[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)]
[Notices]
[Pages 31740-31744]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14748]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26304]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
June 9, 1995.
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 July 3, 1995, 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 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. (70-8505)
The Southern Company (``Southern''), 64 Perimeter Center East,
Atlanta, Georgia 30346, a registered holding company, and its
nonutility subsidiary companies, Southern Electric International, Inc.
(``Southern Electric'') and Mobile Energy Services Holdings, Inc.
(``Mobile Energy''), each of 900 Ashwood Parkway, Suite 500, Atlanta,
Georgia 30338 (collectively, ``Applicants'') have filed a post-
effective amendment under sections 6(a), 7, 9(a), 10, 12(b), 12(c) and
12(d) of the Act and rules 43, 45, 46 and 54 thereunder.
By order dated December 13, 1994 (HCAR No. 26185) (``December 1994
Order''), Southern was authorized to organize and acquire all of the
common stock of Mobile Energy.\1\ The December 1994 Order also
authorized Mobile Energy to acquire the energy and recovery complex
(``Energy Complex'') at Scott Paper Company's (``Scott's) Mobile,
Alabama paper and pulp mill.
\1\On May 17, 1995, Mobile Energy Services Company, Inc. changed
its corporate name to Mobile Energy Services Holdings, Inc. Mobile
Energy and southern Electric have been added as applicants/
declarants under this post-effective amendment.
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At the acquisition closing, Mobile Energy purchased the Energy
Complex from Scott and assumed Scott's obligations relating to $85
million outstanding principal amount of variable-rate solid waste
revenue refunding bonds due 2019 (``Tax-Exempt Bonds'') issued by The
Industrial Development Board of the City of Mobile, Alabama
(``Board''). Southern funded the purchase price in part by making a
$190 million interim loan as evidenced by Mobile Energy's promissory
note (``Interim Note'').
Under the December 1994 Order, Mobile Energy was also authorized to
enter into two separate interest rate swap agreements to hedge against
adverse interest rate movements pending conversion or reissuance of the
Tax-Exempt Bonds on a non-recourse basis\2\ and the proposed sale of up
to $230 million of senior secured non-recourse notes of Mobile Energy.
On December 19, 1994, Mobile Energy entered into two separate interest
rate hedging agreements with Barclays Bank PLC.
\2\Under the December 1994 Order, Mobile Energy is authorized to
enter into agreements with the Board pursuant to which the Board
would issue a new series of fixed-rate Tax-Exempt Bonds, the
proceeds of which would be applied to redeem the outstanding Tax-
Exempt Bonds.
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Applicants now propose to change the ownership structure of the
Energy Complex and the financing and credit support proposals described
in the December 1994 Order.
[[Page 31741]]
It is proposed that Mobile Energy and Southern Electric organize a
new subsidiary of Mobile Energy to be named Mobile Energy Services
Company, L.L.C. (``Project Company'') and that Mobile Energy transfer
ownership of the Energy Complex and related assets to Project Company.
In addition, it is proposed that Project Company assume all liabilities
and obligations of Mobile Energy relating to the Energy Complex,
including liabilities under the Interim Note and under agreements with
the Board, Scott and S.D. Warren Company (``Mill Owners''), and other
third parties.
It is also proposed that Mobile Energy declare and pay to Southern
a dividend in the form of a 1% membership interest in Project Company,
which Southern will contribute to Southern Electric, so that Mobile
Energy will hold 99% and Southern Electric will hold 1% of Project
Company's membership interests.
Applicants also propose that Project Company issue, and Mobile
Energy guaranty, up to $240 million principal amount of first mortgage
bonds (``First Mortgage Bonds'') plus such additional principal amount
of First Mortgage Bonds as may be required to fund (from the net
proceeds thereof) the cost, if any, of terminating the outstanding
interest rate hedging agreements between Mobile Energy and Barclays
Bank PLC. The net proceeds from the sale of the First Mortgage Bonds
(after deduction of the underwriting commission), together with other
available funds, will be used: (i) to repay the Interim Note ($190
million, exclusive of interest) and return to Southern approximately
$4.5 million of paid-in capital; (ii) to pay to Southern electric
approximately $10.5 million, representing amounts paid or incurred by
Southern Electric as preliminary project development costs and as costs
paid or incurred by Southern Electric under the Facility Operations and
Maintenance Agreement between Southern Electric and Mobile Energy;
(iii) to finance the balance of the costs of certain capital
improvements (estimated at approximately $12.7 million) required under
the terms of certain project agreements to be made to the Energy
Complex; (iv) to pay certain development and start-up costs aggregating
approximately $1.3 million; (v) to pay certain financing costs
aggregating approximately $2 million; and (vi) to fund the termination
payment, if any, under the two interest rate hedging agreements.
