NorthStar makes new promises for Vermont Yankee purchase
VERNON — Facing a second round of questions from federal regulators, the proposed buyer of the Vermont Yankee nuclear plant is sweetening its offer.
In newly released documents filed with the Nuclear Regulatory Commission, New York-based NorthStar Group Services is pitching financial, administrative and regulatory tweaks, designed to alleviate the NRC's concerns about the Yankee deal.
At the same time, NorthStar is standing by its original plans and is underscoring its financial strength to manage and complete the accelerated decommissioning of the Vernon site.
"NorthStar currently generates approximately
$500 million in annual revenue from multiple service lines, providing a source of recurring earnings and cash flow that is independent of [the Vermont Yankee project]," administrators wrote.
Entergy stopped producing power at Vermont Yankee at the end of 2014. The company has been preparing the 125-acre site for an extended period of dormancy, under which decommissioning could take up to six decades.
But that timeline could be significantly shortened if Entergy's proposed sale to NorthStar goes through. NorthStar says it can clean up most of the property by 2030 and possibly as early as 2026.
The sale requires approval from the Vermont Public Utility Commission and the NRC.
Both of those reviews have been extended from their original schedules because of the proposal's complexity and its novelty: It would be the first time a company has bought a U.S. nuclear plant for the purpose of decommissioning.
The NRC has twice asked for more information from NorthStar - once late last year, and again last month. NorthStar's latest response required extra time, and NRC spokesman Neil Sheehan said that means the commission will take more time to consider the Vermont Yankee deal.
"The NRC staff will need to develop a new estimate on our timeframe for a decision on the license transfer application," Sheehan said. "However, it appears likely the schedule will now extend past the end of June."
In asking for more information last month, NRC officials said they were not yet convinced that NorthStar's financial plans were "adequate to provide reasonable assurance that sufficient funds will be available" for decommissioning.
The commission also said it was concerned about NorthStar's plans to fund the long-term storage and management of radioactive spent nuclear fuel stored at Vermont Yankee. That's no small expense: NorthStar estimates fuel costs at $287.8 million through 2052.
Covering those fuel costs is the main focus of NorthStar's new NRC responses.
The company has pitched a plan whereby only $20 million of the plant's decommissioning trust fund would be tied up in fuel management at any given time. The plan is reliant on NorthStar regularly receiving money from the U.S. Department of Energy to replenish the trust fund.
That would happen via legal action: Nuclear companies routinely sue the Department of Energy - and win damages - due to the federal government's failure to fulfill its statutory responsibility to build a national repository for nuclear waste.
NorthStar points out that under Entergy, Vermont Yankee "has successfully recovered substantial amounts previously" for spent fuel management. Entergy received $40.7 million from the federal government in 2013 and $19.14 million in 2016.
NorthStar expects to retain a portion of the proceeds from Entergy's next legal action against the government. And NorthStar says it is planning to eventually enter into a long-term settlement with the Department of Energy, providing a steady source of income estimated at just under $9.3 million annually for spent fuel management in Vernon.
Other nuclear operators have signed such settlements, NorthStar told the NRC. Generally, operators' claims against the federal government "have not been controversial, and industry experience is that these damages claims are routinely recovered with few, if any, disallowances when costs are properly documented," administrators wrote.
Nevertheless, NorthStar is making a new promise to the NRC: If there is no federal settlement for spent fuel costs in place by Jan. 1, 2022, the company will obtain a $4.3 million performance bond that would be renewed annually.
The bond would increase to $9.3 million if there's no federal settlement by 2024. That would cover annual spent fuel costs, NorthStar says.
NorthStar is making two other new pledges to the NRC, also related to finances and spent fuel funding.
First, the company is proposing to add language to a $140 million parent company support agreement - meant as backup decommissioning money - to clarify that it is a guaranteed source of funding enforceable by the NRC.
The support agreement "is intended to establish a binding obligation" for NorthStar to cover Vermont Yankee's decommissioning costs "as necessary," the company's filing says. That includes spent fuel costs.
Also, NorthStar says it will apply for a federal regulatory exemption in order to use the plant's decommissioning trust fund for spent fuel expenses.
Entergy received that exemption from the NRC in 2015, over objections from Vermont officials. NorthStar administrators previously had said they expected to simply assume that exemption without having to apply for it again.
But NRC officials questioned that strategy. So NorthStar now says it will "submit a specific exemption request" for permission to use up to $20 million in decommissioning trust fund money for spent fuel costs.
NorthStar's new filings also seek to answer several other NRC questions and concerns. Generally, the company portrays itself as experienced in nuclear issues and well-capitalized to take on the Vernon project.
The company touts its acquisition last year by J.F. Lehman & Co., a New York private equity firm. The Lehman deal "will provide a continuing benefit to NorthStar's future operating results and cash flows," administrators wrote.
"This transaction significantly reduced NorthStar's total debt, also reducing future interest expense and annual debt service requirements," the company's NRC filing says. "In addition, the transaction also provided NorthStar with a $55 million revolving credit facility."
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