[Federal Register Volume 61, Number 42 (Friday, March 1, 1996)]
[Notices]
[Pages 8088-8092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-4740]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26476]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

February 23, 1996.
    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 transactions 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 March 18, 1996, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 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.

American Electric Power Company, Inc., et al. (70-8779)

    American Electric Power Company, Inc. (``AEP''), a registered 
holding company, its service company subsidiary, American Electric 
Power Service Corporation (``AEPSC''), both of 1 Riverside Plaza, 
Columbus, Ohio 43215, and all of AEP's public-utility company 
subsidiaries (``Operating Companies''),\1\ have filed an application-
declaration under sections 6(a), 7, 9(a), 12(b) and 13(b) of the Act 
and rules 45 and 52 thereunder.

    \1\Appalachian Power Company, 40 Franklin Rd., Roanoke, 
Virginia, 24022; Columbus Southern Power Company, 215 No. Front St., 
Columbus, Ohio, 43215; Indiana Michigan Power Company, One Summit 
Sq., Fort Wayne, Indiana, 46801; Kentucky Power Company, 1701 
Central Ave., Ashland, Kentucky, 41101; Kingsport Power Company, 422 
Broad St., Kingsport, Tennessee, 37660; Ohio Power Company, 339 
Cleveland Ave., S.W., Canton, Ohio 44702; and Wheeling Power Company 
51-16th St., Wheeling, West Virginia, 26003.
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    AEP proposes from time to time through December 31, 2000, to form 
one or more direct or indirect new subsidiaries (``New Subsidiaries'') 
to engage in the business of brokering and marketing energy 
commodities, which are defined to include natural and manufactured gas, 
electric power, emission allowances, coal, oil, refined petroleum and 
petroleum products and natural gas liquids (``Energy Commodities''). 
The New Subsidiaries will receive a commission for their brokering 
activities, which will include arranging the sale and purchase, 
transportation, transmission and storage of Energy Commodities. Their 
proposed marketing activities encompass entering into contracts to 
sell, purchase, exchange, pool, transport, transmit, distribute, store 
and otherwise deal in Energy Commodities. The New Subsidiaries may from 
time to time have an inventory of Energy Commodities; however, they 
will not own or operate facilities used for the production, generation, 
processing, storage, transmission, transportation, or distribution of 
Energy Commodities. The applicants assert that no New Subsidiary will 
be a public utility company under the Act.
    The New Subsidiaries propose to broker and market Energy 
Commodities to wholesale customers and, where permitted by law, to 
retail customers. In order to manage risks associated with brokering 
and marketing Energy Commodities, the New Subsidiaries may enter into 
futures, forwards, swaps and options contracts relating to Energy 
Commodities (``Arbitrage Transaction''). No Arbitrage Transaction will 
be entered into for speculation.
    The applicants propose that a New Subsidiary initially issue and 
sell up to 100 shares of common stock for approximately $100 to AEP or 
a subsidiary of AEP. Subsequently, American intends to acquire 
additional shares of stock or make capital contributions to the New 
Subsidiaries in an amount that, when aggregated with the initial 
capitalization of the New Subsidiaries, will not exceed $100 million.
    AEP also proposes from time to time through December 31, 2000, to 
guarantee the debt and other obligations of the New Subsidiaries. The 
maximum amount of debt and other obligations that AEP proposes to 
guarantee is $50 million and $200 million, respectively. Debt financing 
of the New Subsidiaries that is guaranteed by AEP will not (i) exceed a 
term of 15 years or (ii)(a) bear a rate equivalent to a floating 
interest rate in excess of 2.0% over the prime rate, London Interbank 
Offered Rate or other appropriate index in effect from time to time or 
(b) bear a fixed rate in excess of 2.5% above the yield at the time of 
issuance of United States Treasury obligations of a comparable 
maturity. Any commitment and other fees on the debt will not exceed 50 
basis points per annum on the total amount of debt financing.
    AEP may guarantee other obligations where needed for the New 
Subsidiaries to demonstrate that they have support for their 
contractual obligations. Other obligations that AEP may guarantee, 
excluding debt, may take the form of bid bonds or performance or other 
direct or indirect guarantees of contractual or other obligations.
    The New Subsidiaries propose to enter into service agreements with 
AEPSC and the Operating Companies, under which personnel and other 
resources, if available, of AEPSC and the Operating Companies may be 
used to support the New Subsidiaries' activities. Any service 
agreements will require that AEPSC and the Operating Companies provide, 
account for and bill their services, utilizing a work order system, on 
a full cost reimbursement in accordance with rules 90 and 91. All 
direct charges and prorated shares of other related service costs will 
be reimbursed.
    Any service agreements also will provide that AEPSC and the 
Operating Companies make warranties of due care and compliance with 
applicable laws to the New Subsidiaries with respect to the performance 
of the servicesrequested, but failure to meet these obligations will 
not subject them to any claim or liability, other than to reperform the 
work at cost. Furthermore, AEPSC and the Operating Companies will be 
indemnified by the New Subsidiaries against liabilities to or claims of 
third parties arising out of the performance of work on behalf of the 
New Subsidiaries.
    Initially, the New Subsidiaries are not expected to have employees 
and will use the personnel and resources of AEPSC and the Operating 
Companies to broker and market Energy Commodities. No more than 1% of 
the employees of the Operating Companies will render, directly or 
indirectly, services to the New Subsidiaries at any one time.