Applicants propose that Project Company issue the First Mortgage
Bonds in one or more series on or before December 31, 1995. The First
Mortgage Bonds will be issued pursuant to any indenture (``Indenture'')
among Project Company, Mobile Energy, as guarantor, and First Union
National Bank of Georgia, as trustee (``Trustee''). The bonds will have
final maturities of from 10 to 22 years from financial closing and a
weighted average life of from 12 to 15 years; will bear interest at a
fixed rate to be determined on or before the date of financial closing
that will not exceed the sum of the yield to maturity of an actively
traded U.S. Treasury bond with a maturity equal to the weighted average
life of the First Mortgage Bonds, plus 3-\3/4\%; and may not provide
for optional redemption prior to final maturity. Project Company's
obligations under the First Mortgage Bonds will be unconditionally
guaranteed by Mobile Energy.
It is stated that the First Mortgage Bonds will be sold to a group
of underwriters to be led by Goldman, Sachs & Co. pursuant to an
Underwriting Agreement and reoffered by such underwriters in part
directly to the public and in part to certain securities dealers. It is
anticipated that the First Mortgage Bonds will be rated ``investment
grade'' by one or more of the nationally recognized independent rating
agencies.
Applicants alternatively propose that the First Mortgage Bonds may
be sold pursuant to a bond purchase agreement to one or more
institutional purchasers in an offering that is intended to qualify for
an exemption from registration under the Securities Act, or pursuant to
an underwriting agreement with one or more underwriters for resale to
qualified institutional buyers pursuant to rule 144A of the Securities
Act. If the First Mortgage Bonds are not sold in a registered public
offering, the terms of the bond purchase or underwriting agreement may
include registration rights.
Applicants also propose that Project Company enter into agreements
with the Board for the issuance of a new series of Tax-Exempt Bonds,
subject to all other terms and conditions set forth in the December
1994 Order.
In addition, it is proposed that Project Company enter into a
working capital facility (``Working Capital Facility'') with one or
more commercial banks or other institutional lenders, pursuant to which
Project Company may make borrowings from time to time through 2019 in
an aggregate principal amount of up to $15 million at any time
outstanding, as such amount may be escalated for inflation.
Borrowings under the Working Capital Facility generally will be
used by Project Company to pay for operations and maintenance costs and
other routine expenses incurred by Project Company. Each loan under the
Working Capital Facility will have a maturity date no later than 90
days after the date of borrowing, and no more than $5 million of such
loans may be scheduled to mature during any 30-day period. Under the
terms of the Working Capital Facility, Project Company will be required
to repay all amounts advanced so that no amounts are outstanding
thereunder once during each fiscal year (other than 1995) for a period
of at least five consecutive days.
Authorization is requested for either Southern or Project Company
to enter into a dedicated revolving credit facility (``Major
Maintenance Facility'') with one or more commercial banks or other
institutional lenders to fund certain major maintenance reserve
obligations of Project Company. Borrowings at any one time outstanding
under the Major Maintenance Facility will not exceed $13 million.
Southern and Mobile Energy also propose to modify the terms of the
Interim Note to be assumed by Project Company, in order to extend its
maturity to December 31, 1995, and to provide for the payment of
interest from January 1, 1995 to the date of payment at a rate equal to
the lesser of (i) Southern's effective cost of borrowing and (ii) the
prime commercial lending rate in effect from time to time at a
commercial bank designated by Southern, plus 3%.
Under two interest rate hedging agreements executed following the
acquisition closing (``Swaps''), Mobile Energy ``locked in'' base fixed
rates with respect to notional amounts of $224 million, effective May
1, 1995, and $85 million, effective July 1, 1995. Since the acquisition
closing, comparable base rates have declined markedly, with the result
that there would currently be a cost associated with reversing, or
terminating, the Swaps. That potential cost, or the cash impact, of
reversing the Swaps will be based on the comparable base rates in
effect on the dates on which the Swaps are in fact reversed, which will
be the same date or dates on which the rates on the First Mortgage
Bonds and new series of Tax-Exempt Bonds are fixed.
