[Federal Register Volume 61, Number 213 (Friday, November 1, 1996)]
[Notices]
[Pages 56581-56586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28003]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26597]
Filings Under the Public Utility Holding Company Act of 1935, as
amended (``Act'')
October 25, 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
applications(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 November 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.
[[Page 56582]]
New England Electric System (70-7338)
New England Electric System (``NEES''), 25 Research Drive,
Westborough, Massachusetts 01582, a registered holding company, has
filed a post-effective amendment under sections 6(a) and 7 to its
application-declaration filed previously under sections 6(a), 7, 9(a),
10 and 12(c) of the Act and rules 42 and 50(a)(5) thereunder.
By orders dated August 1, 1977, June 7, 1979, December 22, 1981,
September 28, 1982, November 19, 1985, March 10, 1987, February 22,
1991 and December 29, 1993 (HCAR Nos. 20121, 21091, 22333, 22649,
23913, 24337, 25261 and 25966, respectively), NEES was authorized to
issue and sell, through December 31, 1996, up to an aggregate of
10,693,536 shares of its authorized but unissued common stock, $1.00
par value, pursuant to the NEES System Dividend Reinvestment and Common
Share Purchase Plan (``Plan''). NEES has issued 9,093,835 of such
shares through August 31, 1996 under the Plan. The Plan also provides
that NEES may elect to purchase shares of its common stock on the open
market and resell those shares to the Plan at the market price.
NEES now proposes to renew its authority through December 31, 2001
to issue and sell up to 10,693,536 shares of its authorized but
unissued common stock pursuant to its Plan, such that, together with
any other shares of common stock issued and sold under the Plan, the
aggregate does not exceed 10,693,536 shares of common stock. In
addition to the unissued shares of common stock, NEES may elect to
purchase shares of its common stock on the open market and sell these
shares to the Plan at the market price. In all respects, the terms and
conditions associated with the issuance and sale of the common shares
will remain as previously authorized.
The proceeds from the sale of the common stock will be added to
NEES' general funds and be used for any or all of the following
purposes: (1) investment in NEES' subsidiaries; (2) repayment of NEES'
debt; and (3) for other corporate purposes relating to ordinary
business operations, including working capital.
Central and South West Corporation, et al. (70-8133)
Central and South West Corporation, 1616 Woodall Rodgers Freeway,
P.O. Box 660164, Dallas, Texas 75202, a registered holding company, and
its direct and indirect subsidiaries, CSW Energy, Inc. (``CSW
Energy''), 1616 Woodall Rodgers Freeway, P.O. Box 660789, Dallas, Texas
75202, and CSW Development-I, Inc. (``Energy Sub''), a wholly owned
subsidiary of CSW Energy, Orange Cogeneration GP II, Inc. (``Orange GP
Sub''), a subsidiary of Energy Sub, CSW Orange II, Inc. (``Orange LP
Sub''), a wholly owned subsidiary of Energy Sub, Orange Cogeneration
G.P., Inc. (``JV Sub''), a wholly owned subsidiary of Orange GP Sub,
CSW Orange, Inc. (``CSW Orange''), a wholly owned subsidiary of Orange
LP Sub, and Orange Cogeneration Limited Partnership (``Project
Venture''), a subsidiary of JV Sub and CSW Orange, each of 1616 Woodall
Rodgers Freeway, P.O. Box 660164, Dallas, Texas 75202 (collectively,
``Applicants'') have filed a post-effective amendment under sections
6(a), 7, 9(a), 10, and 12(b) of the Act and rules 43, 45, 51 and 54
thereunder to their application-declaration, as amended, filed under
sections 6(a), 7, 9(a), 10, 12(b) and 12(c) of the Act and rules 42,
43, 45(a), 45(b), 50 and 51 thereunder.
By order dated April 15, 1993 (HCAR No. 25796) (``1993 Order''),
the Commission authorized CSW and CSW Energy to, among other things,
form CSW Orange, JV Sub and the Project Venture and to purchase from
certain third parties a cogeneration facility located near Bartow,
Florida (``Project''). The Commission also authorized the then existing
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) (``February 1994
Order''), the Commission authorized CSW, CSW Energy, Energy Sub, CSW
Orange, Project Venture and JV Sub (``1994 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 1994 Applicants were authorized to advance certain funds
in the event the Project Venture was 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 CSW Energy in an aggregate amount not to
exceed $125 million. In addition, the Commission authorized the
issuance of corporate guaranties by the 1994 Applicants or standby
letters of credit (with either CSW or CSW Energy as account party
thereunder) 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.
