[Federal Register Volume 61, Number 234 (Wednesday, December 4, 1996)]
[Notices]
[Pages 64402-64405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30811]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26615]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
November 27, 1996.
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendments thereto is/are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in
writing by December 23, 1996, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. Any request for hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any hearing, if
ordered, and will receive a copy of any notice or order issued in the
matter. After said date, the application(s) and/or declaration(s), as
filed or as amended, may be granted and/or permitted to become
effective.
Cinergy Corp., et al. (70-8933)
Cinergy Corp. (``Cinergy''), a registered holding company, its
wholly-owned nonutility holding company subsidiary, Cinergy
Investments, Inc. (``Investments''), and Cinergy's wholly-owned service
company subsidiary, Cinergy Services, Inc. (``Cinergy Services''), all
located at 139 East Fourth Street, Cincinnati, Ohio 45202, have filed
an application-declaration under sections 6(a), 7, 9(a), 10, 12(b) and
13(b) of the Act and rules 45, 54, 90 and 91 thereunder.
Cinergy and Investments request authorization to form and provide
guaranties in respect of a new wholly-owned nonutility subsidiary,
expected to be named Cinergy Solutions, Inc. (``Solutions''), which
will market a wide variety of energy-related products and services
exclusively to nonassociate commercial/industrial customers (including
governmental, institutional and utility companies) and residential
customers. Applicants state that Solutions will offer an integrated
package of ``value-added'' energy-related products and services to
enable customers to reduce energy costs, improve energy efficiency and
increase productivity. Such services/products will be marketed to
nonassociates on a local, regional, nationwide and, as opportunities
develop, international basis. The services would be priced based on
competitive market rates. Solutions will also develop, acquire, own and
operate certain energy-related projects.
Applicants request authorization to conduct its proposed business
activities directly through Solutions, wholly-owned subsidiaries of
Solutions, and subsidiaries of Solutions jointly owned with joint
venture nonassociates. As part of Solutions' project development and
ownership activities, Applicants further request authority for
Solutions to acquire, directly or indirectly through subsidiaries,
securities or assets of nonassociate companies that derive
substantially all their revenues from the development, ownership or
operation of such projects. Finally, in connection with the formation
of Solutions and its contemplated business activities, Cinergy Services
requests authorization to provide an expanded range of support services
to Solutions (including any subsidiary thereof) and other system
nonutility companies pursuant to an amendment to the existing Cinergy
system nonutility service agreement (``NUSA'').
Solutions intends to offer a complete menu of energy management and
efficiency services and related consulting services, often on a turnkey
basis. These activities (collectively, ``Energy Management Services'')
may also entail the marketing, installation, operation and maintenance
of various products and services designed to implement the solutions
recommended in the course of providing these services. Solutions will
market Energy Management Services primarily to commercial/industrial
customers, but also on a smaller scale to residential customers.
Specifically, Energy Management Services will include: (1)
Identification (through energy audits or otherwise) of energy and other
resource (water, labor, maintenance, materials, etc.) cost reduction or
efficiency opportunities; (2) design of facility and process
modifications or enhancements to realize such opportunities; (3)
management, or direct construction and instillation, of energy
conservation or efficiency equipment; (4) training of client personnel
in the operation of equipment; (5) maintenance of energy systems; (6)
design, management or direct construction and installation of new and
retrofit heating, ventilating, and air conditioning (``HVAC''),
electrical and power systems, motors, pumps, lighting, water and
plumbing systems, and related structures, to realize energy and other
resource efficiency goals or to otherwise meet a customer's energy-
related needs; (7) system commissioning (i.e., monitoring the operation
of an installed system to ensure that it meets design specifications);
(8) reporting of system results; (9) design of energy conservation
programs; (10) implementation of energy conservation programs; (11)
provision of conditioned power services (i.e., services designed to
prevent, control or mitigate adverse effects of power disturbances on a
customer's electrical system to ensure the level of power quality
required by the customer, particularly with respect to sensitive
electronic equipment); and (12) other similar or related activities.
