[Federal Register Volume 59, Number 48 (Friday, March 11, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-5648]
[[Page Unknown]]
[Federal Register: March 11, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-25996]
Filings Under the Public Utility Holding Company Act of 1935
(``Act'')
March 4, 1994.
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 March 28, 1994, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549, a 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.
The Southern Company, et al. (70-8233)
The Southern Company (``Southern''), a registered holding company,
and Southern Company Communications, Inc. (``Communications''), both at
64 Perimeter Center East, Atlanta, Georgia 30346, have filed an
application-declaration under Sections 6(a), 7, 9(a), 10, 12(b) and 13
of the Act and Rules 45, 50, 50(a) (5), 81, 87, 90, 91, 93 and 94
thereunder.
Southern proposes to form Communications and to acquire directly
all of its authorized capital stock of 1,000 shares, with a par value
of $1 per share. Communications will provide the following services
(``Communications Services''): it will design, construct, finance,
maintain and operate the Southern system's future communications
systems, including a mobile radio network that, when complete, will
provide contiguous or ``seamless'' mobile radio service; it will manage
all equipment procurement and inventory maintenance activities,
represent the Southern system in any necessary licensing activities
before the Federal Communications Commission (``FCC'') and become the
FCC licensee of the 800 MHz mobile radio system and acquire and hold
any other rights or interests in property (e.g., leases of transmitter
towers) necessary for the construction, networking, and efficient
operations of this network; and it will provide operations,
maintenance, management and technical services for frequency licensees
in connection with frequencies which third parties own that are used in
connection with the 800 MHz system of Communications.
The new system will modernize, update and replace the existing
mobile radio systems currently being utilized by the operating
companies through a wireless system that performs the functions of two-
way voice, dispatch and data transfer on a seamless, integrated basis.
The new system will consist of towers, transmitters, telecommunications
network facilities, associated vehicular and portable mobile user
equipment, and control stations spaced to provide coverage throughout
Georgia, Alabama, northern Florida, on or north of Florida Highway 40
(to cover the general service areas of Gulf Power Company, transmission
corridors to interconnected utilities including Southern's largest
wholesale customers and a corridor to Tallahassee), southern
Mississippi (to cover the general service area of Mississippi Power
Company) and a corridor to the state capital in Jackson, Mississippi
(``Expanded Southern Territory'').
Southern has initiated the license application process at the FCC
to obtain the necessary frequencies and has contracted to obtain the
necessary equipment and technology for the new system. The frequency
applications have included Industrial Land Transportation (``ILT''),
General Category and Specialized Mobile Radio (``SMR'') 800 MHz
frequencies. Southern represents that there are not sufficient ILT and
General Category frequencies available to meet Southern's needs in
congested markets, such as Atlanta. Southern, however, will be able to
use its ILT and General Category licenses to supplement the SMR
frequencies it obtains through intercategory sharing procedures.
Southern states that, taking technology and ecomonics into account, the
minimum number of frequencies required in urban areas in 42 frequencies
and that it will have between 42 and 50 frequency pairs across its
system. Southern will seek additional frequency channel pairs in order
to optimize use of the new system, but it states that it can meet its
system needs with the currently obtainable frequencies.
To permit system-wide coverage and interconnection with the public
switch telephone network, the 800 MHz fixed transmitter stations will
be networked together, employing microwave and landline
telecommunications facilities. The telephone interconnects will permit
direct communications between customers and filed personnel and quick
access to information by filed personnel.
The system would be primarily offered to associate public utility
companies and to the industrial, commercial and other retail and
wholesale customers of the associate companies, including
interconnected utilities, as well as federal, state and local public
safety, law enforcement, and emergency management governmental
agencies, as well as other agencies of the governments of the states of
Georgia, Alabama, Mississippi and Florida (``Base Service'').1 The
Base Service would also include service to other affiliates and
subsidiaries of Southern, to the extent they are located within the
Expanded Southern Territory. Any excess capacity beyond the Base
Service would be marketed to others.\2\ It is expected that users will
be charged a monthly service fee in addition to a change based on the
actual use of the system through assessed charges for times of use. The
monthly service fee and the time of use charges will be based upon
competitive fair market value pricing.
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\1\Southern states that it is anticipated that a portion of such
classes of users and other holders of radio frequency licenses may
place their own radio frequencies within the new system and have
Communications manage the frequencies so that they can be integrated
on a compatible basis and operated in the overall service, but they
would be reserved for emergency communications with the ability to
``spill over'' to other frequencies when necessary.
