ML20217J436

NRC Staff Response to Commission Order of 970708.* Concludes That Financial Qualifications of Louisiana Energy Svcs Will Continue to Satisfy Applicable Regulation 10CFR70.23(a)(5) Even If Partners Allowed to Withdraw from Partnership

ML20217J436
Person / Time
Site:	Claiborne
Issue date:	08/07/1997
From:	Hodgdon A NRC OFFICE OF THE GENERAL COUNSEL (OGC)
To:	NRC COMMISSION (OCM)
References
CON-#397-18432 ML, NUDOCS 9708140227
Download: ML20217J436 (5)

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,k DOCKETED August 7,1997 USHRC l

UNITED STATES OF AhiERICA .

~0 b NUCLEAR REGULATORY COhihilSSION

\ OFFICE OF SECRETARY BEFORE THE COMMISSION 00CKETggERVICE

n the hiatter of )

LOUISIANA ENERGY SERVICES, L.P. ) Docket No. 70-3070-hiL

)

(Claiborne Enrichment Center) )

)

NRC STAFPS RESPONSE TO COMMISSION ORDER OF JULY 8.1997 I

INTRODUCTION AND DIS' USSION in an order of July li,1997, the Commission directed the Applicant Louisiana Energy Services (LES) to file a supple,wital brief providing an evaluation of the request of one ofits partners, the Greystone Corporation, to withdraw from the partnership and an explanation of the significance,if any, of te evaluation on the financial qualificationsissue that is currently before the Commission. The Commission directed the NRC staff and the intervenor, Citizens Against Nuclear Trash, to file a response to the applicant's comments in a supplemental brief.

Oa August 1,1997, LES filed a supplementalbriefproviding the evaluation and explanatim required by the Commission's order.'

The NRC staffis providing the affidavit of Robert S. Wood, who conducted the NRC staff review of LES's financial qualifications and who providcu testimony.at the hearing on that matter.

8 Applicant's Response to the Commission Order ofJuly 8,1997,(August 1,1997). On that same date, LES filed a motion requesting the Commission to allow it to exceed by one page the five page limit established in the Commission's Order. Ti NRC staff <ima not object to the granting of LES's motion.

9708140227 9765.7 -1 DR ADOCK 0700 OO CJ[

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e 2-As set forth in Mr. Wood's e rf davit, based upon a review of LES's explanation of the significarce of the withdrawal of Greystone and Le Paz as partners, the Staff concludes that; even if the l withdrawal were approved by the other partners, LES would appear to be financially qualified to

. engage in the proposed activitiesin accordancewith the regulationsin 10 C.F.R. Part 70. Affidavit at 12.

l CONCLUSION Accordingly, the NRC staft's conclusion is that the financial qualifications of LES will

- continue to satisfy the applicable regulation,10 C.F.R. Q 70.23(a)(5), even if Greystone and Le Paz are allowed to withdraw from the pannership.

Respectfully submitted, f, D> c

y Dtn \e 'I OcV\(.(*,L Ann P. Hodgdon Counsel for NRC Staff Q

Dated at Rockville, Maryland this day of August,1997

August 7,1997 -

UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION

! In the Matter of - )

l ) - Docket No. 70-3070.ML

! LOUISIANA ENERGY SERVICES, L.P. )

- )

(Claiborne Enrichment Center) -)

AFFIDAVIT OF ROBERT S. WOOD IN SUPPORT OF APPLICANT'S RFRPONSE TO THE COMMIRRION ORDER OF JULY 8.1997 I, Robert S. Wood, first being duly sworn, depose and state:

1. - I am currently employed as a Senior Financial Analyst, Generic Issues and Environmental- Projects Branch, Division of Reactor Program Management, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission. - I provided testimony on the fmancial qualifications of the Applicant Louislate Etr.,;y Services, 4

L.P. (LES) to construct and operate the.Claiborne Enrichment Cet'.er (CEC) at a hearing before the Atomic Safety and Licensing Board on March 15,1995 (Testimony- 1 of Robert S. Wood fol. Tr 721). At the time of that testimony, I .was employed as a Senior Financial Policy Analyst in the License Renewal and Environmental Review Project Directorate of the Office of Nuclear Reactor Regulation. A statement of my

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professional qualifications appeared with my Testimony as Attachment 1.

. 2. The purpose of this' affidavit is to address the Applicant's conclusion that its fmancial qualifications to construct and operate the CEC will not be adversely affected by the possible withdrawal of one of its general partners, Graystone Corporation (Graystone),

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2-and one of its limited panners, Le Paz Incorporated (1.4 Paz).

