[Federal Register Volume 59, Number 68 (Friday, April 8, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-8434]
[[Page Unknown]]
[Federal Register: April 8, 1994]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26018]
Filings Under the Public Utility Holding Company Act of 1935
(``Act'')
April 1, 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 April 25, 1994, to the Secretary, Securities and Exchange
Commission, Washington, DC 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 request 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.
Central and South West Corporation (70-8339)
Central and South West Corporation (``CSW''), a registered holding
company, has filed an application-declaration pursuant to sections
6(a), 7, 9(a), 10 and 13(f) of the Act and Rules 50 and 80-91
thereunder. CSW requests approval of its proposed acquisition
(``Transaction'') of El Paso Electric Company (``EPE'' and after
completion of its reorganization in bankruptcy, ``REPE''), the issuance
of securities in connection with the acquisition, the addition of EPE
to the existing CSW system service agreement (``Service Agreement''),
and certain related transactions, as described herein.
EPE is a Texas electric utility company and a debtor-in-possession
in bankruptcy reorganization proceedings pending in the Bankruptcy
Court for the Western District of Texas (``Bankruptcy Court''). EPE is
engaged in the generation and distribution of electricity through an
interconnected system to approximately 261,000 retail customers in El
Paso, Texas and an area of the Rio Grande Valley in west Texas and
southern New Mexico, and to wholesale customers located in southern
California, Texas, New Mexico and Mexico. EPE has one subsidiary which
it expects to dispose of in the first quarter of 1994. EPE's generating
facilities have a net capacity of 1,497 megawatts (``MWs''), consisting
of an entitlement of 600 MWs from Palo Verde Nuclear Generating Station
Units 1, 2 and 3 and 104 MWs from the Four Corners Generating Project,
and generating capacity of 246 MWs from the Rio Grande Power Station,
478 MWs from the Newman Power Station and 69 MWs from the Copper
Station. EPE also owns various transmission lines and associated
substations and other equipment.
CSW is a registered electric utility holding company.\1\ The
Operating Companies are public utility companies engaged in generating,
purchasing, transmitting, distributing and selling electricity. They
supply electric service to approximately 1.6 million retail customers.
CP&L and West Texas operate in south and central west Texas,
respectively; PSC-OK operates in eastern and southwestern Oklahoma; and
SWEPCO operates in northeastern Texas, northwestern Louisiana and
western Arkansas.
---------------------------------------------------------------------------
\1\CSW owns all of the outstanding shares of common stock of
Central Power and Light Company (``CP&L''), Public Service Company
of Oklahoma (``PCS-OK''), Southwestern Electric Power Company
(``SWEPCO''), West Texas Utilities Company (``West Texas'')
(collectively, ``Operating Companies''), Transok, Inc.
(``Transok''), CSW Credit, Inc. (``Credit''), CSW Energy, Inc.
(``Energy''), and Central and South West Services, Inc.
(``Services''). CSW owns 80% of the outstanding shares of common
stock of CSW Leasing, Inc. (``Leasing''). In addition, Energy holds
interests in several power projects.
Transok is a natural gas gathering, transmission and processing
company which transports for and sells natural gas to PSC-OK and for
the other Operating Companies, as well as processes, transports and
sells natural gas to and for non-affiliates. Services performs
various accounting, engineering, tax, legal, financial, electronic
data processing, centralized power dispatching and other services
for the CSW system. Credit purchases accounts receivable of the
Operating Companies, Transok, and unaffiliated electric and gas
utilities. Energy pursues cogeneration projects and other energy
ventures. Leasing invests in leveraged leases.
---------------------------------------------------------------------------
Summary of the Transaction
To effect the Transaction, EPE will merge with a shell subsidiary
to be established by CSW (``CSW Sub''),\2\ with EPE as the surviving
corporation. As a result of the Transaction, EPE will become a wholly
owned subsidiary of CSW. Simultaneously with the merger, EPE's plan of
reorganization (``Plan'') will become effective. As part of the
reorganization and merger, in exchange for existing EPE securities and
claims against EPE, EPE's current stockholders and creditors will
receive shares of CSW common stock, $3.50 par value (``CSW Common
Stock''), securities of REPE (``New EPE Securities'') and/or cash. The
total Transaction consideration will be approximately $2.1 billion,
exclusive of cash retained by EPE and paid out to EPE creditors and
preferred shareholders prior to the date on which the Plan becomes
effective (``Effective Date'') and exclusive of bonds to be issued in
pledge as security for other obligations. Because the Plan and merger
agreement allow CSW to substitute CSW Common Stock for certain of New
EPE Securities and to substitute cash for CSW Common Stock, the exact
amount and mixture of CSW Common Stock, New EPE Securities and cash has
not yet been determined. In addition, because the amount of
consideration to be paid to holders of EPE common stock is subject to
certain contingencies, the total Transaction consideration may be
somewhat higher than $2.1 billion. It is currently anticipated that the
consideration will consist of approximately $773 million in CSW Common
Stock, approximately $1.19 billion in New EPE Securities, and
approximately $149 million in cash.
