[Federal Register Volume 59, Number 222 (Friday, November 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28543]
[[Page Unknown]]
[Federal Register: November 18, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26158]
Filings Under the Public Utility Holding Company Act of 1935, as
amended (``Act'')
November 14, 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 December 6, 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.
New England Electric System (70-6583)
Eastern Utilities Associates (``EUA''), P.O. Box 2333, Boston,
Massachusetts 02107, a registered holding company, has filed a post-
effective amendment to its application-declaration under Sections 6(a)
and 7 of the Act.
By orders dated, October 12, 1990 (HCAR No. 25166) and July 1, 1992
(HCAR No. 25568), the Commission authorized, among other things, EUA to
issue and sell, and purchase on the open market and sell, from time to
time, through December 31, 1994, up to 5.8 million of its authorized
but unissued common shares pursuant to its Dividend Reinvestment and
Common Share Purchase Plan (``Plan''). As of November 1, 1994, EUA had
issued and sold 5,259,393 of its authorized common shares pursuant to
the Plan.
EUA now proposes to extend its authorization to issue and sell,
through December 31, 1997, the remaining 540,607 shares of common stock
under the Plan. In addition, EUA proposes to issue and sell, through
December 31, 1997, up to one million additional shares of common stock
under the Plan (collectively, ``Common Stock'').
The price per share of the Common Stock credited to a participant's
account (whether through reinvestment of dividends or cash payments)
will be 100% of the average of the closing sales prices of EUA's common
stock as reported by The Wall Street Journal as composite transactions
during the last five trading days immediately preceding the investment
date.
New England Energy Incorporated (70-7055)
New England Energy Incorporated (``NEEI''), 25 Research Drive,
Westborough, Massachusetts 01582, an electric public-utility subsidiary
company of New England Electric System (``NEES''), a registered holding
company, has filed a post-effective amendment to its application-
declaration filed under Sections 9(a) and 10 of the Act.
By order dated October 30, 1974 (HCAR No. 18635), among other
things, NEEI was authorized to enter into a partnership
(``Partnership'') with Samedan Oil Corporation (``Samedan''), a
subsidiary of Noble Affiliates, Inc., both unaffiliated companies. The
Partnership was formed to explore for and develop oil and gas prospects
in order to provide a fuel supply for NEES system companies.
An order dated July 19, 1978 (HCAR No. 20632) authorized NEEI's
methods of accounting for the costs (including capital costs) of it
soil and gas exploration and development program. The methods of
accounting were devised for the purpose of amortizing the costs and
determining the prices at which NEEI sold fuel to New England Power
Company (``NEPCO''), an affiliated electric public-utility company,
pursuant to Section 13(b) of the Act (``Pricing Policy''). These costs
include a return prescribed by the Commission on the equity investment
in NEEI maintained by NEES from time-to-time. Under the Pricing Policy,
the proceeds from the sale to nonaffiliates of production from all of
NEEI's properties were applied first to recovery of amortization and
production costs. Any excess was passed on to NEPCO through a reduction
in the price charged by NEEI for fuel sold to NEPCO under a fuel
purchase contract (``Purchase Contract''). Any deficiency in such
proceeds below NEEI's costs was recoverable by NEEI from NEPCO by an
addition to the price for fuel sold to NEPCO under the Purchase
Contract.
An order dated October 22, 1985 (HCAR No. 23873) amended the
Pricing Policy (``Modified Pricing Policy''). Among other things, the
Modified Pricing Policy was made applicable only to oil and gas
prospects recorded on NEEI's books prior to January 1, 1984 (``Pre-1984
Prospects''). All costs of the Pre-1984 Prospects, including
exploration and development costs and capital costs, but excluding any
return after 1982 on equity invested in the program, were capitalized
into a full cost pool (``Full Cost Pool''). Amortization of the Full
Cost Pool, in combination with low oil and gas prices, resulted in
losses which were passed through to NEPCO and under the Purchase
Contract in accordance with the Modified Pricing Policy. NEPCO was
allowed to recover from its customers all amounts which it paid to NEEI
in connection with the Pre-1984 Prospects.
By an amendment to the Partnership agreement dated February 5,
1985, NEEI elected not to participate in new oil and gas prospects
initiated by Samedan after December 31, 1986, but NEEI remained
obligated to pay its share of expenses for exploration, development and
production of prospects acquired on or before December 31, 1986.
