[Federal Register Volume 59, Number 121 (Friday, June 24, 1994)] [Unknown Section] [Page 0] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-15359] [[Page Unknown]] [Federal Register: June 24, 1994] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 35-26068] Filings Under the Public Utility Holding Company Act of 1935 (``Act'') June 17, 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 July 11, 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. PP&L Resources, Inc., (70-8104) PP&L Resources, Inc. (``Resources''), a Pennsylvania corporation not currently subject to the Act, Two North Ninth Street, Allentown, Pennsylvania, 18101-1179, has filed an application requesting an order (1) approving the direct acquisition by Resources, under sections 9(a)(2) and 10 of the Act, of all of the outstanding shares of common stock of Pennsylvania Power & Light Company (``PP&L''), and, through such acquisition, the indirect acquisition of 33.3% of the outstanding shares of Safe Harbor Waters Power Corporation (``Safe Harbor''), and (2) granting Resources and its subsidiary companies, upon consummation of the proposed transaction, an exemption under section 3(a)(1) of the Act from all provisions of the Act, except section 9(a)(2). PP&L, a Pennsylvania public-utility company and a public-utility holding company exempt from registration by order of the Commission under section 3(a)(2) of the Act,\1\ is principally engaged in the production, transmission, distribution and sale of electricity to approximately 1.2 million customers in central eastern Pennsylvania.\2\ Total operating revenues and net income for 1993 were approximately $2.7 billion and $348 million, respectively. As of December 31, 1993, total assets were $9.8 billion. --------------------------------------------------------------------------- \1\Pennsylvania Power & Light Company, Holding Co. Act Release No. 19725 (1976). \2\PP&L, through direct and indirect subsidiary companies, also engages in nonutility businesses, including holding coal reserves, coal mining-related activities, oil pipeline operations, and passive investments. --------------------------------------------------------------------------- Safe Harbor, a Pennsylvania corporation, owns and operates a hydroelectric plant on the Susquehanna River. The output of the plant is sold to the companies which own the outstanding capital stock of Safe Harbor, PP&L and Baltimore Gas & Electric Company (``BG&E''). PP&L purchased 139 megawatts of capacity from Safe Harbor in 1993. Its share of Safe Harbor's operating revenues for 1993 was approximately $9.9 million (BG&E's share was approximately $19.7 million). PP&L's share of Safe Harbor's net income for 1993 was $2,121,000 ($21.21 a share). PP&L proposes to reorganize by forming a holding company over itself. The principal reasons for the proposed restructuring are (1) to establish a more appropriate corporate structure for nonutility activities, both in the United States and abroad, particularly power development activities permitted under the Energy Policy Act of 1992, (2) to facilitate participation in nonutility businesses, (3) to separate the utility and nonutility businesses, thereby providing a better structure for regulators to assure that there is no cross- subsidization of costs or transfer of business risk from unregulated to regulated lines of businesses, (4) to permit the use of financing techniques that are more directly suited to the particular requirements, characteristics and risks of unregulated and nonutility operations without affecting the capital structure or creditworthiness of PP&L, and (5) to provide additional flexibility for financing and for maintaining appropriate capitalization ratios. Power Markets Development Company (``Power Markets''), a wholly owned subsidiary of CEP Group, Inc. (``CEP''), a wholly owned subsidiary of PP&L engaged in holding passive investments, was formed to conduct PP&L's unregulated business activities. Power Markets was organized on March 9, 1994 and has received temporary funding of a $50 million capital contribution from PP&L. Under an Agreement and Plan of Exchange (``Plan''), one share of common stock, $0.01 par value, of Resources, a corporation organized to facilitate the reorganization, will be exchanged for each share of common stock, $1.00 par value, of PP&L outstanding (``Exchange'') at the effective time of the Plan, and the outstanding shares of the Resources's common stock held by PP&L prior to the effective time of the Plan of Exchange will be cancelled. Following the Exchange, all of the outstanding common stock of Resources