of,them who may take possession of such interests will be subject to the Commission's j'urisdiction in respect thereof.

If I can be of further assistance, please do not hesitate to call.

Sincerely,

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Timothy Michael Toy Copies with enclosure to:

Edward S. Christenbury, Esq.

Assistant. General Counsel for Hearings Nuclear Regulatory Commission 7735 Old Georgetown Road Bethesda, Maryland 21930 1021.700.2898.13:2

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Edwin J. Reis, Esq.

Deputy Assistant General Counsel Nuclear Regulatory Commission 7735 Old Georgetown Road Bethesdai Maryland 21930'reste R. Pirfo, Esq.

Attorney Nuclear Regulatory Commission 7735 Old Georgetown Road Bethesda, Maryland 21930 Arthur C. Gehr, Esp.

Snell 6 Wilmer 3100 Valley Bank Center Phoenix, Arizona 85073 Dane George< Esp.

Kemp< Smith< Duncan 6 Hammond 2000 MBank Plaza El Paso, Texas 79901 Mr. B.E. Bostic El Paso Electric Company 303 North Oregon Street El Paso, Texas 79901 1021.700.2898.13: 2

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