3. On January 29,1991, the Applicant LES filed an application for a license to possess .

and use byproduct, source, and special nuclear material and to enrich natural uranium to a maximum of 5 percent U-235 by the gas centrifuge process through the constmetion and operation of CEC.

4 In February 1991, I was assigned to review the Applicant's fmancial qualifications to construct and operate CEC.

l 5. My financial qualifications review was included in the Safety Evaluation Report for the l

Claiborne Enrichment Center, Homer, Louisiana (NUREG 1491, January 1994) and was included as part of my testimony of March 15,1995 (fol. Tr 721). In that review and testimony, I concluded, in part, that, pursuant to 10 CFR 70.23(a)(5):

The applicant, LES, and its partner owners, appears to be fmancially quallfled to build and operate the proposed CEC. LES has identified sources of debt and equity capital for construction, and has reasonable assurance of securing them when needed. (fol. Tr 721, Attaclanent 2 at 13-4.)

6. On June 27,1997, LES informed the Commission that one of its general partners, Graystone, had requested to withdraw from the partnership.

7. By Order dated July 8,1997, the Commission requested LES both to provide an evaluation of Graystone's request and to explain the significance, if any, of this evaluation on the financial qualifications issue.

8. LES submitted its respty:e tu the Commission Order of July 8,1997 on August 1, 1997.

9. In its response of August 1,1997, LES concluded:

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3 Grsystone ... could be showed to withdraw without affecting the fmancial capability of the partnership or its ability to carry out the Financial Plan ...

Graystone's depanure would not, therefore, materially effect LES's ability to firamce construction and operation of the Claiborne Enrichment Center. The financial qualifications of _ LES ... are not dependent on the fmancial resources of any s,ngle partner, nor does tr.e [ Financial) Plan rely on equity committed in advance by any existing partner as proof of its fmancial qualifications. (August 1,1997, Response at 1-2)

10. To suppon this conclusion, LES made the following points:  ;

l-L (a) Graystone's small equity share is economically insignificant. Should Graystone ,

be permitted to depart, this circumstance would be no different financially than a panner declining to participate in new capital shares - a normal experience in new ventures and one already experienced and successfully resolved by the LES

/ psrtners on several occasions. LES funher notes that, if LES decides to rely on e l outside capital, financial institutions will look to the collective capability of the panners and their parents in assessing the pannership's qualifications. In this respect, each of the existing partners, together with its respective parent, has considerable fmancial resourus.

(b) . Capital contributions by the panners are a flexible ponion of project fmancing.

By design, the LES Financial Plan provides wide latitude in how the project

. shall be fmanced, and contemplates capital contributions through a mixture of

. investor equity and outside fmancing. The Financial Plan anticipates that post-venture equity _ would come from then-existing or new limited partners.

(c) The Pannership-Ayreement has clways anticipated panner withdrawal. From inception, the LES partners have designed into their Agreement flexibility for

4 admitting new partners to replace departing partners, with due consideration to -

licensing requirements. Further, Graystone's departure before receipt of the license -- and therefore before redemption rights arise - could be handled by a redistribution of Graystone's small general partnership share among the other general partners so that the respective relationship of such partners one to each other would remain intact.

11. My observations are as follows. Assuming that Graystone, which has a 0.52 per cent interest, and Le Paz, a limited partner and affiliate of Graystone, with a 6.23 per cent interest, withdraw as general and limited partners, respectively, the combined impact would be only 6.75 percent of total LES ownership. As provided in its Financial Plan,

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>- this amount could be made up from existing partners or new partners. The available

- resources of the remaining partners and their parents are substantial and would be substantially more than required to make any reasonable level of equity contributions

- contemplated in the Financial Plan. Alternatively, it LES decided to substitute debt (bond) fmancing for any equity fmancing that might have come from Graystone and 14 Paz, LES has reasonable assurance of being successful with such an approach, since the resources of the remaining partners and their parents should be sufficient to attract bond investors. Further, LES's overall fmancial structure with respect to the ratio of debt-to-equity would be adequate, even if all of Graystone's and Le Paz's assumed 4

equity contributions were replaced with debt fmancing.

12. In view of the above, I conclude that, even if the withdrawal of Graystone and 1.c Paz l

. are approved by the other partners, pursuant to 10 CFR 70.23(a)(5), LES " appears to

5-be financially qualified to engage in the proposed activities in accordance with the regulations in this part."

