[Federal Register Volume 61, Number 42 (Friday, March 1, 1996)]
[Notices]
[Pages 8088-8092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4740]
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[[Page 8089]]
SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26476]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
February 23, 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 transactions 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 March 18, 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.
American Electric Power Company, Inc., et al. (70-8779)
American Electric Power Company, Inc. (``AEP''), a registered
holding company, its service company subsidiary, American Electric
Power Service Corporation (``AEPSC''), both of 1 Riverside Plaza,
Columbus, Ohio 43215, and all of AEP's public-utility company
subsidiaries (``Operating Companies''),\1\ have filed an application-
declaration under sections 6(a), 7, 9(a), 12(b) and 13(b) of the Act
and rules 45 and 52 thereunder.
\1\Appalachian Power Company, 40 Franklin Rd., Roanoke,
Virginia, 24022; Columbus Southern Power Company, 215 No. Front St.,
Columbus, Ohio, 43215; Indiana Michigan Power Company, One Summit
Sq., Fort Wayne, Indiana, 46801; Kentucky Power Company, 1701
Central Ave., Ashland, Kentucky, 41101; Kingsport Power Company, 422
Broad St., Kingsport, Tennessee, 37660; Ohio Power Company, 339
Cleveland Ave., S.W., Canton, Ohio 44702; and Wheeling Power Company
51-16th St., Wheeling, West Virginia, 26003.
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AEP proposes from time to time through December 31, 2000, to form
one or more direct or indirect new subsidiaries (``New Subsidiaries'')
to engage in the business of brokering and marketing energy
commodities, which are defined to include natural and manufactured gas,
electric power, emission allowances, coal, oil, refined petroleum and
petroleum products and natural gas liquids (``Energy Commodities'').
The New Subsidiaries will receive a commission for their brokering
activities, which will include arranging the sale and purchase,
transportation, transmission and storage of Energy Commodities. Their
proposed marketing activities encompass entering into contracts to
sell, purchase, exchange, pool, transport, transmit, distribute, store
and otherwise deal in Energy Commodities. The New Subsidiaries may from
time to time have an inventory of Energy Commodities; however, they
will not own or operate facilities used for the production, generation,
processing, storage, transmission, transportation, or distribution of
Energy Commodities. The applicants assert that no New Subsidiary will
be a public utility company under the Act.
The New Subsidiaries propose to broker and market Energy
Commodities to wholesale customers and, where permitted by law, to
retail customers. In order to manage risks associated with brokering
and marketing Energy Commodities, the New Subsidiaries may enter into
futures, forwards, swaps and options contracts relating to Energy
Commodities (``Arbitrage Transaction''). No Arbitrage Transaction will
be entered into for speculation.
The applicants propose that a New Subsidiary initially issue and
sell up to 100 shares of common stock for approximately $100 to AEP or
a subsidiary of AEP. Subsequently, American intends to acquire
additional shares of stock or make capital contributions to the New
Subsidiaries in an amount that, when aggregated with the initial
capitalization of the New Subsidiaries, will not exceed $100 million.
AEP also proposes from time to time through December 31, 2000, to
guarantee the debt and other obligations of the New Subsidiaries. The
maximum amount of debt and other obligations that AEP proposes to
guarantee is $50 million and $200 million, respectively. Debt financing
of the New Subsidiaries that is guaranteed by AEP will not (i) exceed a
term of 15 years or (ii)(a) bear a rate equivalent to a floating
interest rate in excess of 2.0% over the prime rate, London Interbank
Offered Rate or other appropriate index in effect from time to time or
(b) bear a fixed rate in excess of 2.5% above the yield at the time of
issuance of United States Treasury obligations of a comparable
maturity. Any commitment and other fees on the debt will not exceed 50
basis points per annum on the total amount of debt financing.
AEP may guarantee other obligations where needed for the New
Subsidiaries to demonstrate that they have support for their
contractual obligations. Other obligations that AEP may guarantee,
excluding debt, may take the form of bid bonds or performance or other
direct or indirect guarantees of contractual or other obligations.
