Senator ANDERSON. Mr. Abbadessa testified that it included rent. Do you think the Government costs do not include rent in the operation of a facility?

Mr. ABBADESSA. When we prepare our budget, sir-and I will just have to keep repeating and keep repeating that this $19.9 million is additional funds that we are going to need in our budget in the next 5-year period we do not need rent money. We do not need depreciation money. We will not need startup money. We will not need money for interest on the bank loans. The AEC does not have these kinds of costs, sir, for purposes of the budget. But let me point out that at the time we sell products we do have a full cost recovery policy. At that time we do recover depreciation, and we include an added factor in order to cover interest on our investment. So when we sell things we recover interest and depreciation. But when we go to the Congress for money in our budget, we do not.

Senator ANDERSON. I would not want to raise any questions about full recovery of cost where we sell plutonium and things of that nature. I am trying to find out what the $19 million represents. You gave four items it represented. You said one of those items was rent. Mr. ABBADESSA. That is correct, sir.

Senator ANDERSON. How much is the rent figure?

Mr. ABBADESSA. I should correct the record. I was giving an explanation to Mr. Morris of why there was a difference of costs. There I was identifying elements of costs that NFS has that we do not have which essentially accounts for the difference.

Senator ANDERSON. Tell us about the rent figure that NFS has that you do not have.

Mr. ABBADESSA. To be precise, it is $3,735,000.

Senator ANDERSON. Where do you get that figure? Have you made a calculation of the size of their plant and figured what an adequate rental value would be?

Mr. ABBADESSA. This is rent that is being paid by NFS to New York State Atomic Research and Development Authority (ARDA). ARDA is putting $8 million of facilities at this site, and they have $500,000 for land. This is the rent that results from amortizing that investment over a 25-year period under a 15-year lease, and we have checked the computation, sir.

FINANCING OF THE PROPOSED PROCESSING PLANT

Senator ANDERSON. On page 3 we find the contributions that are being put in by NFS, and one of them is equity capital. The third item is funding of the construction of storage and other facilities.

Mr. ABBADESSA. The State of New York is funding $82 million of the total project, sir. They are not contributing it. It is not equity capital. It is part of the financing just like the bank loan, and it has to be repaid.

Senator ANDERSON. I didn't say it was equity capital.

Mr. ABBADESSA. I am sorry, sir, I thought you did.

Senator ANDERSON. The proposal provides for the financing of a facility in the following manner: The first item is equity capital of $8 million, and I think the third item was an item reading funding for the construction of storage and other facilities, $82 million.

Mr. ABBADESSA. Under a 15-year lease, sir.

Senator ANDERSON. Do I understand that this $19 million figure is not on a 5-year basis?

Mr. ABBADESSA. The $19 million, sir, represents the additional amount of money that we are going to require under our budget. The four elements of cost I mentioned to Mr. Morris were because he had asked the question whether NFS costs were larger than ours. I was explaining the reason that NFS costs are larger than our budget costs, which is because they have elements of cost which we do not have. Senator ANDERSON. Then I understand that you do not in any way tie the four elements you introduced a while ago to the $19 million. Mr. ABBADESSA. The $8 million equity, definitely no. The $2 mil

lion grant

Senator ANDERSON. $8 million

Mr. ABBADESSA. That is no. The bank loan and the lease, sir, can be relatable to the fact that in repaying these loans the interest costs and the principal costs are in the cost figures I mentioned. So those two figures are relatable.

Representative PRICE. Would the Senator yield a minute?
Senator ANDERSON. Yes.

AEC'S COMMITMENT UNDER PROPOSED CONTRACT

Representative PRICE. I think it is important to get in the record right now just exactly what the AEC will be paying to NFS in the next 5 years under the proposed contract.

Mr. ABBADESSA. About $21.2 million under the contract.
Dr. WILSON. For processing our fuels.

Representative PRICE. During the 5-year commitment?

Mr. ABBADESSA. That is correct. As Mr. Conway has pointed out, the contract is not completely negotiated. Some elements of cost, particularly perpetual waste storage, have not yet been computed. This is an approximation of the magnitude of what the cost will be under the 5-year contract. It is not a precise figure.

Senator ANDERSON. I ask you again, the figure of $19,900,000 which is used in the report of the Comptroller General has no relationship to these four items you gave Mr. Morris, such as rent, interest on the bank loan, prepaid startup, and so forth?