By orders dated October 3, 1991, December 21, 1993 and August 24,
1994 (HCAR Nos. 25390, 25958 and 26110, respectively), NEEI was
authorized to contribute, through December 31, 1994, up to $45 million
to the Partnership.
NEEI now proposes to contribute, through December 31, 1998, up to
an additional $30 million to the Partnership for exploration and
development of existing oil and gas prospects of the Partnership.
The Connecticut Light & Power Company (70-7543)
The Connecticut Light and Power Company (``CL&P''), Seldon Street,
Berlin, Connecticut 06037, an electric utility subsidiary company of
Northeast Utilities, a registered holding company, has filed a post-
effective amendment under Sections 6(a) and 7 of the Act to its
declaration previously filed under Sections 6(a) and 7 and Rule
50(a)(5) thereunder.
By Commission order dated October 24, 1988 (HCAR No. 24734), CL&P
was authorized to finance certain pollution control and/or sewage or
solid waste disposal facilities at the Seabrook Station No. 1 nuclear
electric generating plant (``Facilities''). The cost of acquiring,
constructing and installing the Facilities was financed by CL&P through
its use of the net proceeds from the sale by the Industrial Development
Authority of the State of New Hampshire (``IDA'') of its pollution
control revenue bonds (``Bonds'') in the principal amount of $10
million. The Bonds were issued pursuant to an Indenture of Trust
between the IDA and Baybank Middlesex, as trustee (``Trustee''), and
the proceeds of the issuance of the Bonds were loaned to CL&P pursuant
to a Financing Agreement (``Loan Agreement'') between CL&P and the IDA.
In order to obtain the benefits of a high quality rating for the
Bonds, CL&P's obligations under the Loan Agreement are secured by an
irrevocable letter of credit (``Letter of Credit'') in the amount of
$10,833,334 issued by Union Bank of Switzerland, New York Branch
(``Bank'') in favor of the Trustee. The Letter of Credit secures $10
million of principal amount plus interest in the amount of $833,334 at
the maximum rate of 15% per annum for 200 days.
CL&P now proposes to amend the Reimbursement and Security
Agreement, dated as of October 1, 1988 between CL&P and the Bank in
order to: (1) change the expiration date of the Letter of Credit, from
perpetual to a three-year term ending November 1, 1997, extendible for
successive one-year terms thereafter indefinitely during the term of
the Loan Agreement, with the consent of CL&P and the Bank; (2) change
the annual Letter of Credit fee payable to the Bank; and (3) extend,
modify or replace the Letter of Credit provided by the Bank, as
permitted by the Loan Agreement, by delivery of a substitute credit
facility, consisting of a new letter of credit, and related agreements,
to be provided by a substitute bank to be chosen by CL&P (``Substitute
Bank'').
The proposed Letter of Credit fee will be changed from 0.45% of the
Letter of Credit amount to a percentage ranging from 0.35% to 0.70%,
depending on CL&P's bond ratings from time-to-time as determined by
Moody's and Standard and Poor's. At CL&P's current bond rating the
annual Letter of Credit fee would change from 0.45% to 0.40%,
representing a reduction of $5,417 per annum.
CL&P may extend, modify or replace the Bank's Letter of Credit with
a new letter of credit (``Substitute LOC'') to be issued by the same or
a Substitute Bank during the term of the Bonds. The Substitute LOC
would be issued under a new letter of credit and reimbursement
agreement (``New LOC Agreement'') substantially identical to the Letter
of Credit and Reimbursement Agreement, dated as of September 1, 1993
among CL&P, Deutsche Bank AG, New York Branch and various co-agents and
participating banks, as approved by Commission order, dated September
15, 1993 (HCAR No. 25881). The New LOC Agreement will be in accordance
with the Loan Agreement and will provide that: (1) the total amount
available to be drawn under any such extended, modified, or replacement
letter of credit does not exceed $10,833,334; (2) the annual letter of
credit costs applicable to any such extension, modification, or
replacement do not exceed 1.00% per annum of the total amount
available; (3) tender advances bear interest until paid at a rate not
to exceed the higher of (a) the prime rate plus 2.00% or (b) the
Federal funds rate plus 2.00%; (4) such extension, modification, or
replacement is otherwise on terms that are substantially similar in all
material respects to those applicable to the New LOC Agreement.
