Garry Whittle calls meeting to order. August 1, 2016: 1:30 pm.  Garry Whittle, Rhonda Cagle, Frank Motes

Shannon Carter: Represent TXU in property tax matters. Background information. Go through signed affadavit filed with ARB. Action or decision being protested. Statement "Appraisal district's evaluation not accurate.. inappropriate methodologies, weighs certain valuations too heavily, erroneous assumptions, appraisal may include intangible assets that are not properly includable, inappropriate denied, cancelled, extension that applies to the property. First unit not commercially operating till 1990. Luminant cares deeply about community, paid taxes timely, 2008 to 2014 Luminant has paid 240 million in property taxes. 2014 did see slight drop. 2015 year went to trial. Falling energies have hurt our industry including Comanche Peak. On nuclear plants across country. (examples, CA, WI, VT, NE, NY). When energy prices go down, power plants earn less money. Prices fell appraisal prices did not reflect. If power prices fall, revenue is less, drastically impact value of plant itself. Income approach to calculate value. Appraisal value failed to take into account decline in power prices. Appraisal notice value has not declined. Exhibit 3 displays this. 2015 and 2016 gap in value of power plant not trending with price drops we see in the market. 

 

Carter: Appraisal value much higher than fair value. Judgement on the trial court -appealed by Luminant

2015 value 2.2 billion (appraisal) trial court upheld, Luminant has now appealed.

2016 Luminant almost matches exactly to model that appraisal value used in 2015. Exhibit 4. Same model presented to ARB. Defendants Exhibit #6. Publicly available information, multiple approaches, also used appraisal district methodology. Using that methodology produces number remarkably close to appraisal value.  261 million dollars appraised value. 2016 data includes non public company information. 2015 energy prices continued to decline. Exhibit 6. Pricing chart indicates from 2008 price of power, gas price (red dotted line) wind generation, all things leading to dramatically lower price of power. Negative wholesale prices. Monthly power negative pricing, supply and demand, w increased wind, gas, there is an over supply in the market, negative price. 

 

Whittle: 261 million? 

Carter: We believe 261 million is an appropriate value for 2016. When updated information input into Somervell's own model, results very close. For this reason we ask that the ARB today uphold the value of 261 million for 2016. 

 

Mike Lane- expert Somervell Appraisal hired. Didn't use the model Carter refers to during hearing. (Mike Lane gives his bonafides) Did utilize cost approach, our opinion that there will be no new nuclear plants built in this environment, replacement would be gas facility, adjusted for differences in operating costs, and for depreciation. 1 billion 197 million dollars. Income approach, market prices to estimate prices S&L, average price at S&L was $30. We don't really believe that a 20 year forecast is possible to be accurate, 5 year forecast used,  discount rate (7? 70?) One renewal. Using all those assumptions 2 billion 30 million dollars using income approach. When adjusted for fuel as of January 1 2016 1 billion 985 million  27 thousand 1,985,27,000

 

Rollen: Protest one of things checked was equal and uniform. Some of you may know that Texas only has 2 nuclear power plants in entire state, when we look for equal and uniform, South Texas, capacity 2520 megawatts, CP 2400 megawatts. Operation for South Texas Project 1988, unit 2 1989, CP 1990, 1993 South texas has come to agreed value 1 billion 820 million 1118 thousand. 

 

Whittle: On protest you stated that appraisal district inappropriate denied, etc. 

 

Carter: Have not seen any paperwork or calculation for 2016, so this is essentially a placeholder to bring this up

 

Whittle: Nothing to show they have inappropriate denied, cancelled

 

Carter: Just in case. 

Whittle: Rollen (clarified 1,868,054,000 is value from appraisal district) Looking at methodology on income approach. Cap rate of 14.21. 

 

Carter: Appraisal district's model, used same rate

 

Whittle: What do you disagree with them 261 million?

Rollen: We disagree with all of it. We didn't have current data to establish current value. About using contract (Mike Lane) information.

 

Carter: We used appraisal districts' methology to doublecheck and comes close to appraisal district. Model they used in 2015 and presented to trial court in February. 

 

Whittle: Mr Lane, could you go into what your earning stream method is? We developed cash flow, developing revenues used that as guide. We looked at a number of price forecasts that S&L puts out for power (5 year, 10 year, 20 year). I don't believe you can forecast out past 5 years so we relied on their 5 year forecast and from that to the future we used long term inflation to inflate those prices. Market price for power, capacity for plant (how much energy it can produce) energy plus market price, used their historical expenses to arrive at an expense profile. discount cash flow to present value. 

 

Appraisal district mentioned sale, do you disagree with that value?

 

Carter: haven't seen any papers that went into South Texas plant. Not familiar with South Texas plant

 

Attny: Were y'all given the opportunity to review that information? Did you request that information?

 

Rollen: We did consider that. 

 

Whittle Do you recall getting any requests for information?

 

Rollen: I do not. 

 

Whittle: Why does the district disagree with their methodology. 

 

Rollen: Disagree with the cap rate. Didn't have access to revenue numbers, actual expenses, Good method at the time but we found a better way, hiring an expert that specializes in nuclear plant appraisals. 

 

Whittle: Any information that makes you disagree?

 

Carter: Information contained here not enough, power pricing, without seeing those specific numbers cannot comment

 

Whittle: What do you think the market value should be?

 

Carter: 261 million

 

Whittle: What do you think the market value should be?

 

Rollen: WE believe our value is correct. 

 

Whittle: I think this is something that, somewhere in between? 

 

Attorney: Close hearing as to evidence.

 

Whittle: Deliberations. 

 

Motes: Motion to establish the fair market value as provided by appraisal district. 

 

VOTE: 3/0 motion carries

 

Motion  1868054314 - Carries 3/0

 

Motion: No changes be made on exemption status. 3/0 Motion carries

 

Tha'ts all we have for the board. You'll receive by certified mail. We will continue next item on the agenda to review and approve the tax records.

 

Motes: Motion: MOve to accept tax records as submitted.  3/0 carries

 

Whittle Tries to adjourn, Wes brings up another protest. 

 

Luminant: We would have an issue with the notice

 

Atty: ARB wants to hear what the complaints are, is that on the agenda? 

 

Whittle: Taxpayers protests. 

 

Atty: Protests should be heard at the same time. What is the other protest referencing

 

Lumiinant: Make a motion to close the hearing. 

Move that we deny the protest from the county and appraisal district. Motion carries 3/0 request has been denied

 

Meeting adjourned.