Mr. ABBADESSA. This is not correct, sir.
Senator ANDERSON. You state it your way.

Mr. ABBADESSA. I corrected my answer.

Senator ANDERSON. You state it your way, then.

Mr. ABBADESSA. The purpose of the schedule on page 3 is to show the funding that is going into the NFS project.

Senator ANDERSON. I haven't had a word to say about that in connection with this item on page 16. (See app. 2, p. 194.)

Mr. Morris asked you about the $19 million.

Dr. WILSON. He asked why there was that big a difference, and Mr. Abbadessa was saying that the reason there was that big a difference is because NFS had certain costs that we did not have.

Mr. ABBADESSA. I was trying to simplify the problem, and I have not been too successful, sir.

Senator ANDERSON. May we go again to page 16?

Mr. ABBADESSA. Yes, sir.

Senator ANDERSON. În page 16 there is a table. Can we get agreement on that?

Mr. ABBADESSA. Yes, sir.

Senator ANDERSON. Can we get agreement that payment showed increase or decrease under baseload contract of $19,900,000?

Mr. ABBADESSA. That is correct, sir.

Senator ANDERSON. Does rent, interest on bank loans, or these startup costs have anything whatever to do with this $19 million?

Mr. ABBADESSA. Those elements as such are not in the $19,900,000, sir. But they do explain and were given as an answer to Mr. Morris as to why additional costs are involved.

Senator ANDERSON. Why would the interest on the bank loan indicate why you would have additional costs?

Mr. ABBADESSA. Sir?

Senator ANDERSON. Why would interest on a bank loan indicate why you would have additional costs?

Mr. QUINN. Only in that it affects the charges that NFS————— Senator ANDERSON. Can't you let the witness answer? Have you always got to take it away from him?

Mr. ABBADESSA. In the $19.9 million, sir, if you will look, you will see the $21.2 million. Do you see the $9.6, $8.7, and $2.9? Senator ANDERSON. I do.

Mr. ABBADESSA. That totals $21.2 million, sir.

Senator ANDERSON. Is that under the column headed "Increase or decrease under baseload contract"?

Mr. ABBADESSA. Yes, sir, in the $19.9 million column. Those three figures total $21.2 million.

Senator ANDERSON. Will you specify which three figures?

Mr. ABBADESSA. $9.6, $8.7, and $2.9.

Senator ANDERSON. They total what?

Mr. ABBADESSA. $21.2.

Senator ANDERSON. All right.

Mr. ABBADESSA. As the table indicates, this represents our payment to NFS for processing the load over the entire 5 years.

Senator ANDERSON. Yes.

Mr. ABBADESSA. In this figure are these elements of cost, all of the elements of cost of the NFS contract, including rent, depreciation, interest, and those types of things.

Senator ANDERSON. Then your payments to NFS are going to be based on a cost-plus basis?

Mr. ABBADESSA. No, sir; we have a fixed-price contract.
Senator ANDERSON. That is what I thought.

Mr. ABBADESSA. That is correct, sir.

FINANCING OF THE PROPOSED PROCESSING PLANT

Senator ANDERSON. In connection with financing the proposed facility, $8 million is provided by equity capital, of which 78 percent is contributed by W. R. Grace & Co., and 22 percent is contributed by American Machine & Foundry Co. Does Grace & Co. have any nuclear contracts with AEC of any kind or description?

Mr. ABBADESSA. Not that I know of, sir. A division of the Grace Co., the Davison Co., does have contracts with the Commission.

Senator ANDERSON. This grant by the utilities, will that be tax deductible from their returns?

Mr. ABBADESSA. I do not know the answer to that question.

Senator ANDERSON. Doesn't the Government put up 52 percent of that? You are surely familiar with the fact that when they built the Consolidated Edison plant, and various other plants, that they had a little organization. They even have an organization getting up money for the Fermi reactor. I don't know why, but they have. They deduct that as contributions. Doesn't the Government pay 52 percent of that? Mr. ABBADESSA. If they deduct it as a contribution, yes, sir. I am just not familiar with how this group would do this.

Senator ANDERSON. If they are merely renters for the facilities, what does the $82 million have to do with their financial assets? This is $82 million for funding of construction of storage and other facilities. They are just tenants paying $3,735,000; is it a year or over a period of years?

