BURNHAM LEASING CORPORATION
60 Broad Street
New York, New York 10004
August 18, 1986
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
Attention of J. D. Geist
Chairman and President
Sale and Leaseback of an Undivided Interest
in Palo Verde Nuclear Generating Station Unit 2
Waiver of Deemed Loss Event
Dear Mr. Geist:
We refer to the Participation Agreement, dated as of August 12,
1986, among Public Service Company of New Mexico, Burnham Leasing Corporation,
Chemical Bank, in its individual capacity and as Indenture Trustee, The First
National Bank of Boston, in its individual capacity and as Owner Trustee, and
First PV Funding Corporation (the Participation Agreement), the Facility Lease
dated as of the same date and the other Transaction Documents referred to in the
Participation Agreement. Capitalized terms used herein without definition shall
have the respective meanings set forth in Appendix A to the Participation
Agreement.
6091.BURNHAM.1106.99B:l
Such Appendix A includes a definition of the term "Deemed Less
Event". With respect to any change enacted after the date hereof in the
Price-Anderson Act, the Atomic Energy Act or any other Applicable Law, or the
regulations of the NRC (or other Governmental Authority having jurisdiction)
implementing any such change, which would otherwise constitute a Deemed Loss
Event by virtue of clause (2) of such definition, we hereby waive such Deemed
Loss Event for all purposes of the Facility Lease and the other Transaction
Documents if, but only if , after giving effect to such change or
interpretation: (a) the aggregate liability for a single Nuclear Incident of
"persons indemnified" (within the meaning of Section 170(e) of the Atomic Energy
Act; such Act, together with the regulations of the NRC or other Governmental
Authority having jurisdiction implementing such Act, all as in effect on the
Closing Date, being herein referred to as Existing Law) shall not exceed $6.563
billion (assuming 101 operating nuclear facilities participating in the deferred
premium or similar plan referred to in clause (d) below and subject to
adjustment (X) in an amount not exceeding $63 million for each increase or
decrease in said number of operating nuclear facilities and (V) in an amount not
exceeding the aggregate of all changes in the standard deferred premium to
reflect the effects of inflation contemplated pursuant to clause (d) below): (b)
the amount of primary insurance coverage available from commercial insurance
underwriters on terms substantially equivalent (in the reasonable opinion of the
owner Participant) to the terms in effect on the Closing Date under Existing Law
and required to be maintained by licensees with respect to any single nuclear
facility shall be at least equal to $160 million; (C) the amount of primary
financial protection (excluding the primary insurance coverage referred to in
clause (b) above) required of all licensees with respect to any single nuclear
facility under Applicable Law shall not exceed $40 million; (d) the aggregate
amount payable by all licensees of any single nuclear facility under any
deferred premium or similar plan required under Applicable Law shall not exceed
$63 million per Nuclear Incident (subject to an annual adjustment upward for
each calendar year after the enactment of a change in Existing Law (if such
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change increases the standard deferred premium) by an amount equal to, if
specified by such change or otherwise by Applicable law, a percentage of (X) the
annual percentage change during the immediately prior calendar year in the
implicit price deflator for the Gross National Product published by the united
States Department of Commerce or (V) the annual percentage change in the
consumer price index since the immediately prior calendar year; provided,
however, that (i) in the event that Applicable Law shall not specify an
inflation adjustment, then the inflation adjustment permitted by this
parenthetical shall be that specified in the preceding sub-clause (X) and (ii)
in the event that Applicable Law shall specify a standard deferred premium below
$63 million, the inflation adjustment factor shall not be available to increase
the standard deferred premium permissible under this clause (d) beyond $63
million until such lower deferred premium (as so inflated) equals or exceeds $63
million); (e) the aggregate amount payable by all licensees in any one year with
respect to any one Nuclear Incident under any deferred premium or similar plan
required under Applicable Law shall not exceed $12 million; (f) insurance or
other financial protection shall be in effect under which the providers of such
insurance or other financial protection shall agree to pay any amount payable by
any licensee under any deferred premium or similar plan upon a default in such
payment by such licensee up to a maximum aggregate amount for all such defaults
in payment of not less than $30 million; (g) a mechanism in form and substance
reasonably satisfactory to the Owner Participant shall be in effect under which
the maximum potential liability of all Persons during any calendar year as a
result of a Nuclear Incident shall not exceed the amount of insurance or other
financial protection required to be available during such calendar year to pay
all amounts which may become payable by any such Person, when and as they become
payable, in respect of such liability; (h) the form and source (other than
commercial insurance under-writers in respect of $160 million of primary
insurance coverage and licensees of nuclear facilities in respect of deferred
premiums) of insurance and other financial protection required under Applicable
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6091.BURNHAM.l106.99B:l
Law to be maintained in respect of liability arising from a Nuclear incident
shall be reasonably satisfactory to the Owner Participant; (i) as a result of
such change or interpretation, there shall be pa claim, liability or expense
excluded from the limitation of liability established by Existing Law (through
modification of the meaning of the phrases of "aggregate liability", "persons
indemnified", "nuclear incident" or otherwise) or excluded (or the funding or
payment thereof deferred) under commercially available insurance or other
financial protection provisions provided for by Existing Law except, for
purposes of this clause (i), to the extent and in the amount excluded pursuant
to Existing Law; and (j) neither the Owner Trustee nor the Owner Participant
shall be (in the opinion of independent counsel to the Owner Participant)
exposed to any other increase in its real or potential liability with respect to
a Nuclear incident, either during or subsequent to the Lease Term; provided,
however that this waiver shall not continue beyond the date of enactment of the
first change in the Price-Anderson Act, the Atomic Energy Act or any other
Applicable Law relating to any of the issues set forth above and affecting
licensees of nuclear facilities, but shall continue with respect to any
regulations of the NRC adopted thereafter implementing such change. For purposes
hereof, "nuclear facility" shall mean and refer to a facility designed for
producing substantial amounts of electricity and having a rated capacity of
100,000 electrical kilowatts or more.
Notwithstanding any other provision hereof, the waiver set forth
herein shall automatically terminate in the event (i) the aggregate liability
for a single Nuclear incident of "persons indemnified" (within the meaning of
Section 170(e) of the Atomic Energy Act) shall equal or exceed, after giving
effect to any adjustments pursuant to clause (a) above, $10 billion, or (ii) the
aggregate amount payable by all licensees of any single nuclear facility under
any deferred premium or similar plan required under Applicable Law shall equal
or exceed, after giving effect to any adjustments to reflect the effects of
inflation contemplated pursuant to clause (d) above, $97.03 million.
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6091. BURNHAM. 1106. 99B: 1
This letter shall constitute a Transaction Document for all
purposes of the Participation Agreement and the other Transaction Documents. The
waiver contained herein shall be governed by, and construed in accordance with,
the laws of the State of New York.
BURNHAM LEASING CORPORATION
by
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Assistant Treasurer
Acknowledged and agreed
this 18th day of August, 1986.
PUBUC SERVICE COMPANY OF NEW MEXICO
by
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Vice President, Revenue
Management
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6091.BURNHAM. 1106. 99B: 1