Solutions also proposes to market comprehensive asset management
services (``Asset Management Services'') on a turnkey basis or
otherwise, in respect of energy-related systems, facilities and
equipment (e.g., electric utility systems and assets, including
distribution systems and substations; transmission facilities; electric
generation facilities, including standby generation facilities and
self-generation facilities; boilers; chillers, i.e., refrigeration and
coolant equipment; HVAC; and lighting systems) located on or adjacent
to premises of commercial/industrial customers and used by such
[[Page 64403]]
customers in connection with their business activities. Likewise, these
services would be marketed to other owners of utility assets or systems
such as municipalities and electric cooperatives. Additionally, these
services would be marketed to developers, owners and operators of
nonassociate independent power production facilities (``IPPs''),
including both qualifying and non-qualifying cogeneration or small
power production facilities within the meaning of the Public Utility
Regulatory Policies Act of 1978, as amended (``PURPA'') (such
qualifying facilities, ``QFs'') and exempt wholesale generators and
foreign utility companies within the meaning of the Act, as well as to
developers, owners and operators of nonassociate district thermal
energy systems, i.e., energy systems consisting of central production
plants that distribute steam, hot water and/or chilled water through
underground pipes to customer buildings.
In particular, Asset Management Services will include development;
engineering; design; construction and construction management; pre-
operational start-up testing and commissioning; long-term operations
and maintenance, including system overhaul; load control and network
control; fuel procurement, transportation and storage; fly-ash and
other waste disposal; management and supervision; technical, training
and administrative support; and any other managerial or technical
services required to operate, maintain and manage energy-related assets
physically associated with customer premises or to operate, maintain
and manage municipality or electric cooperative-owned utility systems,
IPPs and district thermal energy systems. Without obtaining the prior
approval of the Commission in a separate filing, Solutions will not
undertake any Asset Management Service if, as a result thereof,
Solutions would become a ``public utility company'' within the meaning
of the Act.
Solutions further proposes; to market to nonassociates, primarily
commercial/industrial customers, general technical consulting services
with respect to energy-related matters (``Consulting Services'').
Specifically, the Consulting Services will include technical and
consulting services involving technology assessments, power factor
correction and harmonics mitigation analysis, commercialization of
electro-technologies, meter reading and repair, rate schedule analysis
and design, environmental services, engineering services, billing
services including conjunctive billing, summary billing for customers
with multiple locations and bill auditing, risk management services,
communications systems, information systems/data processing, system
planning, strategic planning, finance, feasibility studies, and other
similar or related services.
Solutions also proposes to develop, acquire, own and operate
``Projects,'' i.e.: (a) QFs and facilities necessary or incidental
thereto, including thermal energy utilization facilities purchased or
constructed primarily to enable the QF to satisfy the useful thermal
output requirements under PURPA; and (b) district thermal energy
systems and other facilities used for the production, conversion and
distribution of thermal energy products, such as steam, heat, hot water
and chilled water. Project development activities will include Project
due diligence and design review; market studies; site inspection;
preparation of bid proposals (including posting of bid bonds, cash
deposits and the like); applications for required permits or regulatory
approvals; acquisitions of site options and options on other necessary
rights; negotiation and execution of contractual commitments with
owners of existing facilities, equipment vendors, construction firms,
power purchasers, thermal ``host'' users, fuel suppliers and other
Project contractors; negotiation and execution of related financing
commitments and agreements; engineering and construction of Projects;
and similar activities antecedent to the acquisition, ownership and
operation of a Project. In connection with its Project development and
ownership activities, Applicants request authorization for Solutions to
acquire securities or assets of nonassociate companies that derive
substantially all their revenues from the development, ownership or
operation of Projects.
Solutions would also market energy-related services and products
(``Consumer Services'') exclusively to residential and small commercial
customers: (1) Service lines repair/extended warranties--repair of
underground utility service lines owned by and located on the
customer's property and extended service warranties covering the cost
of such repairs; (2) surge protection--meter-based and plug-in
equipment to protect customer household appliances and electronic
equipment from power surges, including due to lightning; (3) appliances
merchandising/repair/extended warranties--marketing of HVAC and other
energy-related household appliances and, in connection therewith or
separately, marketing of appliance inspection and repair services and
extended service warranties covering the cost of repairing customers'
appliances; (4) utility bill insurance--utility bill payment
protection, for a monthly fee for a specified number of months, in the
event the customer becomes unemployed, disabled or dies; (5) gas pilot
lighting of pilot lights for customers; and (6) other similar or
related services.