New England Electric System, et al. (70-8733)

    New England Electric System (NEES), a registered holding company, 
and its nonutility subsidiary company, New England Electric Resources, 
Inc. (``NEERI'') (together, ``Applicants''), both located at 25 
Research Drive, 

[[Page 8090]]
Westborough, Massachusetts 01582, have filed an application-declaration 
under sections 6(a), 7, 9(a), 10, 12(b), 13(b), 32, and 33 of the Act 
and rules 45 and 54 thereunder.
    NEES and NEERI propose to acquire interests in, finance the 
acquisition, and hold the securities, of one or more exempt wholesale 
generators (``EWG'') as defined in section 32 of the Act and/or foreign 
utility companies (``FUCO'') as defined in section 33 (together, 
``Exempt Companies''), either directly or indirectly, through a project 
entity (``Project Parent''), as discussed below, without filing 
specific project applications. The Applicants propose the following 
limitations on such authority: (1) The full amount of any investment or 
financing, as well as any authorized guarantees or assumptions of 
liability, shall be counted as part of a total investment cap of $60 
million (``Total Authority''), as defined below; and (2) no investment 
or financing will be made unless at the time of the investment or 
financing, and after giving effect to the investment or financing, 
NEES' ``aggregate investment,'' as defined in rule 53(a)(1)(i), in 
EWGs, FUCOs and Project Parents does not exceed 50% of the system's 
``consolidated retained earnings,'' as defined in rule 53(a)(1)(ii).
    To facilitate the acquisition and ownership of Exempt Companies, 
NEES and NEERI seek authority to organize, form or acquire, and to 
liquidate, dissolve or sell, in whole or in part, subsidiary Project 
Parents. Project Parents shall engage, directly or indirectly, and 
exclusively, in the business of owning and holding the interests and 
securities of one or more Exempt Companies and in project development 
activities relating to the acquisition of such interests and securities 
and the underlying electrical generation, transmission and distribution 
projects (``Investment Projects'').
    Project parents shall be special purpose domestic or foreign 
corporations, partnerships or limited liability companies (or the 
equivalent of such entities in the foreign country where such Project 
Parent may be formed). NEES and NEERI propose to form Project Parents 
at any time: (1) To make bids or submit proposals to acquire interests 
in Exempt Companies; and (2) to facilitate and/or close on the 
acquisition or financing of interests in Exempt Companies. Project 
Parents may also be formed to participate in joint ventures with 
nonassociates for the purpose of owning interests in Exempt Companies 
and/or engaging in Investment Projects.
    The Project Parents may issue securities to NEES and/or NEERI and 
NEES and/or NEERI may acquire such securities. The securities may take 
the form of capital stock or shares, debt securities, trust 
certificates, partnership interests or other equity or participation 
interests.
    NEERI may provide Project Parents, and Project Parents may provide 
their subsidiaries, services necessary or desirable for their 
operations, including, without limitation, management, engineering, 
employment, administrative, tax, consulting, accounting, and computer 
and software support. The services that NEERI and/or the Project 
Parents will provide will not be provided for any associate company 
which derives, directly or indirectly, any material part of its income 
from sources within the United States, and which is a public utility 
company operating within the United States. In these cases the 
Applicants have requested an exemption under section 13(b) of the Act.
    NEES proposes to finance, from time-to-time through December 31, 
1998, the activities of NEERI and Project Parents (``NEES 