\2\Southern asserts that the term excess capacity, in the
context used for the mobile radio system, means the capacity which
does not interfere with or preclude the communications necessary for
operation of the Base Service.
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Communications proposes that the operating companies be charged the
cost of providing Communication Services to them in accordance with
Rules 81, and 91. Southern states that the rates involved are
completely and normally subject to public regulation by the FCC and may
also be subject to state regulation; thus, it states, the provision of
mobile radio services will be charged to associate companies in the
Southern system on the basis of market prices in accordance with Rule
81--the transactions will be on terms which are comparable to those
offered to non-associate customers having due regard to any differences
of quality or quantity. Southern estimates that this will result in an
annual reduction in costs to the operating companies of $6 million per
year as compared to fully allocated costs. The operating expenses such
as general and administrative expenses and overheads will be spread
evenly over all users, regardless of class. Southern states that the
operating companies and their ratepayers will be the beneficiaries of
economies of scale because their proportionate share of overheads and
general and administrative expenses and non-variable expenses will be
reduced as a result of the participation of other customers. All other
transactions between Communications and associate companies which are
not subject to FCC and/or state rate regulation will be ``at cost'' in
compliance with Rules 90 and 91.
Southern's investment in the infrastructure for a system, confined
solely to its service territory, would be approximately $132 million.
Southern represents that, in order to build out a system which includes
necessary coverage for the Base Service, an incremental investment of
approximately $25 million in additional funds would be necessary. In
addition, Southern anticipates requiring $22 million for frequency
acquisition and working capital, making the overall initial investment
for the new system estimated at $179 million.
Southern contemplates that Communications' business will be
financed with investments by Southern and loans obtained from external
sources, including vendor financing, if available. Initially, Southern
proposes to invest up to $179 million from time to time through
December 31, 1998, for purchases of Communications' stock, loans and
capital contributions to Communications, or guarantees of obligations
of Communications, or any combination thereof. To the extent capital
contributions involve loans from Southern, such loans will be made from
time to time prior to September 30, 1998 with maturities no later than
September 30, 2003. They will bear an interest rate equal to Southern's
comparable cost of capital or, if no such comparability exists, a rate
not to exceed the greater of the prime rate in effect on the date of
the loan at a bank designated by Southern plus three percentage points
or 12 percent per annum. To the extent loans are made by third parties
within the overall $179 million capitalization of Communications (other
than credit extended by equipment vendors),3 such loans will be
evidenced by notes issued by Communications and will have a term of
from 5 to 20 years, with an interest rate not to exceed the greater of
the prime rate of interest plus three percentage points per annum, or
12 percent per annum. Such loans may be guaranteed by Southern.
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\3\Southern states that, when the new mobile radio system is
installed, the equipment vendor will purchase the existing equipment
from each of the operating companies for the market value thereof
and give each one credit which they may use for purchases from the
vendor.
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Southern proposes that existing communications facilities of the
Southern system may in the future be transferred or leased to
Communications from other affiliated companies. Southern states that
wholly owned facilities of the operating companies, such as towers or
tower sites or landline connections, could be used to provide network
interconnections of the new system through lease. Existing fiber optic
capacity held by other Southern subsidiaries may be transferred to
Communications on an ``at cost'' basis or leased to it, so as to link
the transmitter stations, switches, computers, etc. In addition, radio
frequency licenses in the 800 MHz band owned by Southern or the
operating companies will be transferred to Communications, for which
the operating companies will be reimbursed for their costs incurred in
obtaining such licenses. Communications will bear all costs of
transfer.
Initially, a small management staff of approximately five to ten
persons will be transferred to Communications. It is contemplated that
Southern Company Services, Inc. will provide financial, accounting,
data processing, and internal auditing services to Communications in
accordance with the methods and accounts previously approved by the
Commission. In addition, personnel from the operating companies and
Southern Development and Investment Group, Inc. will provide necessary
services to Communications on a full cost reimbursement basis utilizing
a work order procedure.
