Sec. 30197.3 - Criteria Relating to Use of Financial Tests and Parent Company Guarantees for Providing Reasonable Surety of Funds for Decommissioning

ยง 30197.3. Criteria Relating to Use of Financial Tests and Parent Company Guarantees for Providing Reasonable Surety of Funds for Decommissioning

(a) An applicant or licensee may provide reasonable assurance of the availability of funds for decommissioning, based on obtaining a parent company guarantee that funds will be available for decommissioning costs, by demonstrating that the parent company passes the financial test specified in subsection (b), and provided the parent company guarantee contains the terms specified in subsection (e).

(b) To pass the financial test, the parent company shall meet either of the following criteria. For purposes of applying the criteria, tangible net worth must be calculated to exclude all intangible assets and the net book value of the nuclear facility and site, and total net worth, which may include intangible assets, must be calculated to exclude the net book value and goodwill of the nuclear facility and site:

(1) The parent company shall have:

(A) Two of the following three ratios: A ratio of total liabilities to total net worth less than 2.0; a ratio of the sum of net income plus depreciation, depletion, and amortization to total liabilities greater than 0.1; and a ratio of current assets to current liabilities greater than 1.5; and

(B) Tangible net worth of at least $21 million; or

(2) The parent company shall have:

(A) A current rating for its most recent uninsured, uncollateralized, and unencumbered bond issuance of AAA, AA, A, or BBB (including adjustments of + and -) as issued by Standard and Poor's or Aaa, Aa, A, or Baa (including adjustment of 1, 2, or 3) as issued by Moody's; and

(B) Tangible net worth of at least $21 million.

(c) The parent company's independent certified public accountant shall have compared the data used by the parent company in the financial test, which is derived from the independently audited, year-end financial statements for the latest fiscal year, with the amounts in such financial statement. The accountant must evaluate the parent company's off-balance sheet transactions and provide an opinion on whether those transactions could materially adversely affect the parent company's ability to pay for decommissioning costs. The accountant must verify that a bond rating, if used to demonstrate passage of the financial test, meets the requirements of subsection (b). In connection with that procedure, the licensee shall inform the Department within 90 days of any matters coming to the auditor's attention which cause the auditor to believe that the data specified in the financial test should be adjusted and that the company no longer passes the test.

(d) After the initial financial test, the parent company shall annually repeat the passage of the test, and provide documentation of its continued eligibility to use the parent company guarantee to the Department within 90 days after the close of each succeeding fiscal year. If the parent company no longer meets the requirements of subsection (b), the licensee shall send notice to the Department of intent to establish an alternate financial surety as specified in section 30195.1. The notice shall be sent by certified mail within 90 days after the end of the fiscal year for which the year-end financial data show that the parent company no longer meets the financial test requirements. The licensee shall provide an alternate financial surety within 120 days after the end of such fiscal year.

(e) The terms of a parent company guarantee which an applicant or licensee obtains shall provide that:

(1) The parent company guarantee shall remain in force unless the guarantor sends notice of cancellation by certified mail to the licensee and the Department. Cancellation may not occur, however, during the 120 days beginning on the date of receipt of the notice of cancellation by both the licensee and the Department, as evidenced by the return receipts;

(2) If the licensee fails to provide an alternate financial surety as specified in section 30195.1 within 90 days after receipt by the licensee and the Department of a notice of cancellation of the parent company guarantee from the guarantor, the guarantor will provide such alternative financial surety that meets the requirements of section 30195.1 in the name of the licensee;

(3) The parent company guarantee and financial test provisions shall remain in effect until the Department has terminated the license, accepted in writing the parent company's alternate financial surety, or accepted in writing the licensee's financial surety;

(4) A standby trust to protect public health and safety and the environment must be established for decommissioning costs before the parent company guarantee agreement is submitted. If a trust is established for decommissioning costs, the trustee and trust shall be acceptable to the Department. An acceptable trustee includes an appropriate State or Federal Government agency or an entity which has the authority to act as a trustee and whose trust operations are regulated and examined by a Federal or State agency. The Department has the right to change the trustee. An acceptable trust shall meet the regulatory criteria established in this section that govern the issuance of the license for which the guarantor has accepted the obligation to pay for decommissioning costs;

(5) The guarantor must agree that it would be subject to Department orders to make payments under the guarantee agreement;

(6) The guarantor must agree that if the guarantor admits in writing its inability to pay its debts generally, or makes a general assignment for the benefit of creditors, or any proceeding is instituted by or against the guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking dissolution, liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for the guarantor or for any substantial part of its property, or the guarantor takes any action to authorize or effect any of the actions stated in this paragraph, then the Department may:

(A) Declare that the financial surety guaranteed by the parent company guarantee agreement is immediately due and payable to the standby trust or to the Financial Surety Account within the Radiation Control Fund administered by the Department pursuant to Health and Safety Code Section 115092, set up to protect the public health and safety and the environment, without diligence, presentment, demand, protest or any other notice of any kind, all of which are expressly waived by guarantor; and

(B) Exercise any and all of its other rights under applicable law; and

(7) The guarantor must agree to notify the Department, in writing as specified in subsection (f), immediately following the filing of a voluntary or involuntary petition for bankruptcy under any chapter of Title 11 (Bankruptcy) of the United States Code, or the occurrence of any other event listed in paragraph (6), by or against:

(A) The guarantor;

(B) The licensee;

(C) An entity (as that term is defined in 11 U.S.C. 101(15)) controlling the licensee or listing the license or licensee as property of the estate; or

(D) An affiliate (as that term is defined in 11 U.S.C. 101(2)) of the licensee.

(f) The notification required pursuant to subsection (e)(7) shall include:

(1) A description of the event, including major creditors, the amounts involved, and the actions taken to assure that the amount of funds guaranteed by the parent company guarantee for decommissioning will be transferred as soon as possible to the standby trust or to the Financial Surety Account within the Radiation Control Fund administered by the Department pursuant to Health and Safety Code Section 115092;

(2) If a petition of bankruptcy was filed, the identity of the bankruptcy court in which the petition for bankruptcy was filed; and

(3) The date of filing of any petitions.

(1. New section filed 2-26-2019; operative 4-1-2019 (Register 2019, No. 9).)

Note: Authority cited: Sections 115000, 115091 and 131200, Health and Safety Code. Reference: Sections 114965, 114970, 115060, 115091, 115092, 115235, 131050, 131051 and 131052, Health and Safety Code.

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