The New Subsidiaries propose to enter into service agreements with
AEPSC and the Operating Companies, under which personnel and other
resources, if available, of AEPSC and the Operating Companies may be
used to support the New Subsidiaries' activities. Any service
agreements will require that AEPSC and the Operating Companies provide,
account for and bill their services, utilizing a work order system, on
a full cost reimbursement in accordance with rules 90 and 91. All
direct charges and prorated shares of other related service costs will
be reimbursed.
Any service agreements also will provide that AEPSC and the
Operating Companies make warranties of due care and compliance with
applicable laws to the New Subsidiaries with respect to the performance
of the servicesrequested, but failure to meet these obligations will
not subject them to any claim or liability, other than to reperform the
work at cost. Furthermore, AEPSC and the Operating Companies will be
indemnified by the New Subsidiaries against liabilities to or claims of
third parties arising out of the performance of work on behalf of the
New Subsidiaries.
Initially, the New Subsidiaries are not expected to have employees
and will use the personnel and resources of AEPSC and the Operating
Companies to broker and market Energy Commodities. No more than 1% of
the employees of the Operating Companies will render, directly or
indirectly, services to the New Subsidiaries at any one time.
New England Electric System, et al. (70-8733)
New England Electric System (NEES), a registered holding company,
and its nonutility subsidiary company, New England Electric Resources,
Inc. (``NEERI'') (together, ``Applicants''), both located at 25
Research Drive,
[[Page 8090]]
Westborough, Massachusetts 01582, have filed an application-declaration
under sections 6(a), 7, 9(a), 10, 12(b), 13(b), 32, and 33 of the Act
and rules 45 and 54 thereunder.
NEES and NEERI propose to acquire interests in, finance the
acquisition, and hold the securities, of one or more exempt wholesale
generators (``EWG'') as defined in section 32 of the Act and/or foreign
utility companies (``FUCO'') as defined in section 33 (together,
``Exempt Companies''), either directly or indirectly, through a project
entity (``Project Parent''), as discussed below, without filing
specific project applications. The Applicants propose the following
limitations on such authority: (1) The full amount of any investment or
financing, as well as any authorized guarantees or assumptions of
liability, shall be counted as part of a total investment cap of $60
million (``Total Authority''), as defined below; and (2) no investment
or financing will be made unless at the time of the investment or
financing, and after giving effect to the investment or financing,
NEES' ``aggregate investment,'' as defined in rule 53(a)(1)(i), in
EWGs, FUCOs and Project Parents does not exceed 50% of the system's
``consolidated retained earnings,'' as defined in rule 53(a)(1)(ii).
To facilitate the acquisition and ownership of Exempt Companies,
NEES and NEERI seek authority to organize, form or acquire, and to
liquidate, dissolve or sell, in whole or in part, subsidiary Project
Parents. Project Parents shall engage, directly or indirectly, and
exclusively, in the business of owning and holding the interests and
securities of one or more Exempt Companies and in project development
activities relating to the acquisition of such interests and securities
and the underlying electrical generation, transmission and distribution
projects (``Investment Projects'').
Project parents shall be special purpose domestic or foreign
corporations, partnerships or limited liability companies (or the
equivalent of such entities in the foreign country where such Project
Parent may be formed). NEES and NEERI propose to form Project Parents
at any time: (1) To make bids or submit proposals to acquire interests
in Exempt Companies; and (2) to facilitate and/or close on the
acquisition or financing of interests in Exempt Companies. Project
Parents may also be formed to participate in joint ventures with
nonassociates for the purpose of owning interests in Exempt Companies
and/or engaging in Investment Projects.
The Project Parents may issue securities to NEES and/or NEERI and
NEES and/or NEERI may acquire such securities. The securities may take
the form of capital stock or shares, debt securities, trust
certificates, partnership interests or other equity or participation
interests.