will be owned by the former PP&L common shareholders, and Resources will own all of the outstanding common stock of PP&L. Safe Harbor will remain a subsidiary of PP&L. PP&L will transfer the common stock of CEP to Resources. CEP will then transfer the common stock of Power Markets to Resources and Power Markets will become a direct, wholly owned subsidiary of Resources. It is expected that these transfers will be made in the form of stock dividends. There will be no exchange of the outstanding preferred stock or first mortgage bonds of PP&L in connection with the exchange. PP&L proposes to submit the Plan to the holders of its common stock for approval at its 1995 annual meeting of shareholders, currently scheduled for April 26, 1995. The proposed Exchange will also require the approval of the Pennsylvania Utility Commission, the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission (``NRC'') will be requested to consent to the de jure transfer of NRC licenses. The application states that following the restructuring, Resources and its subsidiaries will meet the requirements for an exemption under section 3(a)(1). Resources, PP&L and Safe Harbor are and will continue to be predominantly intrastate in character and will continue to carry on their business substantially in Pennsylvania, the State in which they are organized. Central and South West Corporation, et al. (70-8133) Central and South West Corporation (``CSW''), a registered holding company, and its nonutility subsidiaries, CSW Energy, Inc. (``Energy''), CSW Development-I, Inc. (``Energy Sub'') and CSW Orange, Inc. (``CSWO''), each located at 1616 Woodall Rodgers Freeway, Dallas, Texas 75202, and ARK/CSW Development Partnership (``Joint Venture''), Orange Cogeneration Limited Partnership (``Project Venture'') and Orange Cogeneration G.P., Inc. (``JV Sub''), each located at 23046 Avenida de la Carlota, Suite 400, Laguna Hills, California 92653 (collectively, ``Applicants''), have filed a post-effective amendment under sections 6(a), 7, 9(a), 10, 12(b), and 12(f) of the Act and rules 43, 45, and 51 thereunder to their application-declaration filed under sections 6(a), 7, 9(a), 10 and 12(b) of the Act and rules 45 and 51 thereunder. By order dated April 15, 1993 (HCAR No. 25796) (``1993 Order''), the Commission authorized the Applicants to form CSWO, JV Sub and the Project Venture, and to purchase a 103 megawatt qualifying cogeneration facility located in or near Bartow, Florida (``Project'') from certain third parties. The Commission also authorized the Applicants to incur certain development expenses not to exceed $7 million in connection with the Project. By order dated February 9, 1994 (HCAR No. 25988) (``1994 Order''), the Commission authorized the Applicants to obtain a credit facility (``Credit Facility'') for the construction and operation of the Project in an amount up to $140 million. The Commission also authorized an investment in the Project Venture by a third party (``New Limited Partner'') in lieu of term financing for the Project. The Applicants were authorized to advance certain funds (``Advances''), in the event the Project Venture is unable to obtain third party Project financing prior to the start of Project construction, in the form of loans, open account advances or additional equity contributions to the Project Venture from Energy in an aggregate amount not to exceed $125 million. In addition, the Commission authorized the issuance of corporate guaranties by the Applicants or stand-by letters of credit with the Applicants as account party in an amount not to exceed $50 million, such guaranties or letters of credit to support payment obligations of the Project Venture required by the provider of third party financing for the Project or fuel suppliers, fuel transportation or other third parties under various project agreements. The Applicants now propose that Energy Sub organize a new special purpose wholly owned subsidiary under Delaware law, CSW Orange II, Inc. (``Orange LP Sub''). Orange LP Sub would have an authorized capital of up 1,000 shares of common stock, no par value. Energy Sub will assign to Orange LP Sub all of Energy Sub's right, title and interest in and to CSWO (``Assignment''). In exchange for the Assignment, Energy Sub would subscribe to all of Orange LP Sub's common stock. The Applicants also propose that Joint Venture organize another special purpose wholly owned subsidiary under Delaware law, Orange Cogeneration GP II, Inc. (``Orange GP Sub''). Orange GP Sub would have an authorized capital of up to 1,000 shares of common stock, no par value. As