Applicants further propose that Solutions furnish its own or broker
nonassociate third-party financing to commercial, industrial and
residential customers, both to support sales to customers of goods and
services included within Energy Management Services, Asset Management
Services and Consumer Services and in connection with sales of energy-
related equipment where the customer is not otherwise purchasing goods
and services promoted by Solutions. Customer financing will take the
form of direct loans, installment purchases, operating or finance lease
arrangements (including sublease arrangements) and loan guarantees.\1\
Interest on loans and imputed interest on lease payments will be based
on prevailing market rates. The obligations will have terms of one to
thirty years and will be secured or unsecured. Solutions also may
assign obligations acquired from customers to banks, leasing companies
or other financial institutions, with or without recourse.
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\1\ As discussed below, Cinergy and Investments expect to invest
up to $100 million in Solutions (and its subsidiaries) to finance
the proposed activities. The amount of funds that may be made
available for the proposed customer financing activities is included
in the $100 million.
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Applicants request authorization for Solutions to undertake the
proposed business activities on its own, either directly or through one
or more wholly-owned direct or indirect subsidiaries of Solutions,
formed as corporations, partnerships, limited liability companies or
other legal entities. Applicants state that the decision in particular
cases whether to conduct specific business activities directly through
Solutions or indirectly through one or more wholly-owned subsidiaries
of Solutions will hinge on applicable business, legal, tax, accounting
and strategic considerations. In addition, to mitigate risk or access
skills and relationships that Solutions may require, applicants expect
that Solutions will pursue proposed business activities in certain
instances through alliances with nonassociates. Certain of these
alliances may be relatively informal, not
[[Page 64404]]
involving the formation of any new entities.
Others may encompass formal joint ventures, possibly involving the
formation of one or more wholly- or partly-owned subsidiaries of
Solutions. Applicants also request authorization for Solutions to form
any such joint venture subsidiaries, as in the preceding case solely
for the purpose of implementing Solutions' proposed business
activities. As noted above, as part of Solutions' proposed Project
development and ownership activities, applicants request authority for
Solutions to acquire securities or assets of nonassociate companies
deriving substantially all their revenues from the development,
ownership or operation of Projects.
In connection with its incorporation and initial capitalization,
Solutions is expected to issue and sell up to 100 shares of no par
value common stock to Investments for nominal cash consideration (not
to exceed $1,000). Thereafter, from time to time through December 31,
2001, in order to assist in the financing of Solutions' proposed
business activities, Cinergy and Investments do not expect to invest
more than $100 million in Solutions (including any subsidiaries of
Solutions), either by acquiring securities of Solutions or making cash
capital contributions to Solutions, in exempt transactions pursuant to
rules 52 and 45(b)(4).
Cinergy and Investments request authority through December 31, 2001
to guarantee debt and other obligations of Solutions (including any
subsidiaries of Solutions) incurred in the ordinary course of business
in a maximum principal amount at any one time outstanding not to exceed
$250 million. Debt financing of Solutions proposed to be guaranteed by
Cinergy or Investments (a) will not exceed a term of 15 years, and (b)
will bear interest (1) at a floating rate not in excess of 200 basis
points over the prime rate, London Interbank Offered Rate or other
appropriate index in effect from time to time, or (2) at a fixed rate
not in excess of 250 basis points above the yield at the time of
issuance of U.S. Treasury obligations of a comparable maturity. Any
commitment and other fees on the debt will not exceed 75 basis points
per annum on the total amount of debt financing. Other obligations
incurred by Solutions in the ordinary course of its business as to
which Cinergy and Investments propose to guarantee or otherwise act as
indemnitor or surety are expected often to involve Solutions'
obligation to perform under contracts with customers to which it is a
party. Guarantees issued by Cinergy or Investments in these
circumstances may take the form of procuring bid bonds and the like or
guaranteeing Solutions' performance or other similar direct or indirect
guarantees of Solutions' contractual or other obligations. Applicants
anticipate that these parent company ``backstops'' will be required to
establish Solutions' financial credibility to certain customers as a
prerequisite to obtaining the customer's business and/or on the most
favorable terms.