---------------------------------------------------------------------------
\2\CSW Sub will be formed solely for the purpose of effecting
the Transaction, and all authorized shares of CSW Sub common stock
of 1,000 shares, $0.01 par value per share, will be issued to CSW at
the price of $1 per share and held by it until consummation of the
Transaction, at which time such shares will be converted into shares
of REPE common stock.
---------------------------------------------------------------------------
Under the Plan and merger agreement, CSW may issue a maximum of
approximately $925 million in CSW Common Stock to EPE creditors and
shareholders. In addition, certain options to purchase EPE common
stock, if not exercised prior to the Effective Date, will be converted
into options to purchase shares of CSW Common Stock.
Interconnection
CSW states that EPE is physically interconnected with the CSW
electric utility system through the transmission system of Southwestern
Public Service Company (``SPS'').\3\ SPS and EPE are interconnected at
EPE's transmission substation near Artesia, New Mexico. SPS has three
points of interconnection with the Operating Companies: A 115 KV
interconnection with West Texas near its Shamrock substation; a 230 KV
interconnection with PSC-OK at the Oklahoma-Texas state line by a
transmission line, jointly owned by PSC-OK and SPS, connecting PSC-OK's
Elk City substation and SPS's Harrington/Nichols substation; and a 345
KV interconnection with PSC-OK at its Oklaunion substation
---------------------------------------------------------------------------
\3\It is noted here that SPS was also interested in acquiring
EPE and held intensive negotiations with EPE. However, on September
17, 1993, the Bankruptcy Court entered an order denying SPS's motion
for permission to file a competing plan of reorganization.
---------------------------------------------------------------------------
In order to gain access to the SPS transmission system, EPE and CSW
(through Services, as agent for the Operating Companies) filed an
application with the Federal Energy Regulatory Commission (``FERC'') on
November 4, 1993 seeking an order pursuant to section 211 of the
Federal Power Act (``FPA'') to require SPS to provide firm and non-firm
transmission services in connection with the transfer of power and
energy between the EPE and CSW control areas at rates and on terms and
conditions that the FERC determines to be just and reasonable. Through
its section 211 application with the FERC, CSW intends to enter into an
agreement with SPS giving EPE and PSC-OK the right to use the SPS
transmission system connecting the utility assets of EPE with those of
PSC-OK. If wheeling through the SPS system cannot be obtained on a
timely basis or ultimately is determined not to be available under the
FPA, CSW states that it would implement an alternative plan of
integration, including construction of transmission facilities by one
or more of the Operating Companies.
EPE New Securities
Under the Plan, the New EPE Securities that will be issued are as
follows: Reorganized EPE First Mortgage Bonds (Series A, B, C and X)
(``FMBs''), Reorganized EPE Second Mortgage Bonds (Series A, B, X, Y,
and Z) (``SMBs''), Reorganized EPE Secured Floating Rate Notes (Classes
3A, 5A and 6A) (``Secured Notes''), Reorganized FPE Senior Floating
Rate Notes (Classes 11 and 13) (``Senior Floating Rate Notes'') and
Reorganized EPE Senior Fixed Rate Notes (Series A and Class 13)
(``Senior Fixed Rate Notes'') in the maximum aggregate principal
amounts of $400 million, $500 million, $250 million, $125 million and
$525 million, respectively, and Reorganized EPE Preferred Stock
(``Preferred'') with a maximum aggregate value (calculated as set forth
in the Plan) of $68 million.\4\ These maximum levels reflect the
options of CSW and creditors for distributions of securities and bonds
to be issued in pledge as security for other obligations, and therefore
exceed the total amount of the New EPE Securities projected to be
issued. In addition, holders of the Series A and Series B FMBs and
Series A SMBs have the right (to be exercised not later than five days
before the Effective Date) to have REPE, at its expense, cause to be
underwritten and sold in a registered secondary offering such bonds
within 60 days after the Effective Date.\5\
---------------------------------------------------------------------------
\4\CSW proposes to deviate from the Commission's Statement of
Policy Regarding First Mortgage Bonds (HCAR No. 13105, Feb. 16,
1956, as modified by HCAR No. 16369, May 8, 1969) and the
Commission's Statement of Policy Regarding Preferred Stock (HCAR No.