above, Joint Venture proposes to assign to Orange GP Sub of all of its right, title and interest in and to JV Sub. Joint Venture would subscribe to all of Orange GP Sub's common stock. The Applicants represent that organization of Orange LP Sub and Orange GP Sub will limit the liability of Energy and the Joint Venture in connection with other projects held by them and in the event that Project Venture defaults on its repayment obligations under the Credit Facility. In the event that Orange LP Sub and Orange GP Sub are formed, the Applicants seek to include Orange LP Sub and Orange GP Sub in the flow of funds for equity contributions, open account advances and intercompany loans on the terms and in the manner authorized by the 1993 Order and 1994 Order. The Applicants seek to organize Orange LP Sub and Orange GP Sub in order to aid in the procurement of the Credit Facility. It is anticipated that a pledge of the stock of CSWO and JV Sub by Energy Sub and the Joint Venture, respectively, will be required in connection with the Credit Facility. If, as is anticipated, Orange LP Sub is assigned the stock of CSWO held by Energy Sub and Orange GP Sub is assigned the stock of JV Sub held by the Joint Venture, Orange LP Sub and Orange GP Sub would provide such pledges in lieu of such pledges by Energy Sub and the Joint Venture, respectively. The Applicants represent that, in the event that Orange LP Sub and Orange GP Sub become liable in connection with any such pledge, the interests of Energy Sub and the Joint Venture that are not associated with the Project will be protected. Central and South West Corporation, et al. (70-8209) Central and South West Corporation (``CSW''), a registered holding company, and CSW Energy, Inc. (``Energy''), its wholly owned nonutility subsidiary, both located at 1616 Woodall Rodgers Freeway, P.O. Box 660164, Dallas, Texas 75202, have filed an application-declaration under Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rules 45, 51 and 53 thereunder. Pursuant to a letter of intent (``Letter of Intent'') entered into on January 4, 1993,\3\ CSW and Energy seek to enter into a joint venture (``Joint Venture'') with Pentech Energy, Inc., a Delaware corporation (``Pentech''). The Joint Venture, which will be a general partnership whose general partners will be Pentech and a new subsidiary of Energy discussed below, will develop, construct, own and operate power projects, including: (1) Independent power projects that would constitute a part of CSW's ``integrated public utility system'' within the meaning of Section 2(a)(29)(A) of the Act; (2) qualifying facilities within the meaning of the Public Utility Regulatory Policies Act of 1978; and (3) exempt wholesale generators within the meaning of section 32(e) of the Act (collectively, ``Facilities''). Joint Venture has specific plans to develop an energy facility (``Avon Lake Project'') in Ohio through a limited partnership (``Project Partnership'') to be organized. --------------------------------------------------------------------------- \3\The Letter of Intent, between Energy, Pentech Energy, Inc., and Pentech Enterprises, Inc., was subsequently amended on February 28, 1993 and on March 3, 1993. --------------------------------------------------------------------------- Joint Venture will also, directly or indirectly, own and hold the securities and interests of special purpose corporations and partnerships (``Project Entities''). Energy, Energy Sub and the Joint Venture will seek the prior approval of the Commission, to the extent required by the Act, to invest initially in any particular Project Entity (other than the entities described below and the Project Venture and the Project Partnership, or any EWG) and to construct, own and operate Facilities (other than the Avon Lake Project). CSW and Energy seek to make investments of up to $15 million in the Joint Venture. CSW and Energy also seek to acquire an interest in, and make advances to, Project Partnership. All investments, whether in the form of equity contributions, loans, development payments, or otherwise, will be included in the aggregate investment authority of $15 million (``Joint Venture Investment''). Energy will organize a new wholly owned subsidiary company (``Energy Sub'') under Delaware law to make its investment in the Joint Venture. Energy will subscribe to all of Energy Sub's 1,000 shares of common stock, no par value, at $1.00 per share. CSW proposes to make, through Energy and Energy Sub to Joint Venture, capital contributions, loans, open account advances and associated guarantees in an aggregate amount of up to $15 million, from time to time through December 31, 1995, to facilitate Energy Sub's investment in the Joint Venture. Any advances or loans (``Loans'') will have an interest rate per annum not in excess of Mellon Bank's prime commercial lending rate as announced from time to time plus four percentage points (``Maximum Interest Rate'') and a final maturity not to exceed twenty years. The loans or advances will be repaid upon the earlier of, and from the proceeds of: (i) Construction- and/or term loan closing of any Facility developed or owned by the Joint Venture (directly or indirectly); (ii) the sale, lease or other disposition by the Joint Venture (directly or indirectly) of its interest in any Facility; or (iii) any financing, disposition or distribution of any project received by the Joint Venture, in which the Joint Venture has an interest (including a Facility). Energy will own 65%,\4\ and Pentech will own 35%, of each Facility to be developed by the Joint Venture. Energy does not anticipate owning less than 50% of facilities being developed by Pentech in partnership with other entities; however, the exact percentage will be subject to negotiation.\5\ --------------------------------------------------------------------------- \4\Energy may hold its ownership interests indirectly through subsidiaries. In addition, ownership may be held by persons or entities to whom Energy may sell its interests. \5\In addition, to the extent the Facilities will be qualifying facilities under the Public Utility Regulatory Policies Act of 1978 (``PURPA''), Energy will not acquire or retain an ownership interest in excess of the maximum level consistent with qualifying facility status. --------------------------------------------------------------------------- Energy Sub will pay Pentech all the prior substantiated development expenses of the Facilities selected for the Joint Venture's development. The payment will serve as a development loan (``Development Loan'') with interest compounded annually at the Maximum Interest Rate. The Development Loan will be repaid upon the earlier of, and from the proceeds of: (i) Construction- and/or term-loan closing of any Facility developed or owned by Pentech (directly or indirectly); (ii) the sale, lease or other disposition by Pentech or its affiliates of its interest in any Facility; or (iii) any financing, disposition or distribution received by Pentech or its affiliates of any project in which Pentech or any such affiliate has an interest (including the Facilities and regardless of whether Energy or any of its affiliates has participated in the development of any such project). It is expected that Energy Sub will pay the budgeted development expenses for the Facilities. This payment also will be considered a Development Loan and will have the same repayment and interest terms. It is further proposed that, based upon each Facility's development budget, Energy Sub will directly or indirectly fund, through loans, external development costs not otherwise funded. Energy Sub and Pentech will each pay its own internal development cost.\6\ These external development costs will be repaid in the same manner, and with the same interest, as the Loans. --------------------------------------------------------------------------- \6\Pentech's development costs will be paid by the Development Loan. --------------------------------------------------------------------------- Energy Sub will, directly or indirectly, contribute each Facility's equity requirement (including any equity commitment of Pentech in the form of the Development Loans) not otherwise underwritten at the construction-loan closing; provided, however, that the equity requirement for each Facility will not exceed 20% if the total cost of each Facility. Pentech will arrange for its pro rata equity commitment not later than six months prior to the commencement of such Facility's commercial operation. The Avon Lake Project is currently being developed by Avon Lake Partnership, a California limited partnership (``Project Venture'').