NEERI may provide Project Parents, and Project Parents may provide
their subsidiaries, services necessary or desirable for their
operations, including, without limitation, management, engineering,
employment, administrative, tax, consulting, accounting, and computer
and software support. The services that NEERI and/or the Project
Parents will provide will not be provided for any associate company
which derives, directly or indirectly, any material part of its income
from sources within the United States, and which is a public utility
company operating within the United States. In these cases the
Applicants have requested an exemption under section 13(b) of the Act.
NEES proposes to finance, from time-to-time through December 31,
1998, the activities of NEERI and Project Parents (``NEES
Investments''). The NEES Investments may take the form of purchases of
capital shares, partnership interests, trust certificates (or the
equivalent of any of the foregoing under the laws of foreign
jurisdictions), capital contributions, subordinated loans evidenced by
subordinated promissory notes, open account advances, guarantees, bid
bonds or other credit support to secure obligations incurred by NEERI
and/or Project Parents in connection with Exempt Company investments or
of NEERI's undertaking to contribute equity to a Project Parent.
NEES may enter into reimbursement agreements with banks to support
letters of credit delivered as security for NEES' or NEERI's equity
contribution obligation to a Project Parent or otherwise in connection
with a Project Parent's or NEERI's Exempt Company project development
activities.
NEES and NEERI also propose to, from time-to-time through December
31, 1998: (1) Guarantee the indebtedness or other obligations of one or
more Exempt Companies; (2) assume the liabilities of one or more Exempt
Companies; and/or (3) enter into guarantees and letters of credit
reimbursement agreements in support of equity contribution obligations
or otherwise in connection with project development activities for one
or more Exempt Companies (``Exempt Company Investments''), as discussed
below.
NEES and NEERI propose that the amount of the Total Authority be
reduced from time-to-time by the amount of NEES Investments and/or
Exempt Company Investments made, and Non-Recourse Debt issued, and be
increased from time-to-time by: (1) Proceeds received upon the sale,
liquidation, repayment or other disposition of any NEES Investment or
Exempt Company Investment; (2) proceeds generated from NEERI or Project
Parents' activities in connection with their investments in Exempt
Companies or any particular Investment Project in which NEERI or NEES
has an interest; (3) the reimbursement of such NEES Investments or
Exempt Company Investments out of the proceeds of any third party
financing of NEERI's or Project Parents' activities or any particular
Investment Project in which NEERI or NEES, directly or indirectly, has
an interest; or (4) the extent to which Non-Recourse Debt issued has
been paid. In any case in which NEES and NEERI together own less than
all of the equity interests of a Project Parent, only that percentage
of the non-recourse indebtedness of such Project Parent equal to NEES'
and NEERI's combined equity ownership percentage shall be included for
purposes of the foregoing limitation.
NEES Investments may be made from NEES to NEERI and/or Project
Parents directly or indirectly. Any open account advance made by NEES
will be non-interest bearing and shall have a maturity not exceeding
one year. Any promissory note issued to NEES by NEERI or a Project
Parent, or to NEERI by a Project Parent, and any promissory note or
other similar evidence of indebtedness issued by a Project Parent to a
person other than NEES or NEERI with respect to which NEES or NEERI may
issue a guarantee, would mature not later than 30 years after the date
of issuance. It would bear interest at a rate not greater than the
prime rate of a bank to be designated by NEES in the case of a
promissory note issued to NEES or NEERI. In the case of any note or
similar evidence of indebtedness issued to a person other than NEES or
NEERI and guaranteed by NEES or NEERI, the rate would not exceed (a)
the greater of 250 basis points above the lending bank's or other
recognized prime rate and 50 basis points above the federal funds rate;
(b) 400 basis points above the specified London Interbank Offered Rate
plus any applicable reserve requirement; or (c) a negotiated fixed rate
500 basis points above the 30 year ``current coupon'' treasury bond
rate if such note or other indebtedness is U.S. dollar denominated. If
such note or other indebtedness is denominated in the
[[Page 8091]]
currency of a foreign nation, the interest rate will not exceed a fixed
or floating rate which, when adjusted for the prevailing rate of
inflation, would be equivalent to a rate on a U.S. dollar denominated
borrowing of identical average life that does not exceed 10% over the
highest rate set forth above.
