[Federal Register Volume 59, Number 106 (Friday, June 3, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13515]
[[Page Unknown]]
[Federal Register: June 3, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26058]
Filings Under the Public Utility Holding Company Act of 1935
(``Act'')
May 27, 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 June 20, 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 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. (70-7932)
The Southern Company (``Southern''), 64 Perimeter Center East,
Atlanta, Georgia 30346, a registered holding company, its wholly owned
nonutility subsidiary companies, Southern Electric International, Inc.
(``SEI''), 900 Ashwood Parkway, Suite 500, Atlanta, Georgia 30338 and
Southern Company Services, Inc. (``SCS''), 64 Perimeter Center East,
Atlanta, Georgia 30346, and Southern's operating electric utility
subsidiary companies Southern Nuclear Operating Company, 42 Inverness
Center Parkway, Birmingham, Alabama 36242, Alabama Power Company, 600
Piedmont Avenue NE., Atlanta, Georgia 30308; Mississippi Power Company,
2992 West Beach, Gulfport, Mississippi 39501; Georgia Power Company,
333 Piedmont Avenue NE., Atlanta, Georgia 30308; Gulf Power Company,
500 Bayfront Parkway, Pensacola, Florida 32501; and Savannah Electric
and Power Company (``Savannah''), 600 Bay Street East, Savannah,
Georgia 31401 (``Operating Companies''), have filed an application-
declaration under sections 6(a), 7, 9(a), 10, 12(b), 12(c), 13(b), 32
and 33 of the Act and Rules 43, 45, 46, 53, 54, 86, 87, 90 and 91
thereunder.
By Commission order dated October 20, 1987 (HCAR No. 24476) (``1987
Order''), SEI was authorized to engage in the design, development,
construction, ownership and operation of cogeneration and independent
power facilities within and outside the United States. SEI also
provides technical services to industrial and commercial concerns,
unaffiliated utilities and foreign governments in both domestic and
international markets, and markets intellectual property acquired or
created by Southern system companies to unaffiliated third parties in
accordance with Commission orders dated July 17, 1981 and December 18,
1981 (HCAR Nos. 22132 and 22315A) (``Original Orders'').\1\
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\1\In a related proceeding (see File No. 70-8173), Southern
proposes to restate the operational and financing authority of The
Southern Development and Investment Group, Inc. (``Development''),
also a wholly owned nonutility subsidiary of Southern. It is
proposed that Development will succeed to certain of SEI's
consulting activities (generally, consulting activities that are not
related to domestic power generation or foreign generation,
transmission, or distribution), and to SEI's licensing of
intellectual property, among other business activities.
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As a part of a plan to reorganize various non-utility businesses of
Southern and its subsidiaries along functional lines, Southern and SEI
propose in this application-declaration to amend and restate SEI's
existing financing and operational authority, SEI, SCS and the
Operating Companies also propose to enter into intrasystem service
agreements pursuant to which such companies may render services and
sell goods to ``exempt wholesale generators,'' or ``EWGs,'' as defined
in Section 32 of the Act, and ``foreign utility companies,'' or
``FUCOs,'' as defined in Section 33, as well as to associate companies
that own qualifying facilities (``QFs'') as defined under the Public
Utility Regulatory Policies Act of 1978, as amended (``PURPA''), or
other facilities that SEI may hereafter be authorized to acquire.
Southern and SEI have adopted a plan of reorganization pursuant to
which SEI proposes to organize and acquire all of the stock of a newly
organized Delaware corporation (``Newco'') in exchange for certain
assets of SEI consisting primarily of rights under certain existing
consulting agreements with third parties and accounts receivable
associated therewith, which will be assigned to Newco; computers;
office equipment and furniture; and interests in certain software
programs and other proprietary technology. Newco will also assume
certain liabilities of SEI including accounts payable, accrued pension
and retirement costs associated with employees to be transferred to
Newco, and certain loss reserves under existing contracts. Immediately
thereafter, the shares of Newco will be distributed to Southern as a
dividend distribution, and Newco and Development will be merged
pursuant to a plan adopted under applicable state law.
SEI and Southern propose to relinquish the authority granted by the
Commission in the Original Orders and the 1987 Order upon the effective
date of the Commission's order relating to this application-declaration
and to the application of Southern and Development, except with respect
to any contracts and investments that are entered into or made by SEI
prior to the effective date of such orders in reliance upon and in
accordance with the Original Orders or the 1987 Order.