13106, Feb. 16, 1956, as modified by HCAR No. 16758, June 22, 1970)
with respect to the issuance of the FMBs and SMBs and the Preferred.
\5\To the extent that such sales does not provide the holder
with net proceeds equal to the principal amount of the bonds so
sold, then REPE must pay such holder cash in an amount of such
deficiency.
---------------------------------------------------------------------------
FMBs
The FMBs will consist of Series A, B, C and X and will be issued
under an indenture, pursuant to which State Street Bank and Trust
Company will act as trustee. The Series A and Series B FMBs will mature
on the fifth and fifteenth anniversaries of the Effective Date,
respectively; provided that, by timely notice to the recipients
thereof, CSW may elect another maturity for such series of not less
than five nor more than thirty years which will be in increments of
five years if a maturity of greater than fifteen years is chosen. The
Series C FMBs will mature on the eighth anniversary of the Effective
Date or such shorter maturity as CSW may elect. The Series A, B and C
FMBs will bear interest semi-annually in arrears at a per annum rate
equal to a ``Market Basket Rate'' (as defined in the Plan) to be
determined based on the actual maturity and rating of each series of
such bonds.
Neither the Series A nor the Series B FMBs will be redeemable prior
to the fifth anniversary of their issuance. On and after such date, the
Series A and Series B FMBs will be redeemable at redemption prices
calculated in accordance with the Plan. The Series C FMBs will be
redeemable at any time in whole or in part at redemption prices
calculated in accordance with the Plan.
The Series X FMBs will be issued to partially secure the payment of
the principal and interest due on the Class 3A Secured Notes. The
Series X FMBs will mature on the same dates and bear interest at the
same rates as the Class 3A Secured Notes. The Series X FMBs will be
redeemable only upon an acceleration of the maturity of the Class 3A
Secured Notes.
Additional FMBs may be issued by REPE only upon the basis of: (i)
66\2/3\% of bondable property (including bondable property existing on
the Effective Date less an amount that would be utilized if the 66\2/
3\% test were applied to the issuance of the bonds on such date), (ii)
retired bonds and (iii) the deposit of cash. A net earnings test of two
times interest requirements may be applicable in certain situations.
SMBs
SMBs will consist of Series A, B, X, Y and Z, and under certain
circumstances specified below, Series D, E and F, and will be issued
under an indenture, pursuant to which IBJ Schroder Bank & Trust Company
will act as trustee. The Series A SMBs will mature on the tenth
anniversary of the Effective Date; provided that, by timely notice to
the recipients thereof, CSW may elect another maturity for such series
of not less than five nor more than thirty years which will be in
increments of five years if a maturity of greater than fifteen years is
chosen. The Series B SMBs will mature on the eighth anniversary of the
Effective Date or such shorter maturity as CSW may elect. The Series A
and B SMBs will bear interest semi-annually in arrears at a per annum
rate equal to a ``Market Basket Rate'' to be determined based on the
actual maturity and rating of each series of such bonds.
The Series A SMBs will not be redeemable prior to the fifth
anniversary of their issuance. On and after such date, the Series A
SMBs will be redeemable at redemption prices calculated in accordance
with the Plan. The Series B SMBs will be redeemable at any time in
whole or in part at redemption prices calculated in accordance with the
Plan.
The Series X, Y (sub-series Y-1 through Y-8) and Z SMBs will be
issued to secure the payment of the principal and interest due on
certain secured notes or the payment of certain reimbursement and other
obligations described in such bonds. These pledged SMBs will mature on
the same dates and bear interest at the same rates as the obligations
which such bonds secure. The pledged SMBs will be redeemable only upon
an acceleration of the maturity of the obligations which such bonds
secure.
In the event the Maricopa pollution control revenue bonds
(``PCBs'') are not refunded on the Effective Date as contemplated by
the Plan, REPE will issue Series D, E or F pledged SMBs, as the case
may be, to replace the existing EPE Series D, E or F Second Mortgage
Bonds, as applicable, currently securing the Maricopa PCBs. Upon
refunding, the Maricopa PCBs will no longer be secured.