Mr. ABBADESSA. The $3.7 million was the annual charge, sir.
Senator ANDERSON. The annual charge?

Mr. ABBADESSA. Wait a minute. That amount is for the 5-year contract period.

Senator ANDERSON. That is the 5 years?

Mr. ABBADESSA. The 5-year contract period.

Senator ANDERSON. What does the $82 million have to do with it, if they are mere tenants?

Mr. ABBADESSA. The $81⁄2 million is from the State of New York. Senator ANDERSON. That is what the outsider puts up to build a facility.

Mr. ABBADESSA. That is correct. And the rent is, in effect, a repayment of a loan, if you want to look at it that way. It is principal and interest to repay the loan.

Senator ANDERSON. I don't care to look at rent that way particularly. It never has been in the average household.

Dr. WILSON. Rent includes depreciation and interest and all that. Senator ANDERSON. I am sure of that.

Dr. WILSON. They are paying back the money in effect to New York State which put up the money.

Senator ANDERSON. Why is the $812 million in that figure?

Mr. ABBADESSA. The $812 million is in the figure because the State of New York is building and owns $8 million of the total NFS plant. NFS is repaying the $8 million as part of the lease payment. They are leasing it.

Senator ANDERSON. I understand that the Hilton Hotel is building a great big hotel in Washington. When they get up a balance sheet of their prospective operations, they show a figure named rent. Do they include that in the cost of the hotel?

Mr. ABBADESSA. I believe the Hilton Hotel owns very few of their hotels. They are in the real estate business as well as the hotel business.

Senator ANDERSON. It just happens, knowing where Mr. Hilton came from, I am familiar with that fact. That is why I wanted you to tell me whether or not the cost of the Hilton Hotel would be put in the financial statement.

Mr. ABBADESSA. If the Hilton Hotel builds the hotel and owns the hotel, it is an asset on their balance sheet. If they lease the hotel from another owner, it is not an asset on the balance sheet. It shows up as a cost called rent.

Senator ANDERSON. These people are leasing from somebody else. Why is the $812 million in here?

Mr. ABBADESSA. This is not a balance sheet, sir. This is a statement of the sources of funds; $812 million of the funds comes from the State of New York.

Dr. WILSON. Without which the plant could not be built.
Senator ANDERSON. The bank loan is $1311⁄2 million.

Mr. ABBADESSA. That is right.

Senator ANDERSON. It has been raised $42 million.

Mr. ABBADESSA. About $4 million. It was originally $9.3 million. It is now $13.5 million or approximately $4.2 million more.

Senator ANDERSON. I think you used another figure a while ago, but I assume this is the one you intended to use. I may have misunderstood you before. But suppose additional funds are necessary for this, where will that money come from? Additional bank loans?

Mr. ABBADESSA. I think this is a question that NFS will better be able to answer. I would say one source of funds, if additional funds are required and we have specifically discussed this with NFS, is from the sponsoring companies-Grace and AMF. In the event that the project gets into financial difficulties because of difficulties during startup or because of construction overruns, NFS officials have advised us that the sponsoring companies at that time would make a business judgment whether to invest additional funds in order to protect their $8 million investment. They would consider at that time the status of the project and the prospects for it in the future.

GOVERNMENT SUPPORT AFTER EXPIRATION OF THE PROPOSED CONTRACT

Senator ANDERSON. Dr. Wilson's statement indicated that our current projections of fuel availability, partly due to longer routes being projected, indicate that there will be a few years beyond the term of the lease before 1 ton per day of fuels is available.

Mr. ABBADESSA. That is a 2-year period, sir.

Senator ANDERSON. A 2-year period. Page 9 of the report shows that it won't be up to a ton a day until 1973.

Dr. WILSON. Seven years after the plant is completed.

Mr. ABBADESSA. Mr. Wilson's statement goes to the period of time after our contract, which would take you to 1971. To then go to 1973 would be 2 years.

Senator ANDERSON. That is 10 years from now roughly.

Mr. ABBADESSA. Mr. Wilson's statement was that from the end of the baseload contract, was it not, sir?

Senator ANDERSON. Beyond the term of the baseload contract. Mr. ABBADESSA. That is right. That is 1971. So it would be 2 years to 1973.

Senator ANDERSON. The statement GAO has made in their audit is that it is apparent that NFS's successful operation of the plant cannot be accomplished without Government support before 1973.