Based on the notional amounts of the Swaps and other relevant
factors, the cash impact of a 100 basis point decline in the applicable
base rates would be approximately $25 million. By way of illustration,
on June 2, 1995, the comparable base rate for the Swaps was
approximately 170 basis points lower than the base rate on December 19,
1994, implying a cost (or cash impact)
[[Page 31742]]
of terminating the Swaps of about $45 million. If comparable base rates
were to experience a further decline of an additional 200 basis points,
the termination payment would be approximately $110 million.
Southern proposes to provide up to $95 million in guaranties on
behalf of Mobile Energy and/or Project Company in connection with the
sale of the First Mortgage Bonds and other forms of credit support
(collectively, ``Credit Support''), provided that the amount thereof at
any time outstanding, when added to Southern's equity investment in
Mobile Energy, shall at no time exceed $135 million.
Credit Support may take a variety of forms, including a parent
guaranty of indebtedness to third parties, a capital infusion or
similar agreement under which cash calls from Southern may be made for
certain defined purposes, or an agreement to indemnify or reimburse
commercial banks or other third parties in connection with commercial
letters of credit or other forms of commercially available credit
enhancement that Mobile Energy or Project Company may require.
Southern proposes to negotiate the terms of Credit Support and any
advances related thereto on a case-by-case basis. Subject to the
foregoing, Southern proposes that any advance to or on behalf of Mobile
Energy or Project Company that is structured as a loan may be unsecured
and fully subordinated to the claims of other creditors of Mobile
Energy or Project Company, as the case may be, and that it may bear
interest at a rate equal to the lesser of (i) Southern's effective cost
of borrowing and (ii) the prime commercial lending rate at money center
bank designated by Southern, plus 3%. Southern further proposes that,
at its option, any loan to Mobile Energy or Project Company may be
converted to a capital contribution.
Southern may provide Credit Support in lieu of certain cash funded
major maintenance reserves which Project Company is required to
establish. Credit Support for this purpose will be funded from
borrowings under the Major Maintenance Facility, or by Southern
guaranties of borrowings by Project Company under the Major Maintenance
Facility. It is proposed that notes issued under the Major Maintenance
Facility may have maturities not later than seven years after the date
of issuance.
Notes issued under the Working Capital Facility and Major
Maintenance Facility may bear interest at a rate or rates based on
various interest rate options available to Project Company and
Southern, which in no case would be greater than the sum of the
reference rate for the interest rate option selected by Project Company
or Southern, as the case may be, plus the applicable spread, as
follows:
------------------------------------------------------------------------
Applicable
Reference rate spread
(percent)
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London Interbank Offered Rate............................... 1\1/2\
Adjusted Base Rate.......................................... 1
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The Adjusted Base Rate will equal the greater of (i) the Federal
Funds Rate, plus \1/2\%, and (ii) the lender's publicly announced
reference rate.
It is stated that Project Company and Southern may be required
under the terms of either the Working Capital Facility or the Major
Maintenance Facility to pay a commitment fee based on the unutilized
portion of any lender's commitment and/or maintain compensating
balances. The effective cost of borrowing under either of the foregoing
interest rate options would be increased by no more than .625%.
The obligations of Project Company to make payments on the First
Mortgage Bonds, the new series of Tax-Exempt Bonds and the Working
Capital Facility (collectively, ``Senior Secured Debt'') will be
secured ratably by a lien on and security interest in substantially all
of the real and personal property interests of Project Company, subject
to the priority of the lien of the Working Capital Provider on earned
receivables (i.e., revenues from the sale of electricity, steam and
liquor processing services to the Mill Owners) and proceeds from the
sale of the Energy Complex fuel inventory. The First Mortgage Bonds and
Tax-Exempt Bonds will also be secured by certain reserves required to
be maintained under the terms of the First Mortgage Bond and Tax-Exempt
Bond indentures and/or by credit Supports. Except for the guaranty
provided by Mobile Energy with respect to the First Mortgage Bonds, the
obligation of Project Company to make payments on the Senior Secured
Debt will be secured solely by the assets of Project Company. Neither
Southern nor Southern Electric nor any associate company (other than
Project Company and Mobile Energy) will have any obligation with
respect to the Senior Secured Debt of Project Company, except as may be
expressly provided under the terms of any Credit Support provided by
Southern.
Project Company and Mobile Energy propose to make cash
distributions consisting, in part, of a return of capital to the extent
permitted under Alabama law. Applicants project that cash distributions
by Project Company and Mobile Energy will be made in some years in
amounts exceeding book earnings.