Central and South West Services, Inc. (70-7671)
Central and South West Services, Inc. (``CSWS''), a nonutility
subsidiary company of Central and South West Corporation (``CSW''), a
registered holding company, has filed a post-effective amendment under
Sections 9(a) and 10 of the Act.
By order dated August 10, 1990 (HCAR No. 25132) (``1990 Order''),
CSWS was authorized to license and sell to nonassociate entities
through December 31, 1992 specialized computer programs and to provide
support services to licensees and entities that purchased such
software. Such support services were to include program enhancements
and problem resolution.
The software was developed in connection with services CSWS
rendered to CSW and its public-utility subsidiary companies. CSWS was
authorized to license and sell the software to offset the cost of
development and modification. Profits from licenses and sales were to
be credited to CSW companies in accordance with their respective
contributions to the funds required for the initial development of the
software. The software was to include specialized software acquired
from third parties for particular applications.
The 1990 Order provided that CSWS would not increase staff or
equipment in connection with efforts to license and sell the software.
It also provided that annual expenses to license and sell the software
and to develop the programs would not exceed $100,000. Finally, the
1990 Order provided that CSWS would account for its receipts for
licenses and sales in accordance with the Commission's Uniform System
of Accounts for Mutual Service Companies and Subsidiary Service
Companies and that CSWS would annually file a Form U-13-60 with the
Commission.
By order dated December 18, 1992 (HCAR No. 25714) (``1992 Order''),
CSWS was authorized to license and sell to nonassociate entities
through December 31, 1994 specialized computer programs and to provide
support services to licensees and entities that purchased such
software. Such support services were to be sold to nonassociate
companies for under cost.
Since inception of the program, revenues and costs associated with
development of nonassociate business from software sales have totalled
approximately $36,000 and from related services approximately $9,700.
Proceeds from sales of software are credited or returned to public-
utility subsidiary companies who support the original development of
the product for internal use in accordance with their respective
contributions.
CSWS continues to develop software and data utilized by public-
utility and other subsidiary companies of CSW. In recent years, CSWS
has developed software for tax and rate matters, graphical analysis
software, and databases of financial and operational statistics and
chemical label information. From time to time, CSWS receives inquiries
from nonassociate entities relative to its software and data.
CSWS now requests authorization, through December 31, 1999, to make
expenditures up to $1 million per calendar year and $250,000 per
project to develop or change software for nonassociated entities or to
market software, services or reserve computer capacity and to add up to
ten employees to support these activities. CSWS also seeks
authorization to sell reserve computer capacity and provide data
management services to nonassociate entities--largely customers of
public-utility subsidiary companies. CSWS would limit computer capacity
sales to nonassociated entities to 50 percent of its total capacity.
West Texas Utilities Company (70-8057)
West Texas Utilities Company (``WTU''), 301 Cypress Street,
Abilene, Texas 79601-5820, a wholly owned electric public-utility
subsidiary company of Central and South West Corporation, a registered
holding company, has filed a post-effective amendment to its
declaration under Sections 6(a) and 7 of the Act.
By order dated October 7, 1992 (HCAR No. 25649) (``Order''), WTU
was authorized, among other things, to issue and sell up to an
aggregate principal amount of $150 million of First Mortgage Bonds
(``New Bonds''), in one or more series, from time to time through
December 31, 1994. WTU was further authorized to use the proceeds from
the sale of New Bonds: (1) to redeem all or a portion of its then
outstanding $75 million, 8\7/8\% First Mortgage Bonds, Series N, due
May 1, 2016 (``Series N Bonds''); (2) to purchase, through a tender
offer, all or a portion of its then outstanding $65 million, 9\1/4\%
First Mortgage Bonds, Series O, due December 1, 2019 (``Series O
Bonds''); (3) to repay outstanding short-term borrowings; and/or (4)
for other general corporate purposes. In October 1992, WTU issued $75
million of New Bonds and used the proceeds to redeem the Series N
Bonds.
WTU now proposes to extend the authorization to issue and sell the
remaining $75 million of New Bonds from December 31, 1994 to December
31, 1996, and use the proceeds to redeem the Series O Bonds.
