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EXHIBIT D-7
September 26, 2000
UNITED STATES OF AMERICA
NUCLEAR REGULATORY COMMISSION
In the Matter of )
)
GPU Nuclear, Inc., et al. )
) Docket Nos. 50-146 and 50-320
(Saxton Facility and )
Three Mile Island, Unit No. 2) )
APPLICATION FOR INDIRECT TRANSFERS OF CONTROL
REGARDING FACILITY LICENSE NOS. DPR-4 AND DPR-73
INTRODUCTION AND BACKGROUND
GPU Nuclear, Inc. ("GPUN"), on its own behalf and on behalf of the
licensed owners of Three Mile Island Unit No. 2 (TMI-2") and the Saxton Facility
("Saxton"), and FirstEnergy Corp. ("FE"), acting for itself, hereby submit the
following information in support of this joint application for Nuclear
Regulatory Commission ("NRC") consent to the indirect transfer of control over
the TMI-2 Facility Possession Only License DPR-73, and the Saxton Amended
Facility License No. DPR-4 that will occur as a result of a proposed merger
between FE and GPU, Inc. GPU, Inc. is the parent holding company of GPUN, as
well as the TMI-2 owners -- Metropolitan Edison Company ("Met Ed"), Jersey
Central Power & Light Company ("JCP&L") and Pennsylvania Electric Company
("Penelec") -- and the Saxton owner, the Saxton Nuclear Experimental Corporation
("SNEC").(1)
For Saxton, GPUN and SNEC are holders of Amended Facility License No.
DPR-4. GPUN is licensed to possess, manage, use and maintain Saxton in
accordance with the procedures and limitations set forth in the facility
license. SNEC is licensed to possess the
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(1) GPUN, Met Ed, JCP&L, and Penelec are wholly owned subsidiaries of GPU, Inc.,
and Met Ed, JCP&L, and Penelec are the sole shareholders of SNEC.
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facility. GPUN is currently carrying out Saxton's decommissioning
responsibilities on behalf of SNEC.
For TMI-2, GPUN, MetEd, JCP&L, and Penelec are the holders of Facility
Possession Only License No. DPR-73 and are licensed to possess TMI-2 in
accordance with the procedures and limitations set forth in that license. GPUN
is the licensee responsible for maintaining and decommissioning TMI-2.
The purpose of this Application is to request the consent of the NRC
under 10 C.F.R. ss. 50.80 to the indirect transfers of control of interests in
the TMI-2 and Saxton licenses that will occur under a proposed share purchase
transaction and merger ("the merger") between FE and GPU, Inc. Upon consummating
the merger, FE will remain as the successor company and will become a registered
holding company under the Public Utility Holding Company Act of 1935. The merger
will, therefore, result in the indirect transfers of control to FE of the
interests held by the licensees, all subsidiaries of GPU, Inc., in the TMI-2 and
Saxton licenses. A copy of the Merger Agreement between FE and GPU, Inc. is
filed with this Application as Exhibit A.
The merger transaction will create a stronger, more competitive
enterprise, which will be able to compete more effectively as the deregulation
of the electric utility industry proceeds. As a result of the merger, the
surviving company should be able to achieve cost savings and efficiencies to
reduce its operating costs for the benefit of its customers, shareholders and
the communities that it serves. The transaction will have no adverse affect on
the technical or financial qualifications of the possession-only licensees for
TMI-2 and Saxton, or the decommissioning funding for TMI-2 and Saxton, both of
which have permanently ceased operation.
In addition to the NRC's review, the merger will be reviewed by other
Federal agencies, including the Federal Energy Regulatory Commission ("FERC"),
the Securities Exchange
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Commission ("SEC"), the Federal Communications Commission (FCC"), the U.S.
Department of Justice, Antitrust Division ("DOJ"), and the Federal Trade
Commission (FTC").
Part I below sets forth the information required by 10 C.F.R. ss. 50.80
with respect to the proposed transfers. Part II discusses the effective date for
the license transfers.
I. INFORMATION FOR TRANSFERS OF CONTROL
A. GENERAL INFORMATION CONCERNING GPU, INC.
GPU, Inc., is headquartered in Morristown, New Jersey, and is a
registered public utility holding company providing utility and utility-related
services. GPU Energy serves 2.1 million customers directly through its electric
companies in the United States. GPUN, Met Ed, JCP&L, and Penelec are all direct,
wholly-owned subsidiaries of GPU, Inc.; and Met Ed, JCP&L and Penelec are the
sole shareholders of SNEC. Following the merger, GPUN will continue to perform
the decommissioning of Saxton and will continue to be responsible for
maintaining and decommissioning TMI-2.(2) Met Ed, JCP&L, and Penelec will
continue to be the licensed owners of TMI-2 after the merger, and will continue
to operate as regulated electric utilities, as defined in 10 C.F.R. ss. 50.2.