Additional SMBs may be issued only upon the basis of: (i) 33\1/3\%
of bondable property additions after the Effective Date, (ii) retired
bonds and (iii) the deposit of cash. A net earnings test of two times
interest requirements may be applicable in certain situations.
Secured Floating Rate Notes
The Secured Notes will consist of Class 3A, Class 5A and Class 6A.
The Class 3A Secured Notes will be issued under a term loan agreement
among REPE, the holders of such notes, and an agent acting for such
holders. The Class 5A Secured Notes will be issued under four separate
term loan agreements (each having substantially similar terms and
conditions) between REPE and the holders of the Class 5(a), 5(b) and
5(c) claims. The Class 6A Secured Notes will be issued under a term
loan agreement among REPE, the holders of such notes, and Canadian
Imperial Bank of Commerce, as agent for such holders.
The Class 3A and Class 5A Secured Notes will mature on the earlier
of December 31, 1997 and the last business day of the month in which
the third anniversary of the Effective Date occurs. The Class 6A
Secured Notes will mature on the earlier of December 31, 1998 and the
last business day of the month in which the fourth anniversary of the
Effective Date occurs.
The Class 3A, Class 5A and Class 6A Secured Notes will each be
payable in equal quarterly principal installments commencing on the
earlier of December 31, 1994 and the last business day of the month in
which the first anniversary of the Effective Date occurs (provided
that, if the Effective Date occurs after December 31, 1994, any such
installments that would otherwise have been payable prior to the
Effective Date will be payable on the last business day of the month in
which the Effective Date occurs).
The Class 3A and Class 6A Secured Notes will bear interest at a
rate equal to the 3-month London interbank offered rate (``LIBOR'')
plus 150 basis points (or, at the option of REPE, at the respective
agent's adjusted reference rate plus 50 basis points),\6\ payable at
the end of each interest period. The Class 5A Secured Notes will bear
interest at a rate equal to the LIBOR (resetting, at the option of
REPE, at 1, 3 or 6 months) plus 150 basis points (or, at the option of
REPE, at the respective holder's adjusted reference rate plus 50 basis
points), payable at the end of each interest period (but in any event
not less often than quarterly).
---------------------------------------------------------------------------
\6\The term ``adjusted reference rate'' means, with respect to
any bank, a rate determined with reference to such bank's ``base''
or ``prime'' rate, such determination to be made according to the
formula customarily applied by such bank to its domestic loans
priced with reference to such rate, which formula may require that
such rate be the higher of such ``base'' or ``prime'' rate and the
sum of a specified margin plus a rate determined with reference to
certificates of deposit and/or federal funds.
---------------------------------------------------------------------------
The Second Notes will be prepayable by REPE at any time in whole or
in part without premium, subject only to LIBOR breakage costs, if any.
In addition, the Class 5A Secured Notes will provide that the net
proceeds of any remarketing or refunding after the Effective Date of
any Maricopa PCBs purchased prior to the Effective Date through draws
on letters of credit (``LCs'') issued by the holders of such notes will
be applied to repay the principal of such notes. The Class 3A Secured
Notes will be secured by bonds, one-third of which will be Series X
FMBs and two-thirds of which will be Series X SMBs; the Class 5A
Secured Notes will be secured by Series Y SMBs; and the Class 6A
Secured Notes will be secured by Series Z SMBs. Such Series X FMBs and
Series X, Series Y and Series Z SMBs will be issued and deposited as
security for the payment of, and will have interest and payment terms
identical to those in, the Class 3A, Class 5A and Class 6A Secured
Notes, as the case may be. However, no principal or interest will be
payable on such bonds except if, and to the extent that, the
corresponding payment on the related Class 3A, Class 5A or Class 6A
Secured Notes remains unpaid after the due date thereof.
Senior Fixed Rate Notes
The Senior Fixed Rate Notes will consist of Series A and Class 13
and will be issued under an indenture, pursuant to which United States
Trust Company of New York will act as trustee. The Series A Senior
Fixed Rate Notes will mature at the end of the quarter immediately
following the tenth anniversary of the earlier of the Effective Date
and December 31, 1994. The term of the Series A Senior Fixed Rate Notes
may be adjusted at the election of CSW provided that such term may not
exceed 10 years. The Class 13 Senior Fixed Rate Notes will mature on
the ninth anniversary of the earlier of the Effective Date and December
31, 1994.