Allegheny Power System, Inc., et al. (70-8411)
Allegheny Power System, Inc. (``APS''), 12 East 49th Street, New
York, New York, 10017, a registered holding company, has filed a post-
effective amendment to its application-declaration under Sections 6(a),
7, 9(a), 10, 12(b), 13(b), 32 and 33 of the Act and Rules 45, 53, 87,
90 and 91 thereunder.
APS requests authorization to allow its nonutility subsidiary
company, AYP Capital, Inc. (``AYP''), to engage in preliminary
development activities, to engage in activities related to the
ownership and/or operation of companies for the acquisition and
ownership of exempt wholesale generators (``EWGs''), to engage in
contracts for consulting services to nonaffiliated companies, and to
increase investment in AYP from $500,000 to $3 million through
purchases of AYP stock or capital contributions through December 31,
1996.
By order dated July 14, 1994 (HCAR No. 26085), APS was authorized
to organize AYP and to invest therein up to $500,000 to explore
investment opportunities in companies in the area of emerging
technologies related to the core utility business of APS and companies
for the acquisition and ownership of EWGs in accordance with Section 32
of the Act.
AYP now proposes to expand the scope of those previously approved
activities to include activities related to the ownership and/or
operation of companies for the acquisition and ownership of EWGs. In
addition, AYP proposes to engage in preliminary development activities
relative to opportunities with (i) qualifying cogeneration facilities,
located throughout the U.S., in accordance with the Public Utility
Regulatory Act of 1978 (``PURPA'') and regulations thereunder; (ii)
qualifying small power production facilities (``SPPs''), located
throughout the U.S., in accordance with PURPA and the regulations
thereunder; (iii) nonqualifying cogeneration facilities, nonqualifying
SPPs, and independent power production facilities (``IPPs'') located
within the service territories of APS's public-utility subsidiary
companies; (iv) EWGs; (v) companies involved in new technologies
related to the core business of APS; and (vi) foreign utility companies
in accordance with Section 33 of the Act.
Preliminary development activities would include research and
analysis of potential investment opportunities, site investigations,
proposals for finance programs, and other activities relative to the
feasibility of investment opportunities. APS states that no investment
would be made by AYP in these businesses beyond the amounts authorized
for preliminary development activities without specific Commission
approval.
In addition, APS proposes that AYP be authorized to provide
consulting services to nonaffiliated companies relative to (i)
management services and technical capabilities and expertise; (ii)
technical and procedural services; (iii) computer hardware and software
services; (iv) electronic systems and control systems services; and (v)
training sessions and seminars.
American Electric Power Company, Inc. et al. (70-8489)
American Electric Power Company, Inc. (``AEP''), a registered
holding company, and its nonutility subsidiary company, AEP
Investments, Inc. (``AEPI''), both located at 1 Riverside Plaza,
Columbus, Ohio 43215, have filed an application-declaration under
Sections 6(a), 7, 9(a), 10, 12(b) and 13(b), of the Act and Rules 45,
51, 90 and 91 thereunder
By orders dated December 11, 1991 (HCAR No. 25424) and November 2,
1992 (HCAR No. 25667), the Commission authorized AEP to organize and
acquire AEPI, whose primary purpose would be to invest in the
development of demand-side management projects, and, in particular,
authorized AEPI to invest in the development of electronic light bulb
technology with InterSource Technologies, Inc.
AEP now proposes making cash capital contributions in AEPI in an
amount not to exceed $10 million for the purpose of funding: (1) AEPI's
preliminary development and administrative activities in amounts of up
to $2 million; (2) AEPI's investment in an amount not exceeding $3
million in Holtec International (``Holtec''), a nonassociate company,
for the development of the HI-STAR and other series of multi-purpose
containers to be used for storage and transportation of spent nuclear
fuel; and (3) AEPI's acquisition of a limited partnership interest in
EnviroTech Investment Fund I Limited Partnership (``EnviroTech
Partnership'') for an amount not in excess of $5 million.
AEPI's preliminary development activities will include acquiring
options and rights, contract drafting and negotiating, preparation of
proposals and other necessary activities to identify and analyze
feasible investment opportunities. AEPI also proposes to engage in
administrative activities including the ongoing personnel, accounting,
engineering, legal, financial and other support activities necessary
for AEPI to manage its investments and its preliminary development
activities.