Cinergy states that it will not seek recovery through higher rates
to customers of Cinergy's utility subsidiaries in order to compensate
it or Investments for any potential losses they may sustain, or
inadequate returns they may realize, resulting from investments in
Solutions or guarantees of Solutions' debt or other obligations.
Initially, Solutions is expected to have limited full-time staff,
primarily executive, management, and administrative personnel.
Applicants expect that Solutions will make extensive use of outside
contractors and consultants in performing its proposed business
activities.
Applicants propose that Cinergy Services render an expanded range
of support services to Solutions (including any subsidiaries thereof)
and the other Cinergy system nonutility companies. Pursuant to the
NUSA, which was authorized by the Commission in its 1994 order
approving the merger that created Cinergy and certain ancillary
transactions including the formation of Cinergy Services (HCAR 26146,
Oct. 21, 1994), Cinergy Services may provide certain services,
primarily administrative and management-type services, to Cinergy's
nonutility subsidiaries, priced at cost for the domestic nonutility
subsidiaries, as determined pursuant to rule 90 under the Act, and at
fair market value for certain foreign subsidiaries of Cinergy pursuant
to section 13(b)(1) and rule 83, and otherwise in accordance with
applicable rules and regulations promulgated by the Commission pursuant
to Section 13(b) of the Act. Specifically, the services that Cinergy
Services may currently render to its nonutility associates are as
follows: (1) Information systems, (2) transportation, (3) human
resources, (4) facilities, (5) accounting, (6) public affairs, (7)
legal, (8) finance, (9) internal audit, (10) investor relations, (11)
planning and (12) executive. Under the Cinergy system Utility Service
Agreement (``USA''), also approved in the Commission's 1994 merger
order and pursuant to which Cinergy Services renders services at cost
to Cinergy's utility subsidiaries, a much broader range of services are
made available. In addition to the same 12 services made available to
the client companies under the NUSA, the following additional services
may be provided by Cinergy Services to the utility subsidiaries: (1)
Electric system maintenance, (2) marketing and customer relations, (3)
electric transmission and distribution engineering and construction,
(4) power engineering and construction, (5) materials management, (6)
power planning, (7) rates, (8) rights of way, (9) environmental affairs
and (10) fuels.
Applicants request authorization for Cinergy Services to provide
certain additional services under the NUSA, priced in accordance with
the Commission's 1994 merger order and otherwise rendered in
conformance with Section 13(b) of the Act and the applicable rules and
regulations thereunder. Applicants state that the proposed additional
services are in general very similar to those additional services under
the USA (enumerated above) that are not currently available under the
NUSA and that the proposed additional services are intended to
accommodate the scope of Solutions' proposed business activities as
well as that of the Cinergy system's other nonutility subsidiaries.
Specifically, the proposed additional services (collectively,
``Additional NUSA Services'') are as follows: (1) Energy-related
facility maintenance, (2) engineering and construction, (3) marketing
and customer relations, (4) materials management, (5) fuels, (6)
environmental affairs, (7) rates, (8) rights of way and (9) energy-
related system operations.
Applicants state that the Additional NUSA Services would be
implemented by means of a restatement of existing Appendix A to the
NUSA (which lists and describes the currently available services under
the NUSA). Applicants do not otherwise in any respect propose to amend
the NUSA.
Applicants state that the Additional NUSA Services are roughly
parallel to the additional functions already made available to
Cinergy's utility subsidiaries under the USA. Consequently, applicants
do not anticipate a need to add any new employees to Cinergy Services
solely to implement the Additional NUSA Services. Applicants represent
that the provision of the Additional NUSA Services will not impair
Cinergy Services' ability to provide the full range of services that it
currently provides to the system utility companies under the USA. All
costs associated
[[Page 64405]]
with Cinergy Services personnel rendering any Additional NUSA Services
(including compensation, benefits and overhead) will be fully
reimbursed by Solutions and other system companies that request and
receive such services in accordance with section 13(b) of the Act and
the applicable rules and regulations thereunder, including rules 90 and
91.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-30811 Filed 12-3-96; 8:45 am]
BILLING CODE 8010-01-M