13 The foregoing'is true and comvt to the best of m knowledge and belief.

. Robert S. Wood Senior Financial Analyst -

Generic Issues and Environmental Projects -

Branch Subscribed and sworn to before me l this 9hof August,~ 1997

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, Mry Public ~g My cogojpgggppgcy:

NOTARY Nsu STATE Of M.ARY' AND My Commiulon bpt;Ducab::1,1979 4

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t DOCKETED UNITED STATES OF AMERICA USHRC NUCLEAR REGULATORY COMMISSION BEFORE THE COMMISSION ~0

! In the Matter of ) 0FFICE OF SECRETARY 00CKETlHG & SERVICE f ) BRANCH l LOUISIANA ENERGY SERVICES, L.P. ) Docket No. 70-3070-ML

)

-(Claiborne Enrichment Center) ) i

) ,

NOTICE OF APPEARANCE Notice is hereby given that the undersigned attorney enters an appearance in the above-captioned matter. In accordance with Q 2.713(b),10 C.F.R., Part 2, the following information is provided:

Name: Ann P. Hodgdon Address: Office of the General Counsel U.S. Nuclear Regulatory Commission Washington, D.C. 20555 Telephone Number: (301) 415-1587

. Admissions: U.S. Court of Appeals, District of Columbia -

Name of Party: NRC Staff Respectfully submitted, T yt it -

e<r (cw Ann P. Hodgdon Counsel for NRC Staff Dated at Rockville, Maryland this 7th day of August,1997.

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" UNITED STATES OF AMERICA DOCKETED NUCLEAR REGULATORY COMMISSION USHRC BEFORE THE COMMISSION 97 AUG -8 A8 :07 In the Matter of )

Of flCE OF SECRETARY

) 00CKETING & SERVICE LOUISIANA ENERGY SERVICES, L.P. ) Docket No. 70-3070-MIANCH

)

(Claiborne Enrichment Center) ) l CERTIFICATE OF SERVICE I hereby certify that copies of "NRC STAFF'S BRIEF IN SUPPORT OF COMMISSION REVERSAL OF LBP-97-8", "NRC STAFF'S RESPONSE TO

, COMMISSION ORDER OF JULY 8,1997", and " NOTICE OF APPEARANCE" of l Ann P. Hodgdon in the above captioned proceeding have been served on the following through deposit in the Nuclear Regulatory Commission's internal mail system, or by deposit in the United States mail, first class, as indicated by an asterisk this 7th day of l August,1997:

Thomas S. Moore, Chairman Richard F. Cole Administrative Judge Administrative Judge Atomic Safety and Licensing Board Atomic Safety and Licensing Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission Washington, DC 20555 Washington, DC 20555 Frederick J. Shon Mr. Ronald Wascom*

Administrative Judge Deputy Assistant Secretary Atomic Safety and Licensing Board Office of Air Quality &

U.S. Nuclear Regulatory Commission Radiation Protection Washington, DC 20555 P.O. Box 82135 Baton Rouge, LA 70884-2135 J. Michael McGarry, III, Esq.* Peter LeRoy*

Winston & Strawn Duke Engineering & Services, Inc.

1400 L Street, N.W. P.O. Box 1004 Washington, DC 20005 Charlotte, NC 28201-1004

s

', ]

' Dr. W. Howard Arnold

• Marcus A. Rowden, Esq.*

I.ouisiana Energy Services, L.P. Fried, Frank, Harris 2600 Virginia Avenue, N.W. Shriver & Jacobsen Suite 608 1101 Pennsylvania Avenue, N.W.

Washington, DC 20037 Suite 900 South Washington, DC 20004 i Office of the Commission Appellate Office of the Secretary Adjudication ATTN: Rulemakings and Adjudications '

. Mail Stop

16-G-15 OWFN Staff U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission Washington, DC 20555 Washington, DC 20555 Atomic Safety and Licensing Board Nathalie M. Walker, Esq.*

Panel Sierra Club Legal Defense Fund U.S. Nuclear Regulatory Commission 400 Magazine Street, Ste. 401

- Washington, DC 20555 New Orleans, LA 70130 Diane Curran, Esq.* Joseph DiStefano, Esq *

. Harmon, Curran, Gallagher & Spielberg Urenco Investments, Inc.

2001 S Street, N.W., Suite 430 Suite 610 Washington, D.C. 20009-1125- 2600 Virginia Ave., N.W.

Washington, DC 20037 David S' Bailey, Esq.*

Thomas J. Henderson, Esq.

Lawyers' Committee for Civil Rights Under Law 1450 G Street N.W., Ste 400 Washington, DC 20005 ttNL ke a cw Ann P. Hodgdon Counsel for NRC Staff 'h

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