AEPI also proposes to invest up to $3 million from time-to-time
through December 31, 2002 in the development and licensing by Holtec of
the HI-STAR and other series of multi-purpose containers to be used for
storage and transportation of spent nuclear fuel (``HI-STAR''). Holtec
is a privately held corporation engaged in providing installation,
design and fabrication work, as well as consulting and engineering
services to utilities.
Under the HI-STAR Investment Agreement between AEPI and Holtec,
AEPI has agreed, subject to approval of this Commission, to pay Holtec
$1.2 million to reimburse Holtec for a portion of HI-STAR development
costs and to support licensing and development of HI-STAR. The funds
will be paid over approximately 30 months beginning when this
Commission approves the investment. In return for AEPI's investment,
Holtec will pay AEPI on a quarterly basis 2\1/4\% of Holtec's revenues
resulting from the worldwide sale of the HI-STAR System other than to
an affiliate of AEPI.
AEPI will also have the option to invest additional amounts if the
Nuclear Regulatory Commission revenue charges exceed $625,000 and
receive an additional 0.012% of the revenues for each $300,000 of
additional investment up to an aggregate total investment of $2.6
million. AEPI may invest $400,000 toward development of a new 75 ton
container series and receive 2\1/4\% of the revenue of that series.
AEPI will not own an equity interest in Holtec and Holtec is not and
will not become an affiliate of AEPI.
Finally, AEPI proposes to invest up to $5 million, from time-to-
time through December 31, 2002, to acquire an interest as a limited
partner (``Limited Partner'') in the EnviroTech Partnership, which will
represent not more than 9.9% of the interests of all the Limited
Partners. The EnviroTech Partnership is an investment pool being formed
to invest in companies commercializing electrotechnologies and
renewable energy technologies that promote environmental and economic
responsibility (each, ``Portfolio Companies''). The formation of the
EnviroTech Partnership is being coordinated by the Edison Electric
Institute (``EEI''), a non-profit industry-wide membership organization
comprised of electric utility companies throughout the United States.
The Limited Partners will be EEI member companies and their affiliates,
subsidiaries, parent holding companies or qualified pension or profit-
sharing plans sponsored by such companies.
The term of the EnviroTech Partnership shall be for 10 years from
the date of the Partnership Agreement, subject to extension for up to
two years upon agreement of the general partner and Limited Partners
holding 66\2/3\% of the combined limited partnership interests. The
Partnership Agreement provides that, not later than the date of
becoming a Limited Partner of the EnviroTech Partnership, each Limited
Partner shall contribute to the capital of the EnviroTech Partnership
up to 10% of its capital commitment. The balance shall be due from
time-to-time through the seventh anniversary of the final closing in
installments of not less than 5% nor more than 25%.
Subject to certain limitations set forth in the Partnership
Agreement, the management, operation, and implementation of policy of
the EnviroTech Partnership will be vested exclusively in the general
partner, which will be Advent International Limited Partnership
(``General Partner''), whose own general partner is Advent
International Corporation (``AIC''). AIC is a venture capital
investment firm managing investments in the energy and environmental
sectors. Among other powers, the General Partner shall have discretion
to invest the partnership's funds in accordance with investment
guidelines. The investment guidelines set forth criteria on approved
types of technologies, size of investment, and portfolio
diversification. Among other limitations on investment activities, the
General Partner may not cause the EnviroTech Partnership to invest: (1)
more than 7.5% of the total capital commitments in any single Portfolio
Company; (2) more than 5% of the total capital commitments in
securities of Portfolio Companies that are readily tradeable on
established securities markets; or (3) invest in hostile takeover
transactions or in highly leveraged buy-outs.
Under the terms of the Partnership Agreement, in consideration of
its services to the EnviroTech Partnership, the General Partner will be
paid an annual management fee equal to 2\1/2\% of the total amount of
the capital commitments of the partners through the first 6 years,
thereafter declining by \1/4\ of 1% on each anniversary to 1.5%
commencing on the 9th anniversary date. In addition, the General
Partner shall be entitled to reimbursement for all reasonable expenses
incurred in the organization of the EnviroTech Partnership up to
$195,000, and for other third party expenses incurred on behalf of the
EnviroTech Partnership.