IP Holding Company (70-8305)
IP Holding Company (``Holding Company''), 500 South 27th Street,
Decatur, Illinois, 62525, a Illinois corporation has filed an
application under Sections 3(a)(1), 9(a)(2) and 10 of the Act,
requesting the Commission to authorize its acquisition of all of the
outstanding common stock of Illinois Power Company (``Illinois
Power''), an Illinois electric and gas public-utility holding company
exempt from registration under Section 3(a)(2) of the Act pursuant to
Rule 2 (``Acquisition''). In addition, Holding Company requests that
upon completion of the Acquisition, the Commission grant it an
exemption under Section 3(a)(1) from all provisions of the Act, except
Section 9(a)(2) thereof.
As a result of the Acquisition, Holding Company would indirectly
acquire 20% of the outstanding common stock of Electric Energy, Inc.
(``EEI''), an Illinois corporation. EEI owns and operates a steam
electric generating station near Joppa, Illinois and related
transmission facilities. EEI's electric energy is sold to the U.S.
Department of Energy for use in its uranium processing plant near
Paducah, Kentucky, but Illinois Power has a right to purchase a
specified percentage of the annual output of the Joppa facility.
Illinois Power, an Illinois corporation, is engaged in the
generation, transmission, distribution, and sale of electric energy and
the distribution, transportation, and sale of natural gas in the State
of Illinois. Illinois Power and EEI are ``electric utilities'' as
defined in Section 2(a)(3) of the Act and ``public utilities'' as
defined in Section 2(a)(5) of the Act. Illinois Power is also a ``gas
utility'' as defined in Section 2(a)(4) of the Act.
Holding Company was incorporated under Illinois law on November 12,
1993, for the purpose of carrying out the proposed corporate
restructuring in which Holding Company will become a holding company
over Illinois Power. Currently, Holding Company owns all of the
outstanding common stock of IP Merging Corporation (``Merging Corp.''),
an Illinois corporation that has also been incorporated to effect the
restructuring. Neither Holding Company nor Merging Corp. owns any
utility assets.
The Acquisition will be accomplished through a merger (``Merger'')
of Illinois Power and Merging Corp. in which Illinois Power will be the
surviving corporation. Illinois Power and Merging Corp. entered into an
Agreement and Plan of Merger dated November 15, 1993 (``Merger
Agreement''), and Holding Company, Illinois Power and Merging Corp.
entered into a Supplemental Agreement dated November 15, 1993. The
Merger will be done on a ``pooling of interests'' basis under generally
accepted accounting principles. As result of the Merger, the common
stock of Merging Corp. owned by Holding Company will be converted into
common stock of Illinois Power. The outstanding common stock of
Illinois Power will be converted, on a share-for-share basis, into
common stock of Holding Company, and Illinois Power will become a
subsidiary company of Holding Company.
The Merger Agreement also provides that the present holders of
Illinois Power common stock will cease to have any rights as Illinois
Power shareholders after the restructuring, except holders of shares
who have perfected their dissenters' rights in accordance with Illinois
law will have the right to be paid fair value of such shares. After the
Articles of Merger are filed with the Secretary of State of Illinois,
certificates representing shares of Illinois Power common stock will
represent, and be exchangeable for certificates representing shares of
Holding Company common stock. The outstanding preferred stock and debt
of Illinois Power will not be exchanged or changed in connection with
the restructuring, and Holding Company will thus have no outstanding
securities other than common stock immediately following the
restructuring. Holders of Illinois Power preferred stock and debt
securities will continue as security holders of Illinois Power, except
for those holders of Illinois Power preferred stock who properly
exercise statutory appraisal rights.
Illinois Power's present subsidiary companies, except for IP Group,
Inc. (``IP Group'') would remain its direct subsidiary companies. IP
Group would become a direct subsidiary company of Holding Company.
Illinois Power currently owns 100% of the capital stock of IP
Group, Inc., which was formed to invest in and develop independent
power projects, to provide services for such projects, and to engage in
other non-utility businesses (``Non-utility Businesses''). The proposed
restructuring is intended to permit Holding Company, through IP Group,
to participate in Non-utility Businesses in a timely manner without the
need for prior regulatory approvals to increase financial flexibility,
to enhance managerial accountability for separate business activities,
and to protect Illinois Power and its ratepayers from the risks and
costs of non-utility projects.
Holding Company is not currently a ``holding company'' under the
Act because it does not own, control, or hold with power to vote ten
percent or more of the voting securities of a public-utility company.
Holding Company asserts that, following the consummation of the Merger,
it will be a public-utility holding company entitled to an exemption
under Section 3(a)(1) of the Act because it and each of its public-
utility subsidiary companies from which it will derive a material part
of its income will be predominantly intrastate in character and will
carry on their businesses substantially within the State on Illinois.