SEI proposes to continue to engage in preliminary project
development activities (``Development Activities'') relating to the
potential acquisition and ownership of independent power facilities,
including QFs and facilities to be owned or operated by EWGs and FUCOs,
and other power production facilities located within the service
territories of the Operating Companies or the service territories of
other members of the Southeastern Electric Reliability Council,
together with facilities and equipment that are ancillary to the
foregoing, such as may be used for fuel production, conversion,
handling and/or storage; electrical transmission; and energy
management, recovery and efficiency (hereinafter referred to
collectively as ``Projects''). With the exception noted below, in any
case in which SEI's Development Activities culminate in a proposal to
acquire the securities of or other interest in any EWG or EUCO, it is
intended that Southern, rather than SEI, would consummate the
acquisition in an exempt transaction pursuant to section 32 or 33 of
the Act, as applicable, subject to complying with all rules and
regulations promulgated thereunder. Any acquisition by Southern or SEI
of an interest in any other type of Project, and any related financing,
would be the subject of separate filings with this Commission.
SEI requests authority to acquire the stock of and provide needed
working capital to one or more foreign subsidiaries through which SEI
would conduct its project Development Activities. SEI represents that
in no case will any such subsidiary, directly or indirectly, acquire,
own or operate any significant assets or facilities, other than a bank
account, leased office space and related office equipment, issue or
acquire any securities, other than common shares issued to SEI, or
provide services or sell goods to any associate company. The sole
function of any such subsidiary would be to engage in Development
Activities on behalf of SEI in a foreign country or countries whose
laws would subject SEI to significant restrictions or penalties if SEI
were itself to maintain a legal presence in any such country. The
capitalization of any such subsidiaries is expected to be less than
$50,000.
SEI also proposes to render project development, engineering,
design, construction and construction management, operating, fuel
management, maintenance and power plant overhaul, and other similar
kinds of managerial and technical services to both affiliated Project
entities and to non-affiliated developers, operators and owners of
independent power projects and foreign and domestic utility systems.
SEI proposes to render such services utilizing its own work force, and
personnel and other resources of SCS and the Operating Companies
obtained pursuant to service agreements (``Service Agreements'') as
described below. SEI also proposes that in conjunction with providing
services to non-affiliates, it may enter into separate agreements to
sell or license intellectual property it has created or acquired from
non-affiliates in connection with its authorized business activities.
All services rendered by SEI to non-affiliates will be based upon
the fair market value thereof. SEI also proposes to provide such
services and sell goods to any Project entity that is an associate
company (including but not limited to any EWG, FUCO, or QF) at fair
market prices, and requests an exemption pursuant to section 13(b) from
the requirements of rules 90 and 91 as applicable to such transactions
in any case in which any one or more of the following circumstances
shall obtain:
1. Such Project entity derives no part of its income, directly or
indirectly, from the generation, transmission, or distribution of
electric energy for sale within the United States;
2. Such Project entity is an EWG which sells electricity at market-
based rates which have been approved by FERC or the appropriate state
public utility commission, or a QF which sells electricity at the
purchaser's ``avoided cost'' determined in accordance with the
regulations under PURPA, or sells electricity at rates negotiated at
arms'-length with large industrial or commercial customers purchasing
such electricity for their own use and not for resale;
3. Such Project entity sells electricity at rates based upon its
cost of service, as approved by FERC or any state public utility
commission having jurisdiction, provided that: (i) the purchaser of
such electricity is not an associate company of SEI within the Southern
system, and (ii) the terms and conditions (including price) of the
contract pursuant to which SEI agrees to provide such services or goods
have been expressly approved by the holders of a majority of the equity
interests of such Project entity other than Southern or any associate
company of Southern.
SEI owns the exclusive rights to a proprietary computer-based
remote generator dispatch and control program, known as ``Standby
Capacity Network'' (``SCN''). The SCN program enables a utility company
remotely to access the capacity associated with stand-by or emergency
generators owned by its large customers, such as hospitals, factories,
and office buildings and operate the generators in parallel with its
own grid. An SCN program could be implemented pursuant to a contract
between a utility and SEI under which SEI would agree to install
certain equipment (primarily controls) incorporating its proprietary
software program and interconnection equipment and to act as the
utility's agent in operating, maintaining and fueling the customer's
standby generator. Under such an arrangement, SEI would be compensated
by the utility. SEI would not seek to acquire any interest in the
customer's generating equipment, and would not take title to the
electricity generated. SEI would retain all right, title and interest
to the proprietary software used in SCN.
SEI proposes to market the SCN program to both affiliated and
unaffiliated utilities and/or their respective customers. The program
and related services would be sold to unaffiliated parties at prices to
be negotiated based upon the fair market value thereof. As currently
required under the terms of the Original Orders, SEI will make the
proprietary technology incorporated into the SCN program available to
the Operating Companies without charge (except for the actual expenses
incurred by SEI in making such program available). If an Operating
Company requests SEI to provide any related service, e.g., software
support, training of Operating Company personnel, maintenance of the
customer's equipment, or the like, SEI would be the associate company
for the costs of such services, determined in accordance with rules 90
and 91.