Central Ohio Coal Company, et al. (70-8611)
Central Ohio Coal Company (``COCCO''), Southern Ohio Coal Company
(``SOCCO'') and Windsor Coal Company (``WCCO''), each located at 1
Riverside Plaza, Columbus, Ohio 25327 and each a nonutility subsidiary
of Ohio Power Company (``Ohio Power''), a public utility subsidiary of
American Electric Power Company, Inc., a registered holding company,
have filed an application-declaration under sections 6(a), 7, and 12
(c) of the Act and rule 46 thereunder.
COCCO proposes to pay to Ohio Power periodic dividends on common
stock and a return of capital in amounts aggregating $19,961,687. To
pay these dividends and return of capital, COCCO proposes to amend its
Amended Articles of Incorporation to (1) reduce the par value of its
authorized common shares to $0.10 per share, (2) change each of its
outstanding common shares, par value of $100.00 per share, into a
common share, par value $0.10 per share, and (3) reduce the stated
capital of its common shares from $6.9 million to $6,900.
SOCCO intends to enter into negotiations for the lease financing of
certain existing facilities, namely, a coal preparation plant,
intermine coal conveyor and overland coal conveyor (the ``SOCCO
Plant'') with a financial institution (the ``Lessor''). SOCCO
anticipates that the Lessor will pay SOCCO up to $50 million for the
SOCCO Plant. With this amount, and $18 million of internally generated
funds which are projected to be available in excess of its needs, SOCCO
proposes to pay up to $68 million as one or more dividends on SOCCO's
common stock out of its capital surplus.
WCCO also intends to enter into negotiations for the lease
financing of certain existing facilities, namely, a coal preparation
plant, river loading terminal and overland coal conveyor (the ``WCCO
Plant'') to the Lessor. WCCO anticipates that the Lessor will pay WCCO
up to $11 million for the WCCO Plant. With this amount, and internally
generated funds projected by WCCO to be available in excess of its own
needs, WCCO proposes to pay up to $11,048,356 as a return of capital
and as one or more dividends on WCCO's common stock out of its capital
surplus.
In conjunction with the payment of these dividends and return of
capital, WCCO proposes to reduce the stated capital of outstanding
stock.
[[Page 31743]]
Specifically, WCCO proposes to amend its Amended Articles of
Incorporation to (1) reduce the par value of its authorized common
shares from $100 per share to $0.10 per share, (2) change each of its
outstanding common shares, par value of $100.00 per share, into a
common share, par value $0.10 per share, and (3) reduce the stated
capital of its common shares from $406,400 to $406.40.
In accordance with the Commission's order dated December 10, 1982,
(HCAR No. 22770), Ohio Power may earn up to a specified rate of return
on its capital contributions to COCCO, SOCCO and WCCO. Applicants state
that, if the Commission authorizes COCCO, SOCCO and WCCO to pay the
requested dividends and, in the case of each of COCCO and WCCO, reduce
the par value of its common stock, Ohio Power's total capital
investment in COCCO will be reduced by the amount of such payments.
This reduction in Ohio Power's capital surplus investment will remove
from Ohio Power's cost of coal the return associated with the portion
of its capital investment repaid.
Consolidated Natural Gas Company et al. (70-8631)
Consolidated Natural Gas Company (``Consolidated''), CNG Tower, 625
Liberty Avenue, Pittsburgh, Pennsylvania 15222, a registered holding
company, and CNG Energy Services Corporation (``CNG Energy''), One Park
Ridge Center, P.O. Box 15746, Pittsburgh, Pennsylvania 15244, a
nonutility subsidiary of Consolidated, have filed an application-
declaration under sections 6(a), 7, 9(a), 10 and 12(b) of the Act and
rules 16 and 45 thereunder. Consolidated and CNG Energy propose to
enter into a series of transactions from time to time through December
31, 2020 (except with respect to the guarantee authorization described
below, which expires December 31, 1998), that will permit them to
participate in the business of buying and selling natural gas and
electric power, including in connection with arbitrage transactions,
principally in wholesale energy markets.
The applicants propose that CNG Energy raise up to $10,000,000 by
selling shares of its common stock, $1,000 par value, to Consolidated,
receiving open account advances or long-term loans from Consolidated,
or any combination of the foregoing. Open account advances and long-
term loans to CNG Energy will have the same effective terms and
interest rates as related borrowings of Consolidated. Consolidated
proposes to obtain the funds required for these transactions through
internal cash generation, issuance of long-term securities, borrowings
under credit agreements or other sources subsequently approved by the
Commission.