The Senior Fixed Rate Notes will bear interest semi-annually in
arrears at a per annum rate equal to a ``Market Basket Rate'' to be
determined pursuant to the Plan based on the actual maturity and rating
of each series of such notes. The Senior Fixed Rate Notes will be
redeemable at any time in whole or in part at redemption prices
calculated in accordance with the Plan.
Senior Floating Rate Notes
The Senior Floating Rate Notes will consist of Class 11 and Class
13. The Senior Floating Rate Notes will be issued under separate term
loan agreements among REPE, the holders of such notes, and an agent
acting for such holders.
The Senior Floating Rate Notes will mature on the seventh
anniversary of the earlier of the Effective Date and December 31, 1994,
and will each be payable in equal quarterly principal installments
commencing at the end of the quarter after the earlier of the fifth
anniversary of the Effective Date and December 31, 1994 (provided, that
the maturity and amortization schedule of such notes will be adjusted
prior to the Effective Date, if necessary, such that the maturity
thereof is not greater than the maturity of the Series A Senior Fixed
Rate Notes, as selected by CSW).
The Senior Floating Rate Notes will bear interest at a rate equal
to 3-month LIBOR plus 200 basis points (or, at the option of REPE, at
the respective agent's adjusted reference rate plus 100 basis points),
payable at the end of each interest period (but in any event not less
often than quarterly). The Senior Floating Rate Notes will be
prepayable by REPE at any time in whole or in part without premium,
subject only to LIBOR breakage costs, if any. REPE will be required to
redeem all of the outstanding Class 11 and Class 13 Senior Floating
Rate Notes if at any time less than 33\1/3\% of the Series A Senior
Fixed Rate Notes issued on the Effective Date remain outstanding. In
addition, the Class 11 Senior Floating Rate Notes will include
provisions for the mandatory prepayment thereof from the proceeds of
any remarketing or refunding of the Farmington Series A 1983 PCBs paid
for or purchased prior to the Effective Date with a draw on the
Farmington PCB LC.
Letters of Credit Supporting Maricopa PCBs
The post-Effective Date obligations of REPE with respect to
replacement LCs supporting the Maricopa PCBs will be governed by
separate letter of credit and reimbursement agreements between REPE and
the respective issuers of such replacement LCs. Such replacement LCs
will be scheduled to expire (i) in the case of the replacement LC for
the Maricopa Series A 1983 PCBs, on the earlier of December 31, 1997
and the third anniversary of the Effective Date, (ii) in the case of
the replacement LC for the Maricopa Series E 1984 PCBs, on the last day
of the fourth month following the earlier of December 31, 1998 and the
fourth anniversary of the Effective Date, and (iii) in the case of the
replacement LC for the Maricopa Series A 1985 PCBs, on the earlier of
December 31, 1998 and the fourth anniversary of the Effective Date, in
each case with a one-year extension at the option of REPE.
Drawings under the replacement LCs may be treated as loans by the
respective issuer to REPE. Such loans would mature on the stated
termination date of the relevant replacement LC, would be payable in
equal quarterly installments (commencing on the last day of the
calendar quarter in which the 90th day following the relevant drawing
occurs), would bear interest at a rate equal to LIBOR (resetting, at
the option of REPE, at 1, 3 or 6 months) plus 150 basis points (or, at
the option of REPE, at the respective issuer's adjusted reference rate
plus 50 basis points), and would be prepayable by REPE at any time in
whole or in part without premium, subject only to LIBOR breakage costs,
if any. Reimbursement obligations in respect of the replacement LCs
(including those treated as loans, together with interest thereon) will
be secured by pledged Series Y SMBs.
LC commissions will be payable to the respective issuers of the
replacement LCs at an initial rate per annum equal to 0.75% of the
amount available to be drawn under such LC, such rate increasing by
0.125% per annum on each anniversary of the earlier of December 31,
1994 and the Effective Date.
Letter of Credit Supporting Farmington PCBs
The post-Effective Date obligations of REPE with respect to the
replacement LC supporting the Farmington PCBs will be governed by a
letter of credit and reimbursement agreement between REPE and the
issuer of such replacement LC. Such replacement LC will be scheduled to
expire on the last day of the sixth month after the scheduled final
maturity date of the Class 13 Senior Floating Rate Notes.