Investments''). The NEES Investments may take the form of purchases of 
capital shares, partnership interests, trust certificates (or the 
equivalent of any of the foregoing under the laws of foreign 
jurisdictions), capital contributions, subordinated loans evidenced by 
subordinated promissory notes, open account advances, guarantees, bid 
bonds or other credit support to secure obligations incurred by NEERI 
and/or Project Parents in connection with Exempt Company investments or 
of NEERI's undertaking to contribute equity to a Project Parent.
    NEES may enter into reimbursement agreements with banks to support 
letters of credit delivered as security for NEES' or NEERI's equity 
contribution obligation to a Project Parent or otherwise in connection 
with a Project Parent's or NEERI's Exempt Company project development 
activities.
    NEES and NEERI also propose to, from time-to-time through December 
31, 1998: (1) Guarantee the indebtedness or other obligations of one or 
more Exempt Companies; (2) assume the liabilities of one or more Exempt 
Companies; and/or (3) enter into guarantees and letters of credit 
reimbursement agreements in support of equity contribution obligations 
or otherwise in connection with project development activities for one 
or more Exempt Companies (``Exempt Company Investments''), as discussed 
below.
    NEES and NEERI propose that the amount of the Total Authority be 
reduced from time-to-time by the amount of NEES Investments and/or 
Exempt Company Investments made, and Non-Recourse Debt issued, and be 
increased from time-to-time by: (1) Proceeds received upon the sale, 
liquidation, repayment or other disposition of any NEES Investment or 
Exempt Company Investment; (2) proceeds generated from NEERI or Project 
Parents' activities in connection with their investments in Exempt 
Companies or any particular Investment Project in which NEERI or NEES 
has an interest; (3) the reimbursement of such NEES Investments or 
Exempt Company Investments out of the proceeds of any third party 
financing of NEERI's or Project Parents' activities or any particular 
Investment Project in which NEERI or NEES, directly or indirectly, has 
an interest; or (4) the extent to which Non-Recourse Debt issued has 
been paid. In any case in which NEES and NEERI together own less than 
all of the equity interests of a Project Parent, only that percentage 
of the non-recourse indebtedness of such Project Parent equal to NEES' 
and NEERI's combined equity ownership percentage shall be included for 
purposes of the foregoing limitation.
    NEES Investments may be made from NEES to NEERI and/or Project 
Parents directly or indirectly. Any open account advance made by NEES 
will be non-interest bearing and shall have a maturity not exceeding 
one year. Any promissory note issued to NEES by NEERI or a Project 
Parent, or to NEERI by a Project Parent, and any promissory note or 
other similar evidence of indebtedness issued by a Project Parent to a 
person other than NEES or NEERI with respect to which NEES or NEERI may 
issue a guarantee, would mature not later than 30 years after the date 
of issuance. It would bear interest at a rate not greater than the 
prime rate of a bank to be designated by NEES in the case of a 
promissory note issued to NEES or NEERI. In the case of any note or 
similar evidence of indebtedness issued to a person other than NEES or 
NEERI and guaranteed by NEES or NEERI, the rate would not exceed (a) 
the greater of 250 basis points above the lending bank's or other 
recognized prime rate and 50 basis points above the federal funds rate; 
(b) 400 basis points above the specified London Interbank Offered Rate 
plus any applicable reserve requirement; or (c) a negotiated fixed rate 
500 basis points above the 30 year ``current coupon'' treasury bond 
rate if such note or other indebtedness is U.S. dollar denominated. If 
such note or other indebtedness is denominated in the 