Open account advances from Consolidated to CNG Energy will mature
no later than one year from the date of the first advance and bear
interest at the same effective rate as Consolidated's weighted average
effective rate for commercial paper and/or revolving credit borrowings
(or, if no such borrowings are outstanding, at a rate based on the
federal funds effective rate of interest). Loans from Consolidated to
CNG Energy will be evidenced by long-term, non-negotiable, book-entry
notes, will mature over a period of time not in excess of thirty years
from issuance and will bear interest at a rate equal to Consolidated's
cost of funds for comparable borrowings (or, if Consolidated had no
recent comparable borrowings, at a rate tied to the published Salomon
Brothers indicative rate for comparable debt issuances).
CNG Energy also proposes to organize a new subsidiary, CNG Energy
Arbitrage Corporation (``CNGEA''), which will be incorporated under the
laws of the State of Delaware with an authorized equity capitalization
of $10,000,000, consisting of 1,000 shares of common stock with a par
value of $10,000 per share. CNG Energy proposes to use not more than
$10,000,000 of proceeds from its financing transactions with
Consolidated to purchase shares of, or make open-account advances or
long-term loans to, CNGEA, on the same terms as the related financing
from Consolidated. Initially, it is expected that CNGEA will sell, and
CNG Energy will acquire, 300 shares of common stock for $3,000,000.
CNGEA will acquire a one-third general partnership interest in
Energy Alliance Partnership (``Energy Alliance''), a partnership to be
formed under the laws of the State of Delaware. The applicants propose
that CNGEA invest not more than $10,000,000 in Energy Alliance, for the
acquisition of its general partnership interest and for further equity
contributions. The other partners in Energy Alliance will be Noverco
Energy Services (U.S.) Inc., a wholly-owned subsidiary of Noverco Inc.,
a Canadian public-utility holding company whose subsidiaries engage in
the gas utility business and related businesses, and H.Q. Energy
Services (U.S.) Inc., a wholly-owned indirect subsidiary of Hydro-
Quebec, a Canadian electric utility company.
The business of Energy Alliance will be to supply, sell, purchase,
market, broker or otherwise trade electricity or fuel, to provide
electricity or fuel management services, and to carry on activities, or
perform services, related to the foregoing, including in connection
with arbitrage transactions. Energy Alliance will initially conduct its
activities generally in the wholesale energy markets in the
northeastern and middle-Atlantic United States. Energy Alliance intends
to use risk-reduction methods, such as market hedging tools, to limit
financial risks.
The applicants state that fundamental changes in the energy
industry have led to an increasingly integrated and competitive energy
market, in which marketers are dealing in interchangeable units of
energy rather than sales of natural gas or electricity. Consolidated
and CNG Energy seek to enter into the proposed transactions to
participate in this market. The applicants believe that these
activities are closely related to the core energy business of the
Consolidated system.
Energy Alliance may engage in energy transactions with companies in
the Consolidated holding company system, including utility companies,
on the same market terms that would be available to its nonaffiliate
customers. Energy Alliance may also contract with any of its partners,
including CNG Energy, or their affiliates for services, at charges that
will be made on the basis of salary plus fringe benefits for use of
personnel and direct out-of-pocket expenses for other items.
In addition to providing financing to CNGEA indirectly through CNG
Energy, Consolidated also proposes to enter into an undertaking
agreement under which it will commit to provide up to $3,000,000 to
CNGEA, as necessary to permit CNGEA to fulfill its obligations
respecting its capital contributions under the Energy Alliance
partnership agreement. Consolidated also proposes to guarantee, either
directly or through CNGEA, the fuel and power transactions of Energy
Alliance. These guarantees would be part of, and subject to the same
overall $750,000,000 limitation in, the current authorization of
guarantees relating to the obligations of CNG Energy (Holding Co. Act
Release No. 25926, November 16, 1993). This guarantee authorization
expires December 31, 1998.
The applicants also request that Energy Alliance and each of its
affiliates (other than companies in the Consolidated system) be deemed
exempt under rule 16 from all obligations imposed by the Holding
Company Act.
[[Page 31744]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-14748 Filed 6-15-95; 8:45 am]
BILLING CODE 8010-01-M