Drawings under such replacement LC may be treated as loans by such
issuer to REPE. Such loans would mature on the stated termination date
of the replacement LC, would be payable in equal quarterly installments
(commencing on the last day of the calendar quarter in which the 90th
day following the relevant drawing occurs), would bear interest at a
rate equal to LIBOR (resetting, at the option of REPE, at 1, 3 or 6
months) plus 150 basis points (or, at the option of REPE, at the
issuer's adjusted reference rate plus 50 basis points), and would be
prepayable by REPE at any time in whole or in part without premium,
subject only to LIBOR breakage costs, if any. Reimbursement obligations
in respect of the replacement LC (including those treated as loans,
together with interest thereon) will be secured by pledged Series Y
SMBs.
LC commissions will be payable to the issuer of such replacement LC
at an initial rate equal to 0.625% per annum of the amount available to
be drawn under such LC, such rate increasing on the first seven
anniversaries of the earlier of December 31, 1994 and the Effective
Date to 0.75% per annum, 0.875% per annum, 1% per annum, 1.125% per
annum, 1.25% per annum, 1.625% per annum and 2% per annum,
respectively.
Preferred Stock
The Preferred will provide for cumulative cash dividends payable
quarterly at a rate equal to a ``Market Basket Rate'' to be determined
based on the actual rating of such stock. The Preferred will be
redeemable at any time in whole or in part at redemption prices
calculated in accordance with the Plan plus accrued dividends. In
addition, on each of the eleventh, twelfth, thirteenth and fourteenth
anniversaries of the Effective Date, REPE is required to redeem one-
twentieth of the originally issued Preferred, and on the fifteenth
anniversary, it is required to redeem all outstanding Preferred, in
each case at a redemption price equal to the liquidation value of such
stock.
The Preferred will be entitled to vote only in the following
limited circumstances: (i) Amendments to terms of the Preferred which
are adverse to the holders thereof (including increases in authorized
number of shares); (ii) creation of a class of stock having a
preference superior to the Preferred or of a security convertible into
any kind of stock; (iii) issuance of additional Preferred or parity
stock (unless an earnings test is met); and (iv) merger or sale of all
or substantially all of REPE's assets. In addition, if dividends are in
default in an amount at least equal to four quarterly dividends, the
Preferred, voting as a class, will be entitled to elect a majority of
the REPE Board of Directors.
Rule 50
CSW requests an exemption from the competitive bidding requirements
of Rule 50 pursuant to subsection (a)(5) thereunder for the issuance of
CSW Common Stock and the New EPE Securities. In addition, CSW requests
authorization to retain one or more experienced investment banking
firms to assist in the determination of the ``Market Basket Rate'' for
the New EPE Securities. It may do so.
Addition of EPE to the Service Agreement
CSW seeks authority to add EPE as a party to the Service Agreement
effective immediately upon the consummation of the transaction.
However, the full assimilation of EPE into the CSW system is expected
to occur over a number of years. Under the proposed phase-in
arrangements, EPE will bear one-third of its pro-rata allocation of
Services' indirect charges during the first twelve months after the
Effective Date, two-thirds during the second twelve months after the
Effective Date, and the full allocation thereafter. EPE would bear its
full share of direct charges by Services for functions such as
information processing. This phase-in procedure for indirect charges
will require an amendment to section 3 of the Service Agreement, which
governs the allocation of costs among the parties for services
performed by Services.
Reacquisition by EPE of Ownership of the Palo Verde Assets
On November 15, 1993, EPE entered into, and on December 8, the
Bankruptcy Court approved, settlement agreements (``OP Settlements'')
with the beneficiaries of the trusts (``Palo Verde Owner
Participants'') holding title to certain interests in the Palo Verde
Nuclear Generating Station. The Plan and the OP Settlements provide for
EPE to reacquire ownership of the Palo Verde interests previously sold
and leased back by EPE.
Under the Plan, holders of the Palo Verde bonds will be treated as
creditors of the EPE estate and will receive consideration equal to
95.5% of their claims, to be allowed in the amount of $700 million,
together with post-petition interest at LIBOR plus 200 basis points
from July 29, 1993. Pursuant to the OP Settlements, the liens of the
Palo Verde bondholders and the Palo Verde indenture trustees will be
discharged, and the Palo Verde indenture trustees will transfer their
rights with respect to the leased Palo Verde assets to REPE and
exchange releases with the Palo Verde Owner Participants. Subject to
the approval of the Nuclear Regulatory Commission, the Palo Verde Owner
Participants will transfer their interests in the leased Palo Verde
assets to REPE, release their claims for any additional damage amounts
under the Palo Verde leases, retain $288.4 million previously drawn
under related LCs, and be released from claims by EPE and other
creditors. After the consummation of the Transaction and the OP
Settlements, the Palo Verde assets will be used for the benefit of
EPE's operations and customers.