[[Page 8091]]
currency of a foreign nation, the interest rate will not exceed a fixed 
or floating rate which, when adjusted for the prevailing rate of 
inflation, would be equivalent to a rate on a U.S. dollar denominated 
borrowing of identical average life that does not exceed 10% over the 
highest rate set forth above.
    Any reimbursement agreement supporting a letter of credit would 
have a term not in excess of 30 years. Drawings under any such letter 
of credit would bear interest at not more than 5% above the prime rate 
of the letter of credit bank as in effect from time-to-time, and letter 
of credit fees would not exceed 1% annually of the face amount of the 
letter of credit.

New England Electric Resources, Inc. (70-8785)

    New England Electric System (``NEES''), a registered holding 
company, and its research and development subsidiary company, New 
England Electric Resources, Inc. (``NEERI'') (together, 
``Applicants''), both located at 25 Research Drive, Westborough, 
Massachusetts 01582, have filed an application under sections 9(a) and 
10 of the Act.
    By order dated February 23, 1995 (HCAR No. 26235) (``Order''), 
NEERI was authorized to invest up to $10 million in research and 
development activities. The Order provided that NEERI could invest in 
projects and technologies, which could include electro-technologies, 
energy efficiency and power quality measures, other developing 
environmental technologies and new generation and transmission 
technologies. The Order was issued on the condition that particular 
acquisitions remained subject to further Commission authorization.
    Applicants now propose to make an initial investment of $500,000, 
and a possible second investment in the same amount, in Monitoring 
Technology Corporation (``MTC''), a Virginia corporation and the 
developer of a vibration monitoring technology for the risk management 
and performance monitoring of power turbines. MTC is developing a 
method to read vibration frequency ``signatures'' of power turbines and 
other turbomachines. This technology, referred to as Rotational 
Vibration Monitoring (``RVM''), would enable turbine operators to 
monitor their machines during normal operations and quantitatively 
analyze turbine performance and predict mechanical problems. This 
method of continuous, automated on-line monitoring, when compared to 
present technology, would result in: (1) Reduced turbine maintenance 
costs; (2) early warning of some potential catastrophic failures; and 
(3) ultimately more efficient turbine performance. While initially 
targeted at electric utilities, RVM technology has the potential for 
further application in other areas, such as propulsion and industrial 
turbines.
    In consideration of NEERI's initial $500,000 equity investment and 
subsequent investments in the same amount, MTC will: (1) Issue shares 
of preferred stock and warrants to NEERI; (2) waive a participation 
fee, currently estimated at $200,000, for NEERI's associated power 
company, New England Power (``NEP''), to participate as a testing site 
for MTC's vibration monitoring technology; and (3) offer NEP 
significant discounts on certain future services from MTC.
    NEERI proposes to purchase shares of MTC's convertible preferred 
stock (``Shares'') at a price of $1.75 per share, for a total equity 
investment of $500,000. NEERI's investment in the Shares will result in 
NEERI's ownership of not more than 4.99% of the voting securities of 
MTC. The Shares may be converted to shares of common stock upon the 
closing of an initial public offering, in which MTC's proceeds from 
such offering are not less than $10 million and in which the share 
offering price is $3.50 or more. NEERI will also receive A and B 
warrants which will be exercisable under certain terms and conditions 
to ensure that NEERI's ownership does not exceed 4.99% of the voting 
securities of MTC. Both the Shares and warrants will have full ratchet 
anti-dilution protection.
    Further, the Applicants propose to make additional investments in 
MTC on an emergency basis prior to its commercialization period in 
amounts of up to $500,000. The investments will take the form of 
preferred or common stock, warrants or debt that is convertible to 
equity.