All EnviroTech Partnership income and losses, including income and
losses deemed to have been realized when securities are distributed in
kind, will generally be allocated 80% to and among the Limited Partners
and 20% to the General Partner. 100% of all cash distributions to the
partners shall be made first to the Limited Partners until such time as
the Limited Partners shall have received aggregate distributions equal
to the aggregate of their respective capital contributions, and
thereafter 20% to the General Partner and 80% to the Limited Partners.
Distributions in kind of the securities of Portfolio Companies that are
listed on, or otherwise traded in, a recognized over-the-counter or
unlisted securities market may be made at the option of the General
Partner. However, AEPI will attempt in good faith to divest itself of
any such Portfolio Company securities received as a distribution in
kind as soon as practical, but in no event later than one year from the
date of their receipt.
The Southern Company (70-8505)
The Southern Company (``Southern''), 64 Perimeter Center East,
Atlanta, Georgia 30346, a registered holding company, has filed an
application-declaration under sections 6(a), 7, 9(a), 10 and 12 of the
Act and rules 43, 45 and 54 thereunder.
Southern proposes to organize and acquire all of the common stock
of a new subsidiary to be named Mobile Energy Services Company, Inc.
(``Mobile Energy''). Through Mobile Energy, Southern proposes to
purchase the energy and recovery complex (``Energy Complex'') at Scott
Paper Company's Mobile, Alabama, pulp and paper mill (``Mill''). Upon
the acquisition of the Energy Complex, Mobile Energy will become an
``electric utility company'' within the meaning of section 2(a)(3) of
the Act.
The Energy Complex consists of three turbine generators with an
aggregate rated capacity of approximately 105 MW, three power boilers,
two recovery boilers, and various ancillary facilities. The Energy
Complex provides approximately 100% and 98%, respectively, of the steam
and electric requirements of the Mill.
More than 80% of the fuel requirements of the Energy Complex are
met by waste streams (``black liquor,'' biomass and sludge) of the Mill
operations. Supplemental fuel needs are met with coal and natural gas.
Through existing electrical interconnections with the Mill and Energy
Complex, Alabama Power provides back-up and supplemental electric
service.
Mobile Energy proposes to purchase the Energy Complex for $350
million. A portion of the consideration paid would be in the form of
the assumption by Mobile Energy of Scott Paper Company's (``Scott'')
obligations under various agreements relating to certain outstanding
tax exempt industrial development bonds, due 2019 (``Tax Exempt
Bonds'') issued by the Industrial Development Board of Mobile, Alabama
(``Board''), in 1985, in connection with the financing of certain solid
waste disposal facilities. The total financed costs of the proposed
acquisition will not exceed $420 million, which includes the purchase
price, the cost of certain improvements that Mobile Energy will make to
the Energy Complex, closing costs and amounts needed for working
capital and as cash reserves to satisfy the requirements of lenders.
The financed costs will be provided as follows: (i) By equity
investments by Southern in Mobile Energy in an aggregate amount not to
exceed $105 million, in the form of purchases of all of Mobile Energy's
authorized shares of common stock and cash capital contributions; (ii)
by Mobile Energy's assumption of Scott's obligations with respect to
$85 million aggregate principal amount of Tax Exempt Bonds; and (iii)
by the issuance of up to $230 million aggregate principal amount of
notes (``Notes'') to one more financial institutions in a private
placement or to one or more underwriters for resale to qualified
institutional buyers. Closing on the sale of the Notes is anticipated
to occur in the first or second quarter of 1995. Southern proposes to
advance up to $190 million to Mobile Energy in the form of a non-
interest bearing interim loan, which would be repaid from the proceeds
of the Notes.
The Tax Exempt Bonds do not have any scheduled payments of
principal prior to maturity in 2019. The Tax Exempt Bonds currently
bear interest at a rate which is reset weekly. The bond holders have
the right to tender their Tax Exempt Bonds for repurchase upon seven
days notice. If Tax Exempt Bonds are so tendered, the remarketing agent
offers them for resale. To secure and assure liquidity for these
arrangements, Scott has delivered direct-pay letters of credit, backed
by reimbursement agreements between Scott and the issuing banks, in the
full amount of the outstanding Tax Exempt Bonds, plus a portion of the
interest thereon.