There will be no change in the extent of EPE's utilization of the
Palo Verde Nuclear Generating Station, the percentage of costs that EPE
is to bear, or the percentage of capacity it is entitled to receive. As
a consequence of the settlement, $956.9 million will have been paid on
account of the Palo Verde claims, including the $288.4 million received
by the Palo Verde Owner Participants as a result of their draws on the
Palo Verde LCs, for the reacquisition of the leased Palo Verde assets
and lease rejection damages. Of this amount, the Bankruptcy Court has
determined that $605 million is reflective of the fair market value,
based on the regulatory book value as of June 30, 1993, of the assets
which are being reacquired, and $351.9 million is attributable to lease
rejection damages.
Ocean State Power, et al. (70-8373)
Ocean State Power (``OSP'') and Ocean State Power II (``OSP II'')
(collectively, ``Applicants'') both located at P.O. Box 561,
Harrisville, Rhode Island 02830, each electric public-utility
subsidiary companies of both Eastern Utilities Associates (``EUA'') and
New England Electric System (``NEES''), registered holding companies,
have filed an application-declaration under sections 6(a), 7 and 12(c)
of the Act and Rule 42 thereunder.
The Applicants, each Rhode Island general partnerships propose to
enter into financing arrangements whereby they may borrow up to $25
million aggregate principal amount of secured revolving debt
(``Revolver'').\7\ As evidence of the Revolver, Applicants propose to
issue, through June 1, 1995, notes (``Notes'') with maturities not in
excess of ten years from the date of the initial borrowing under the
Revolver (``Final Maturity'').
---------------------------------------------------------------------------
\7\The investors in both partnerships, and their respective
ownership and voting interests, are identical. The partners in OSP
and OSP II are JCM Ocean State Corporation, a subsidiary of J.
Makowski Company, Inc., TCPL Power Ltd., a subsidiary of TransCanada
PipeLines Limited, Narragansett Energy Resources Company, a
subsidiary company of NEES, and EUA Ocean State Corporation, a
subsidiary company of EUA.
---------------------------------------------------------------------------
The Notes will bear interest at a floating rate not to exceed the
then current market rate for revolving debt of comparable issuers. The
Notes may be prepaid in whole or in part by the Applicants at any time
prior to the final maturity date without premium or penalty. The
principal amount of optional prepayments may be reborrowed by the
Applicants any time prior to the Final Maturity date. The Notes may be
subject to mandatory prepayment, without penalty or premium, upon the
occurrence of certain loss events., which prepayment obligation may be
limited in certain situations. The Notes may be renewed, replaced or
extended, for additional periods pursuant to the terms of the Revolver
Loan Agreement, including any renewal, replacement or extension of the
Revolver Loan Agreement.
The obligations of the Applicants under the Notes will be secured,
jointly and severally, under a security agreement dated as of October
19, 1992, as amended, among the Applicants and State Street Bank and
Trust Company, as collateral agent (``Guarantor Security Agreement'').
All of the collateral subject to the Guarantor Security Agreement will
be shared ratably and pari passu in right of security among one or more
lending institutions (collectively, ``Lender'') and the holders of the
notes issued in connection with the refinancing of the construction and
term financing of the two units of a 500 MW combined cycle electric
generating facility owned by the Applicants. In order to become
entitled to the benefits of the Guarantor Security Agreement, the
Lender will execute a supplement thereto. The Guarantor Security
Agreement creates a first-priority security assignment of the
Applicants' interests in their respective unit power agreements subject
only to the exclusive security interest of Tennessee Gas Pipeline
Company, in certain components of the revenues received under their
respective unit power agreements.
The Applicants propose to use the proceeds from the Revolver to
fund capital expenditures, to pay transaction costs and other costs in
connection with the financing, and to provide liquidity in general.
The Applicants request that the Commission reserve jurisdiction,
pending completion of the record, with respect to any renewal or
extension of the Notes for additional periods in excess of ten years
from the date of initial borrowing under the Revolver.