General Public Utilities Corporation (70-8793)

    General Public Utilities Corporation (``GPU''), 100 Interpace 
Parkway, Parsippany, New Jersey 07054, has filed a declaration under 
sections 6(a), 7 and 12(b) of the Act and rules 45 and 54 thereunder.
    By order dated September 29, 1993 (HCAR No. 25898), the Commission, 
among other things, authorized GPU Service Corporation, GPU's 
subsidiary service company (``Service Company''), to enter into a Term 
Loan, Revolving Credit and Guaranty Agreement, dated September 30, 1993 
(``FUNB Loan Agreement''), with First Union National Bank (successor in 
interest to First Fidelity Bank, National Association, New Jersey) 
(``FUNB'') and to issue to FUNB its unsecured promissory notes maturing 
not later than September 30, 1998, representing borrowings thereunder 
in the amount of up to $16.5 million (of which $11.5 million 
constituted a term loan and $5 million a revolving credit facility 
which facility has expired). The proceeds of the term loan borrowings 
were used to refinance $11.5 million of Service Company's then 
outstanding indebtedness which Service Company had incurred to finance 
the construction and equipping of its Parsippany, New Jersey 
headquarters office building. The revolving credit borrowings were to 
be used for general corporate purposes including capital expenditures. 
The Commission further authorized GPU to unconditionally guarantee 
payment of principal of and interest on the notes and Service Company's 
other obligations to FUNB under the FUN Loan Agreement.
    By order dated April 24, 1986 (HCAR No. 24069) (``April Order''), 
the Commission, among other things, authorized Service Company to issue 
to Aetna Life Insurance Company (``Aetna'') $32 million aggregate 
principal amount of its secured notes (``Aetna Loan''), maturing not 
later than December 31, 2001, secured by a first lien and security 
interest in Service Company's Reading, Pennsylvania office building. 
The proceeds of such borrowing were used to repay then outstanding 
borrowings incurred to finance the construction and equipping of the 
Reading office building and for working capital purposes. The April 
Order also authorized GPU to guarantee Service Company's payment of 
principal and interest on and performance of its other obligations with 
respect to these secured notes.
    As of February 1, 1996, the principal amount of borrowings 
outstanding under the FUNB Loan Agreement and Aetna Loan was $11.5 
million and $19.2 million, respectively. The Aetna Loan bears interest 
at a fixed rate of 10.87% per annum. Notes issued under the FUNB Loan 
Agreement bear interest at fluctuating rates based upon (i) FUNB's base 
rate, or (ii) the London Interbank Offered Rate plus 37.5 basis points 
and the applicable reserve.
    Service Company has determined that market conditions are 
sufficiently favorable to warrant a refinancing of the Aetna Loan and, 
possibly, at the same time a refinancing of borrowings under the FUNB 
Loan Agreement as well. Accordingly, Service Company now intends, from 
time to time through February 1, 2006, to borrow up to $40 

[[Page 8092]]
million from one or more commercial banks or other institutions under 
one or more new term loan and/or revolving credit facilities (``New 
Loan Agreement'') entered into on or before February 1, 2006. Each New 
Loan Agreement would provide for interest at negotiated market rates 
but, in any case, not in excess of the greater of (i) 150 basis points 
above the greater of (a) the lending bank's or other recognized prime 
rate and (b) 50 basis points above the federal funds rate, (ii) 200 
basis points above the specified London Interbank Offered Rate plus any 
applicable reserve requirement, (iii) a negotiated fixed rate which, in 
any event, would not exceed 300 basis points above the treasury bond 
rate with an identical average life, or (iv) a rate equal to the 
average domestic money bid rate for certificates of deposit of similar 
maturities, plus up to 100 basis points and any applicable reserve 
requirements; and would include other customary terms and conditions. 
Loans under each New Loan Agreement would have a maturity of up to 20 
years and may be evidenced by promissory notes. Proceeds of borrowings 
under the New Loan Agreement would be used to repay all or a portion of 
the outstanding borrowings under the FUNB Loan Agreement. The balance 
would be used for working capital and other corporate purposes.
    In order to enable Service Company to borrow at more favorable 
rates and other terms, GPU proposes, from time to time through February 
1, 2006, to enter into guaranty agreements in favor of the banks or 
other institutional lenders under the New Loan Agreements to 
unconditionally guarantee payment of principal, interest and Service 
Company's other obligations under the New Loan Agreements.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-4740 Filed 2-29-96; 8:45 am]
BILLING CODE 8010-01-M