Under the Original Orders, SEI has entered into Service Agreements
with SCS and each of the Operating Companies (other than Savannah,
which was not then a subsidiary of Southern) pursuant to which
personnel and other resources of SCS and the Operating Companies may be
made available to SEI, upon request, to support SEI in connection with
its authorized activities. Under these agreements, SEI is obligated to
reimburse SCS or an Operating Company, as the case may be, for the cost
of such services, determined in accordance with Rules 9 and 91. The
cost of services provided by an Operating Company to SEI includes all
direct charges and certain indirect costs, such as pension costs,
insurance, payroll taxes, and payments to employee benefits plans, and
a portion of the administrative and general expenses of the Operating
Company.
The existing Service Agreements also obligate SEI to make any new
intellectual or proprietary property, processes, programs, computer or
other data bases, support services, training and other facilities and
techniques developed in the course of SEI's business available for
utilization by other Southern system companies without charge, except
for the actual expenses incurred in making the same available, to the
extent that SEI has or retains proprietary rights therein. Under the
Service Agreements, SEI has a reciprocal right to receive such
intellectual property from SCS and the Operating Companies without
charge, except for the actual expenses incurred in making the same
available.
SCS and the Operating Companies propose to continue to render
services and provide other resources to SEI in connection with SEI's
authorized activities in accordance with the existing Service
Agreements, as amended, to reflect the changes to SEI's authorized
business activities and to comply with the Commission's rules relating
to the rendering of services or sale of goods directly by SEI or
indirectly by the Operating Companies and SCS to EWGs and FUCOs in
which Southern holds an interest.
SCS and the Operating Companies will not, without requesting the
further approval of the Commission, render any services or sell any
goods directly or indirectly to any EWG or FUCO in which Southern holds
an interest, except pursuant to the Service Agreements, as herein
proposed to be amended.
Southern proposes to invest in SEI up to an aggregate of
$250,000,000 from time to time through December 31, 1998, in addition
to any investments in SEI that Southern shall have made pursuant to
previous authorizations, including but not limited to the 1987 Order,
prior to the effective date of the order in this proceeding. It is
proposed that such additional investments may take the form of any
combination of cash capital contributions to SEI, loans to SEI by
Southern, and loans to SEI by one or more lenders other than Southern
that are guaranteed by Southern.
SEI proposes to issue promissory notes (``Notes'') from time to
time through December 31, 1998 to Southern or to lenders other than
Southern which have been guaranteed by Southern, provided that the sum
of the aggregate principal amount of Notes at any time outstanding and
Southern's additional investments in SEI shall not exceed $250 million.
The Notes would have maturities no later than December 31, 2003, and
would bear interest at a rate of not more than 3% over the prime rate
at the bank to be designated by Southern in the case of Notes issued to
lenders other than Southern, and a rate of not more than the prime rate
in the case of Notes issued to Southern. In connection with any sale of
Notes to lenders other than Southern, a commitment fee may be paid in
an amount not greater than \1/2\ of 1% of the principal amount of the
Note. It is anticipated that any such Notes may be guaranteed by
Southern as to principal, premium, if any, and interest. It is further
proposed that the Notes issued to Southern may, at the option of
Southern, be converted to capital contributions to SEI through
Southern's forgiveness of the debt (including any accrued interest)
represented thereby.
Southern also proposes, from time to time, to guarantee or act as
indemnitor of commercial sureties required to support bid bonds and
performance and other obligations (other than securities or other
financial instruments) issued or undertaken by SEI in connection with
its authorized activities.
It is therefore proposed that Southern may (i) provide such
guarantees of, and similar provisions and arrangements concerning, the
performance and undertaking of other obligations by SEI (or any
subsidiary of SEI), or of any Project entity (including but not limited
to EWGs and FUCOs) in which Southern holds a direct or indirect
interest, and of other obligations relating to SEI's authorized
activities, and (ii) provide such indemnifications of and with respect
to persons acting as surety on bonds or other obligations on behalf of
such companies, in an aggregate amount outstanding at any one time of
$800,000,000 through December 31, 2003; provided, that any guarantees
or indemnifications outstanding at December 31, 2003 shall continue
until expiration or termination in accordance with their terms; and
provided further that the aggregate amount of such authorized
guarantees or indemnifications of sureties shall be reduced dollar for
dollar by any similar guarantees or indemnifications of sureties made
or incurred by Southern pursuant to authority requested in File No. 70-
8173 in connection with the business activities of Development.
As a further limitation to the foregoing, Southern states that the
aggregate maximum amount of its exposure at any one time under all
performance guarantees or indemnification or similar arrangements
entered into on behalf of subsidiary companies that are EWGs or FUCOs
shall not exceed $250,000,000, and that such amount shall be treated as
part of Southern's ``aggregate investment'' in all such entities for
purposes of rule 53(a). Southern proposes to negotiate specific
guarantees and similar provisions and arrangements with third parties,
and indemnifications of sureties, as the need to do so arises, without
further Commission authorization.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-13515 Filed 6-2-94; 8:45 am]
BILLING CODE 8010-01-M