SNEC will continue to be the licensed owner of Saxton after the merger.
GPUN, Met Ed, JCP&L, Penelec and SNEC are not now, nor will they be
after the merger, owned, controlled, or dominated by an alien, foreign
corporation or foreign government, nor are such companies acting as
representatives of any other person in this application for consent for the
indirect transfers of control of the licenses.
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(2) It is possible that at some later point after the merger, FE may decide to
consolidate GPUN's and FENOC's nuclear activities. If FE decides to do so, it
will timely submit another application seeking NRC consent to the appropriate
license transfers.
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B. GENERAL INFORMATION CONCERNING FE
FE is a diversified electric utility holding company, headquartered in
Akron, Ohio, and prior to the merger, comprises the tenth largest investor-owned
electric system in the United States. Its wholly-owned subsidiaries include the
Ohio Edison Company, Pennsylvania Power Company, the Cleveland Electric
Illuminating Company, and The Toledo Edison Company, as well as First Energy
Nuclear Operating Company ("FENOC"), which operates the Davis-Besse, Perry, and
Beaver Valley nuclear stations.
Subsequent to the merger, the board of directors of FE, the surviving
corporation, will be comprised of 16 members, including ten members to be
designated by FE's current board of directors and six members to be designated
by GPU, Inc.'s current board of directors. All current directors and principal
officers of FE are U.S. citizens. After the merger, all principal officers of
FE, and all of the 10 directors to be appointed by FE's board will be U.S.
citizens. With the possible exception of one of GPU, Inc.'s existing directors,
who is a citizen of the United Kingdom, it is also anticipated that the six
directors to be designated by GPU, Inc. for the merged company will also be U.S.
citizens. FE is not now, nor will it be after the merger, owned, controlled, or
dominated by an alien, foreign corporation, or foreign government.
C. TECHNICAL QUALIFICATIONS
The technical qualifications of the licensee, GPUN, will be unchanged
by the merger transaction, since the technical management and nuclear
organization of GPUN currently responsible for completing the decommissioning of
Saxton and maintaining and decommissioning TMI-2 will remain in place. The GPUN
nuclear organization will continue to have clear and direct lines of
responsibility and authority after the merger. Therefore, the technical
qualifications of GPUN to carry out its responsibilities under the TMI-2 and
Saxton licenses will remain unchanged and will not be adversely affected by the
merger.
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D. FINANCIAL QUALIFICATIONS; DECOMMISSIONING FUNDING
There will be no change in the financial qualifications of the
licensees. Met Ed, JCP&L, and Penelec, are the licensed owners of TMI-2 and are
responsible for the costs associated with maintaining and decommissioning the
unit. Each of the licensed owners will continue to distribute electricity
through rates authorized by the New Jersey and Pennsylvania public utilities
commissions. Therefore, MetEd, JCP&L, and Penelec will continue to meet the
definition of "electric utility" set forth in 10 C.F.R. ss. 50.2. MetEd, JCP&L,
and Penelec have also committed to cover, from their general corporate funds,
any shortfall which may occur in the decommissioning trusts established under 10
C.F.R. ss. 50.75(e)(1) for Saxton.
NRC regulations require information showing "reasonable assurance. . .
that funds will be available to decommission the facility." 10 C.F.R. ss.
50.33(k). GPUN on behalf of the licensed owners of TMI-2 and Saxton, has filed
decommissioning reports with the NRC under 10 C.F.R. ss. 50.75(f)(1), most
recently on March 14, 2000. The licensed owners are providing financial
assurance for decommissioning TMI-2 and Saxton in accordance with these reports
through external sinking trust funds. After the transaction closes, the licensed
owners will remain responsible for the decommissioning liabilities associated
with their respective interests in TMI-2 and Saxton and will continue to
maintain their respective decommissioning trusts for these plants until license
termination in accordance with commission regulations. In addition, Met Ed,
JCP&L, and Penelec will continue to operate as electric utilities after the
merger, and their commitment to meet any shortfall in decommissioning funding
for Saxton that may arise will be unaffected. Accordingly, the indirect transfer
of control over these licenses will have no effect on the decommissioning
funding for TMI-2 and Saxton.
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E. ANTITRUST CONSIDERATIONS
The NRC has found that antitrust reviews of post-operating license
transfer applications are neither required nor authorized by the Atomic Energy
Act. KANSAS GAS AND ELECTRIC CO. (Wolf Creek Generating Station, Unit 1),
CLI-99-19, 49 NRC 441 (June 18, 1999). Accordingly, no antitrust review is
required with respect to the indirect transfers of control that would result
from the proposed transaction.