Consolidated Natural Gas Co., et al. (70-8387)
Consolidated Natural Gas Co. (``CNG''), CNG Tower, 625 Liberty
Avenue, Pittsburgh, Pennsylvania 15222, a registered holding company,
The East Ohio Gas Co. (``Ohio''), 1717 East 9th Street, Cleveland, Ohio
44114, a local distribution company (``LDC'') and a subsidiary company
of CNG, and The River Gas Company (``River''), 324 4th Street,
Marietta, Ohio 45750, also an LDC and a subsidiary company of CNG, have
filed an application-declaration under sections 6(a), 7, 9(a), 10 and
12(c) of the Act and Rule 42 thereunder. The application-declaration
proposes to merge Ohio and River.
CNG is a registered holding company with fifteen subsidiaries
engaged in natural gas exploration, production, transmission, storage,
distribution, and research and other activities related to the natural
gas business. Ohio is the largest LDC in the CNG system, serves the
northeastern region of Ohio, and has over 2,000 employees. River serves
the Marietta area in southeastern Ohio and has 50 employees.
To effect the combination, Ohio and River propose to conclude an
Agreement and Plan of Merger (``Agreement''), to which CNG will
consent. The Agreement will provide for Ohio to survive the
combination, upon which each share of River common stock, $100 par
value,\8\ will be cancelled, and each share of Ohio common stock, $50
par value, will continue to be one share of Ohio common stock, $50 par
value.\9\
---------------------------------------------------------------------------
\8\On December 31, 1993, River had authorized common stock of
70,000 shares, $100 par value, and outstanding common stock of
35,500 shares.
\9\On December 31, 1993, Ohio had authorized common stock of
4,500,000 shares, $50 par value, and outstanding common stock of
3,159,353 shares.
---------------------------------------------------------------------------
Upon the combination, Ohio shall acquire all rights, privileges,
powers and franchises of both Ohio and River. It also shall acquire all
restrictions, disabilities, liabilities and duties of both Ohio and
River. All indebtedness of River shall become indebtedness of Ohio, and
all capital and retained earnings of River shall become capital and
retained earnings of Ohio. The River properties that Ohio will acquire
will be recorded on its books on the basis of the value with which
River recorded them on its books.
It is proposed that River will become a division of Ohio. It is
stated that no changes in general functional activities are needed for
River to make the transition from a stand-alone corporation to a
division of Ohio and that no organizational changes are expected to
Ohio. Finally, it states that for most Ohio employees the proposed
combination will result in no change.
By order dated June 30, 1993 (HCAR No. 25841) (``Order''), CNG was
authorized to finance its system from July 1, 1993 through June 30,
1994. The Order authorized Consolidated to provide up to $10 million to
River through: (i) Open account advances, (ii) long-term loans, and
(iii) the purchase of River common stock, $100 par value. Since July 1,
1993, CNG, under the Order, has refinanced long-term loans to River in
the amount of $1.125 million. On December 31, 1993, there was, under
the Order, $4.65 million in open account advances to River. The
application-declaration requests Commission approval for Ohio to assume
the amount of unused advances, loans, and stock purchases authorized
under the Order.
Public Service Co. of Oklahoma (70-8389)
Public Service Company of Oklahoma (``PSCO''), P.O. Box 201, Tulsa,
Oklahoma 74102, an electric utility subsidiary company of Central and
South West Corporation, a registered holding company, has filed a
declaration, pursuant to section 12(d) of the Act and Rule 44
promulgated thereunder, for the sale of certain electrical distribution
facilities to St. Francis Hospital, Inc. (``St. Francis''), a non-
profit Oklahoma corporation and a commercial customer of PSCO.
PSCO owns and maintains, relative to its transmission and
distribution system, certain electrical distribution facilities located
on PSCO property and on the premises of St. Francis in Tulsa, Oklahoma.
The distribution facilities consist of four 15KV 1200 amp vacuum
circuit breakers, two 15KV vacuum tie breakers, four 15 KV aluminum
conductor circuits, and associated equipment.
The declaration proposes that St. Francis purchase the distribution
facilities for $166,871, which price was reached through arms-length
negotiation and is based on the depreciated replacement value of the
distribution facilities found in the Handy-Whitman Index. PSCO records
reflect an original cost of $159,431 and a book value--net of
depreciation--of $129,357 for the distribution facilities on December
31, 1993.
Since 1989, St. Francis has received electric service from the
distribution facilities and is the sole customer provided electric
service from such facilities. The distribution facilities are not
adaptable for electric service for other customers. After the purchase,
in accordance with standard PSCO electric service price schedules, St.
Francis is expected to save about $150,000 annually. Oklahoma expects
to use the proceeds of the proposed sale for its general operational
funds.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-8434 Filed 4-7-94; 8:45 am]
BILLING CODE 8010-01-M