Any reimbursement agreement supporting a letter of credit would
have a term not in excess of 30 years. Drawings under any such letter
of credit would bear interest at not more than 5% above the prime rate
of the letter of credit bank as in effect from time-to-time, and letter
of credit fees would not exceed 1% annually of the face amount of the
letter of credit.
New England Electric Resources, Inc. (70-8785)
New England Electric System (``NEES''), a registered holding
company, and its research and development subsidiary company, New
England Electric Resources, Inc. (``NEERI'') (together,
``Applicants''), both located at 25 Research Drive, Westborough,
Massachusetts 01582, have filed an application under sections 9(a) and
10 of the Act.
By order dated February 23, 1995 (HCAR No. 26235) (``Order''),
NEERI was authorized to invest up to $10 million in research and
development activities. The Order provided that NEERI could invest in
projects and technologies, which could include electro-technologies,
energy efficiency and power quality measures, other developing
environmental technologies and new generation and transmission
technologies. The Order was issued on the condition that particular
acquisitions remained subject to further Commission authorization.
Applicants now propose to make an initial investment of $500,000,
and a possible second investment in the same amount, in Monitoring
Technology Corporation (``MTC''), a Virginia corporation and the
developer of a vibration monitoring technology for the risk management
and performance monitoring of power turbines. MTC is developing a
method to read vibration frequency ``signatures'' of power turbines and
other turbomachines. This technology, referred to as Rotational
Vibration Monitoring (``RVM''), would enable turbine operators to
monitor their machines during normal operations and quantitatively
analyze turbine performance and predict mechanical problems. This
method of continuous, automated on-line monitoring, when compared to
present technology, would result in: (1) Reduced turbine maintenance
costs; (2) early warning of some potential catastrophic failures; and
(3) ultimately more efficient turbine performance. While initially
targeted at electric utilities, RVM technology has the potential for
further application in other areas, such as propulsion and industrial
turbines.
In consideration of NEERI's initial $500,000 equity investment and
subsequent investments in the same amount, MTC will: (1) Issue shares
of preferred stock and warrants to NEERI; (2) waive a participation
fee, currently estimated at $200,000, for NEERI's associated power
company, New England Power (``NEP''), to participate as a testing site
for MTC's vibration monitoring technology; and (3) offer NEP
significant discounts on certain future services from MTC.
NEERI proposes to purchase shares of MTC's convertible preferred
stock (``Shares'') at a price of $1.75 per share, for a total equity
investment of $500,000. NEERI's investment in the Shares will result in
NEERI's ownership of not more than 4.99% of the voting securities of
MTC. The Shares may be converted to shares of common stock upon the
closing of an initial public offering, in which MTC's proceeds from
such offering are not less than $10 million and in which the share
offering price is $3.50 or more. NEERI will also receive A and B
warrants which will be exercisable under certain terms and conditions
to ensure that NEERI's ownership does not exceed 4.99% of the voting
securities of MTC. Both the Shares and warrants will have full ratchet
anti-dilution protection.
Further, the Applicants propose to make additional investments in
MTC on an emergency basis prior to its commercialization period in
amounts of up to $500,000. The investments will take the form of
preferred or common stock, warrants or debt that is convertible to
equity.
General Public Utilities Corporation (70-8793)
General Public Utilities Corporation (``GPU''), 100 Interpace
Parkway, Parsippany, New Jersey 07054, has filed a declaration under
sections 6(a), 7 and 12(b) of the Act and rules 45 and 54 thereunder.