F. Statement Of Purposes For the Transfers And The Nature Of The
Transaction NECESSITATING OR MAKING THE LICENSE TRANSFERS DESIRABLE
The purpose of the proposed merger is to achieve benefits for the
shareholders and customers of both FE and GPU, Inc. The merger of FE and GPU,
Inc. is a key strategic step in achieving their vision of becoming the premier
energy and related services provider in the region in which they serve. If the
merger were completed today, the combined company would be the sixth largest
investor-owned electric utility system in the U.S., based on customers served.
With assets of approximately $40 billion, a domestic customer base of 4.3
millions, and a service area of 37,200 square miles, the combined company will
be one of the nation's largest electric utility systems with more resources and
opportunities to compete successfully in the increasingly competitive electric
utility industry. Benefits of the merger would not be achievable if FE and GPU,
Inc. were to remain separate companies.
As described above, this application requests NRC consent to the
indirect transfers of control over the TMI-2 Possession Only License and the
Saxton Amended Facility License that will occur as a result of the proposed
merger between FE and GPU, Inc. With FE remaining as the successor company, the
merger will result in the indirect transfer of control of the interests in TMI-2
and Saxton licenses currently held by subsidiaries of GPU, Inc.
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G. RESTRICTED DATA
This Application does not contain any Restricted Data or other
classified defense information, and it is not expected that any will become
involved in the licensed activities. However, in the event that such information
does become involved, GPUN and FE agree that they will appropriately safeguard
such information and will not permit any individual to have access to Restricted
Data until the Office of Personnel Management (the successor to the Civil
Service Commission) shall have made an investigation and reported to the NRC on
the character, associations and loyalty of the individual, and the NRC has
determined that permitting such person to have access to Restricted Data will
not endanger the common defense and security of the United States.
H. NO ENVIRONMENTAL IMPACT
The indirect transfers described herein do no involve any change to the
nuclear plant operations or equipment of TMI-2 or Saxton. Furthermore, the NRC
has determined that license transfers, whether direct or indirect, and any
associated amendments are categorically exempt from environmental review. 10
C.F.R. ss. 51.22(c)(21). This Application, therefore, involves no significant
environmental impact.
II. EFFECTIVE DATE
The merger between FE and GPU, Inc. requires the approval of other
federal regulatory authorities in addition to the NRC, such as FERC, the SEC,
the FCC, the DOJ or the FTC. Approvals of the state public utility commissions
of New Jersey and Pennsylvania and the shareholders of FE and GPU, Inc. are also
required. Until all necessary approvals have been obtained, the transaction
cannot be closed. FE and GPU, Inc. intend to consummate the merger as soon as
reasonably possible after all the necessary approvals have been obtained.
Therefore, the NRC is requested to review this Application on a schedule that
will permit it to act on and
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provide its final consent to the proposed indirect transfers of control that
would be effectuated by the transaction as promptly as possible and in any event
before February 15, 2001.
CONCLUSION
For the foregoing reasons, the NRC is requested to consent to the
indirect transfers of control that would result from the merger of GPU, Inc. and
FE regarding the interests held by GPUN, Met Ed, JCP&L, Penelec and SNEC in
TMI-2 and Saxton.
I, Sander Levin, state that I am Chief Nuclear Officer of GPU Nuclear Inc., that
I am authorized to sign and file this application, and that the matters set
forth herein pertaining to GPU, Inc., and its affiliates are true and correct to
the best of my knowledge, information and belief.
/s/ Sander Levin
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Sander Levin
Chief Nuclear Officer
GPU Nuclear, Inc.
Subscribed and sworn to before me this 25th
day of September, 2000
/s/ Sharon K. Cepeda
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Notary Public
My commission expires: Nov. 29, 2000.
Sharon K. Cepeda
Notary Public of New Jersey
My Commission Expires Nov. 29, 2000
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I, Anthony J. Alexander, state that I am President of FirstEnergy Corp., that I
am authorized to sign and file this application, and that the matters set forth
herein pertaining to FirstEnergy Corporation are true and correct to the best of
my knowledge, information and belief.
/s/ Anthony J. Alexander
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Anthony J. Alexander
President
FirstEnergy Corp.
Subscribed and sworn to before me this 26th
day of September, 2000.
/s/ Mary E. O'Reilly
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Notary Public
My commission expires: Mary E. O'Reilly
Notary Public State of Ohio
My Commission has no Expiration Date
Section O.R.C. 146.09
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Exhibit A - Copy of Agreement and Plan of Merger
Between FirstEnergy Corp. and GPU, Inc. Dated as of
August 8, 2000.
Exhibit Intentionally Omittted.