Public Service Co. of Oklahoma (70-8341)
Public Service Company of Oklahoma (``PSCO''), P.O. Box 201, Tulsa,
Oklahoma 74102, an electric public utility subsidiary of Central and
South West Corporation, a registered holding company, has filed an
application pursuant to Sections 9(a) and 10 of the Act.
PSCO requests authorization to invest up to $2.5 million, through
capital stock purchases, in Excel Energy Technologies, Limited
(``Excel''), a Delaware corporation, pursuant to an October 14, 1993
Debenture, Common Stock and Preferred Stock Purchase Agreement
(``Purchase Agreement''), which was signed by Excel, PSCO, and ML
Oklahoma Venture Partners, L.P. (``Partnership''), an unaffiliated
Oklahoma limited partnership.
Excel is engaged in research, development, and installation of
proprietary energy management micro-processors (``Technology''). On
April 9, 1993, PSCO and Excel entered into a Consulting and Research
and Development Agreement (``Consulting Agreement'') to enhance jointly
the application of the Technology. PSCO believes that the Technology
might provide its commercial and residential customers with significant
demand side management (``DSM'') opportunities.
Pursuant to the Consulting Agreement, PSCO will provide Excel with,
for example, commercial and industrial electric power usage patterns
and Excel will provide PSCO with product research and development
expertise, sales experience, a database of information on installed
energy management systems, and otherwise will consult on DSM issues.
PSCO believes Excel and the Technology can help it advance its DSM
program with respect to, in particular, middle-market commercial
customers.
Excel, the Partnership, and PSCO expect to purchase, install, and
maintain at least five Excel energy management systems, which will
provide data to gauge their results and evaluate customer perceptions.
PSCO will acquire no energy management system outside of its service
territory. Excel, the Partnership, and PSCO also intend to market the
Technology to other utilities and other interested parties. It is
anticipated that, in the future, more than 50% of the sales of the
Technology will be outside the service territory of PSCO. In
consideration for its services and energy management systems under the
Consulting Agreement, PSCO will pay Excel up to $1.35 million and
provide Excel with market research data.
Under the Purchase Agreement, PSCO has agreed to acquire from Excel
(i) 3,882 shares of Series A Preferred Stock @ $30.67 per share, which
shares represent 19.23% of all Series A Preferred Stock, (ii) 61,336
shares of Series B Preferred Stock @ $30.67 per share, which shares
represent 100% of all Series B Preferred Stock, (iii) 4,334 shares of
Common Stock for $625, which shares represent 3% of all Common Stock.
Series A Preferred Stock is voting stock, and the 3,882 shares of
Series A Preferred Stock will represent 2.36% of the voting stock, and
Series B Preferred Stock is non-voting stock. In addition, under the
Purchase Agreement, PSCO has paid Excel $200,000 to finance the further
development of the Technology. PSCO also requests authorization to
invest an additional $500,000 in Excel, through capital stock
purchases, to finance further technological development.
Both series of preferred stock are convertible into common stock
upon the terms and conditions set forth in the Certificate of
Designations relative to the preferred stock. Series B Preferred Stock,
however, is convertible into non-voting common stock. The application
states that upon conversion of the non-voting stock into voting stock,
PSCO will own 4.99% of the voting securities of Excel. Thus it is
stated that Excel will neither be a subsidiary company under section
2(a)(8)(A) of the Act nor an affiliate company under section
2(a)(11)(A) of the Act.
The application states that PSCO will divest its equity interest in
Excel once PSCO has achieved its objectives under its DSM program and,
in any event, prior to December 31, 2004, unless PSCO receives
Commission approval to retain the equity interest for an additional
period of time.
PSCO concluded with Excel on September 14, 1993 a Registration
Agreement, which provides for Excel to register the common stock under
the Securities Act of 1933. Finally, PSCO and other shareholders of
Excel concluded on October 14, 1993 a Shareholder Agreement that allows
PSCO to elect a single member of the six-member Excel board of
directors. PSCO states that other rights provided to PSCO under the
Shareholder Agreement will allow PSCO to monitor the development of the
Technology to ensure its Compatibility with the needs of PSCO and its
retail customers.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-5648 Filed 3-10-94; 8:45 am]
BILLING CODE 8010-01-M