At closing, Mobile Energy will assume Scott's obligations under the
Tax Exempt Bond lease and agree to pay all of Scott's obligations under
the existing reimbursement agreements. Southern proposes to guaranty
Mobile Energy's obligations. Notwithstanding the foregoing, Scott will
remain directly and primarily liable under the Tax Exempt Bond lease
and the reimbursement agreements. Mobile Energy is obligated to cause
Scott to be discharged from all liability under the Tax Exempt Bond
lease and reimbursement agreements not later than 9 months after
closing. If Mobile Energy should fail to take action that would
discharge Scott under these agreements, Scott would have the right to
draw down on the Southern guaranty and redeem the Tax Exempt Bonds in
full.
Mobile Energy requests authority to exercise an option in the Tax
Exempt Bond documents to convert the Tax Exempt Bonds to a fixed rate
through maturity, or, alternatively, to enter into arrangements with
the Board, pursuant to which the Board would issue new fixed rate bonds
in an aggregate principal amount not to exceed $85 million and use the
proceeds thereof to redeem the existing Tax Exempt Bonds. In either
case, it is proposed that the fixed rate on the converted Tax Exempt
Bonds or new bonds would be no greater than 8\1/2\%. Upon conversion of
the Tax Exempt Bonds or issuance of new bonds, the existing letters of
credit and reimbursement obligations would be released.
It is proposed that the Notes would have maturities of from 16 to
22 years from the date of issuance and would bear interest at a fixed
rate not to exceed the sum of the yield to maturity of an actively
traded U.S. Treasury bond with a maturity equal to the average life of
the Notes (proposed to be from 13 to 15 years) plus 3\3/4\%. Southern
has requested authority to provide a guaranty to the holders of the
Notes in any amount of up to $40 mullion in lieu of part or all of any
cash funded debt service and/or working capital reserve account
balances that may be required under the terms of the Note documents.
Southern states that having the flexibility to provide a guaranty would
enable Mobile Energy to reduce the amount of Notes sold, thereby
reducing interest expense.
The obligations of Mobile Energy under the Tax Exempt Bond
documents and the Notes would be secured by the assets and properties
of Mobile Energy, including the collateral assignment of Mobile
Energy's rights under three separate 25-year energy services agreements
with Scott pursuant to which Mobile Energy will sell electricity,
steam, and black liquor processing services to Scott. The three
agreements are each with Scott in its capacity as owner of the pulp
mill, the tissue mill, and the paper mill, which are the three
components of the Mill. Separate agreements will be executed because
Scott has already announced its agreement to sell its paper mill to an
unaffiliated third party, and may in the future offer for sale either
or both of the tissue mill and pulp mill.
Mobile Energy proposes to enter into two separate interest rate
swap agreements at closing for the purpose of hedging against adverse
movements in long-term interest rates between closing and the date (not
earlier than six months after closing) on which the Tax Exempt Bonds
are converted to fixed rate bonds or redeemed from the proceeds of new
tax exempt bonds and the date (not later than June 30, 1995) on which
the Notes are sold. The term of each swap and their respective
amortization schedules would match the anticipated maturity and
amortization of the converted or new tax exempt bonds and the Notes.
Southern proposes to guaranty absolutely and unconditionally Mobile
Energy's obligations under the interest rate swap agreements.
Under the terms of the acquisition documents, Mobile Energy and
Scott will agree to indemnify each other with respect to environmental
claims relating to the Energy Complex and each of the three mills to
the extent such claims arise after closing. Southern proposes to
guaranty uninsured claims against Mobile Energy under the terms of the
environmental indemnities in an aggregate amount not to exceed $20
million, as escalated for inflation.
SEI will enter into an agreement with Mobile Energy pursuant to
which SEI will operate and maintain the Energy Complex at cost, as
determined in accordance with rules 90 and 91. At closing on the
purchase of the Energy Complex, SEI will hire a majority of the
approximately 130 current employees of Scott who are dedicated to the
Energy Complex operations. These employees will remain dedicated to the
Energy Complex.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-28543 Filed 11-17-94; 8:45 am]
BILLING CODE 8010-01-M