\7\ The Project Venture is currently owned by Pentech Power Corporation, a Delaware corporation (``Pentech GP''), which is a ten percent (10%) general partner of the Project Venture, and by Avon Lake, Inc., a Delaware corporation (``Pentech LP''), which is a ninety percent (90%) limited partner of the Project Venture. Pentech GP and Pentech LP are both wholly owned by Pentech, which is in turn owned by the ultimate corporate parent of the group, Pentech Enterprises, Inc., also a Delaware corporation (``Pentech Enterprises''). None of these entities is an affiliate of CSW. --------------------------------------------------------------------------- \7\The Project, which is still in the planning stage, is currently contemplated to be an exempt wholesale generator under the Act and/or a qualifying facility under PURPA. The Project Venture is negotiating contracts for the acquisition of certain rights to develop the Project, and it is contemplated that the construction of the Project will commence in 1995, and be completed in 1997. --------------------------------------------------------------------------- To hold its interest in the Avon Lake Project, Energy Sub will organize two new wholly owned subsidiaries under Delaware law: (i) CSWE Avon Lake GP, Inc. (``CSWE GP'') and (ii) CSWE Avon Lake LP, Inc., a Delaware corporation (``CSWE LP'').\8\ Energy Sub (or Energy GP Sub) will subscribe to all of CSWE GP's 1,000 shares of common stock, no par value, at $1.00 per share, and Energy Sub (or Energy LP Sub) will subscribe to all of CSWE LP's 1,000 shares of common stock, no par value, at $1.00 per share.\9\ --------------------------------------------------------------------------- \8\Energy Sub will own CSWE LP and CSWE GP either directly or indirectly through a wholly owned special purpose subsidiary or affiliate companies to be organized under Delaware law (``Energy LP Sub'' and ``Energy GP Sub,'' respectively). \9\Energy Sub will also subscribe to all of Energy GP Sub's and Energy LP Sub's and Energy LP Sub's 1,000 shares of common stock, no par value, at $1.00 per share, assuming these companies are organized. --------------------------------------------------------------------------- CSWE GP and CSWE LP will require an interest in the Avon Lake Project in the following steps: (1) CSWE GP will acquire a general partnership interest in the Project Venture from Pentech GP, for the purchase price of $1,000, pursuant to a to-be-negotiated subscription agreement (``Subscription Agreement''); (2) CSWE LP will acquire a limited partnership interest in the Project Venture from Pentech LP, for the purchase price of $1,000, pursuant to the Subscription Agreement; (3) Pentech GP, Pentech LP, CSWE GP, CSWE LP and Siemens Power Ventures, Inc., a nonaffiliate Delaware corporation (``Siemens'') will execute a to-be-negotiated Amended and Restated Agreement of Limited Partnership; (4) the Project Venture will change its name from ``Avon Lake Partnership, a California limited partnership'' to ``Avon Lake Limited Partnership''; and (5) the Project Venture will be reorganized as a limited partnership under Delaware law. The Project Venture will thereupon become the Project Partnership. Alternatively, CSWE GP, CSWE LP, Pentech GP, Pentech LP and Siemens (directly or indirectly) will form the Project Partnership and merge the Project Venture into the Project Partnership such that the resulting entity is the Project Partnership. Upon the organization of the entities and/or purchase of the interests in the Project Venture, each entity will bear the following relationship to the others. Pentech GOP will hold a 1% general partnership interest in the Project Partnership; CSWE Avon Lake GP will hold a 1% general partnership interest in the Project Partnership; Pentech LP will hold a 9% limited partnership interest in the Project Partnership; CSWE LP will hold a 49% limited partnership interest in the Project Partnership; and Siemens will hold a 1% general partnership interest and a 39% limited partnership interest in the Project Partnership. Energy and the Project Partnership may incur certain development expenses (``Development Expenses'') in connection with the Avon Lake Project. The total amount of the Development Expenses will not exceed such amount to be included in the Joint Venture Investment. Energy will fund its pro rata share of the Development Expenses (whether incurred pursuant to the Subscription Agreement or otherwise) by capital contributions, loans or open account advances to the Project Partnership (directly or indirectly), by capital contributions, loans or open account advances from Energy to Energy Sub; from Energy Sub to Energy GP (if formed) and/or Energy LP Sub (if formed) or to CSWE GP and/or CSWE LP; from Energy GP Sub (if formed) to CSWE GP; from Energy LP Sub (if formed) to CSWE LP; and from CSWE GP and/or CSWE LP to the Project Partnership. Loans or advances extended for the purpose of funding the Development Expenses will be repaid with the same interest and repayment terms as the Loans. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. [FR Doc. 94-15359 Filed 6-23-94; 8:45 am] BILLING CODE 8010-01-M