By order dated September 29, 1993 (HCAR No. 25898), the Commission,
among other things, authorized GPU Service Corporation, GPU's
subsidiary service company (``Service Company''), to enter into a Term
Loan, Revolving Credit and Guaranty Agreement, dated September 30, 1993
(``FUNB Loan Agreement''), with First Union National Bank (successor in
interest to First Fidelity Bank, National Association, New Jersey)
(``FUNB'') and to issue to FUNB its unsecured promissory notes maturing
not later than September 30, 1998, representing borrowings thereunder
in the amount of up to $16.5 million (of which $11.5 million
constituted a term loan and $5 million a revolving credit facility
which facility has expired). The proceeds of the term loan borrowings
were used to refinance $11.5 million of Service Company's then
outstanding indebtedness which Service Company had incurred to finance
the construction and equipping of its Parsippany, New Jersey
headquarters office building. The revolving credit borrowings were to
be used for general corporate purposes including capital expenditures.
The Commission further authorized GPU to unconditionally guarantee
payment of principal of and interest on the notes and Service Company's
other obligations to FUNB under the FUN Loan Agreement.
By order dated April 24, 1986 (HCAR No. 24069) (``April Order''),
the Commission, among other things, authorized Service Company to issue
to Aetna Life Insurance Company (``Aetna'') $32 million aggregate
principal amount of its secured notes (``Aetna Loan''), maturing not
later than December 31, 2001, secured by a first lien and security
interest in Service Company's Reading, Pennsylvania office building.
The proceeds of such borrowing were used to repay then outstanding
borrowings incurred to finance the construction and equipping of the
Reading office building and for working capital purposes. The April
Order also authorized GPU to guarantee Service Company's payment of
principal and interest on and performance of its other obligations with
respect to these secured notes.
As of February 1, 1996, the principal amount of borrowings
outstanding under the FUNB Loan Agreement and Aetna Loan was $11.5
million and $19.2 million, respectively. The Aetna Loan bears interest
at a fixed rate of 10.87% per annum. Notes issued under the FUNB Loan
Agreement bear interest at fluctuating rates based upon (i) FUNB's base
rate, or (ii) the London Interbank Offered Rate plus 37.5 basis points
and the applicable reserve.
Service Company has determined that market conditions are
sufficiently favorable to warrant a refinancing of the Aetna Loan and,
possibly, at the same time a refinancing of borrowings under the FUNB
Loan Agreement as well. Accordingly, Service Company now intends, from
time to time through February 1, 2006, to borrow up to $40
[[Page 8092]]
million from one or more commercial banks or other institutions under
one or more new term loan and/or revolving credit facilities (``New
Loan Agreement'') entered into on or before February 1, 2006. Each New
Loan Agreement would provide for interest at negotiated market rates
but, in any case, not in excess of the greater of (i) 150 basis points
above the greater of (a) the lending bank's or other recognized prime
rate and (b) 50 basis points above the federal funds rate, (ii) 200
basis points above the specified London Interbank Offered Rate plus any
applicable reserve requirement, (iii) a negotiated fixed rate which, in
any event, would not exceed 300 basis points above the treasury bond
rate with an identical average life, or (iv) a rate equal to the
average domestic money bid rate for certificates of deposit of similar
maturities, plus up to 100 basis points and any applicable reserve
requirements; and would include other customary terms and conditions.
Loans under each New Loan Agreement would have a maturity of up to 20
years and may be evidenced by promissory notes. Proceeds of borrowings
under the New Loan Agreement would be used to repay all or a portion of
the outstanding borrowings under the FUNB Loan Agreement. The balance
would be used for working capital and other corporate purposes.
In order to enable Service Company to borrow at more favorable
rates and other terms, GPU proposes, from time to time through February
1, 2006, to enter into guaranty agreements in favor of the banks or
other institutional lenders under the New Loan Agreements to
unconditionally guarantee payment of principal, interest and Service
Company's other obligations under the New Loan Agreements.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-4740 Filed 2-29-96; 8:45 am]
BILLING CODE 8010-01-M