By order dated September 12, 1994 (HCAR No. 26122), the Commission
authorized the 1994 Applicants to organize two special purpose
subsidiaries, Orange LP Sub and Orange GP Sub, in order to aid in the
procurement of the Credit Facility.
Applicants now propose: (i) To organize a wholly owned subsidiary
of the Project Venture (``OCLP Sub''); (ii) that the Project Venture
acquire all of the to-be-issued common stock of the OCLP Sub; (iii)
that the Project Venture may fund the previously-approved Credit
Facility from one or more third parties to be determined (each, a
``Project Lender'') that will purchase certain debt securities to be
issued either by the Project Venture or OCLP Sub in an amount not to
exceed $140 million for the construction and operation of the Project;
(iv) that OCLP Sub loan to the Project Venture the proceeds of the
Orange Securities received by OCLP Sub; (v) that Project Venture, JV
Sub, CSW Orange, Orange GP Sub and Orange LP Sub guarantee OCLP Sub's
obligations under the Orange Securities; and (vi) that Project Venture,
JV Sub, CSW Orange, Orange GP Sub and Orange LP, Sub pledge
substantially all of its respective assets, including the partnership
interests in the Project Venture held by JV Sub and CSW Orange, the
securities of JV Sub held by Orange GP Sub, and the securities of CSW
Orange held by Orange LP Sub, to secure OCLP Sub's obligations under
the Orange Securities.
Applicants state that, as previously approved, the Credit Facility
would include: (1) A construction loan in an amount not to exceed $130
million, to be later converted to, or refinanced by, a term loan or
repaid by additional equity capital provided by a new limited partner
(``New Limited Partner'') in the Project Venture, which New Limited
Partner would have a right to distributions from the Project Venture on
a preferred basis, and (2) letters of credit and a revolving working
capital credit line, each to be provided by the Project Lender, in an
aggregate amount not to exceed $10 million to issue any letters of
credit or guaranties that may be required by any fuel suppliers, fuel
transporters or other third parties under the Project documents and to
fund working capital for the Project. Alternatively, the Credit
Facility now could include: (1) The issuance by OCLP Sub of certain
debt securities to third parties (``Orange Securities'') in reliance on
exemptions to the
[[Page 56583]]
registration of such securities under the Securities Act of 1933, as
amended, including such exemptions available under Rule 144A
thereunder, which third party Project Lenders will have no recourse
under the Orange Securities to CSW or any of its domestic public
utility subsidiaries; or (2) any combination of the financing described
above, provided that in no event shall such financing in the aggregate
exceed $140 million. Applicants anticipate that any unreimbursed
drawings under any letters of credit issued as part of the Credit
Facility will be treated as loans thereunder. It is further anticipated
that the stock of JV Sub held by Orange GP Sub, the stock of CSW Orange
held by Orange LP Sub, the Project assets owned by the Project Venture
and the partnership interests of the Project Venture held by each of JV
Sub and CSW Orange may be required to be pledged as collateral to the
Project Lender as a condition to obtaining the Credit Facility.
To the extent that any proceeds remain in the Credit Facility after
repaying the construction loan or issuing term debt to the New Limited
Partner, as the case may be, the Project Venture may distribute the
proceeds to its partners, including JV Sub and CSW Orange, to reimburse
such partners for costs and risks incurred by such partners in
connection with the development and construction of the Project.
As mentioned above, it is anticipated that OCLP Sub would loan to
the Project Venture the proceeds of the Orange Securities received by
OCLP Sub (``OCLP Sub Loan''). The OCLP Sub Loan would be on
substantially the same terms as the Orange Securities, which terms
would be established by OCLP Sub and the Project Lenders in an arm's
length transaction in accordance with market expectations and
requirements, to ensure that OCLP Sub will be able to make the debt
payments required with respect to the Orange Securities. The Project
Venture would distribute the proceeds of the OCLP Sub Loan to its
partners, including JV Sub and CSW Orange, to reimburse such partners
for costs and risks incurred by such partners in connection with the
development and construction of the Project.
Applicants further propose that, once formed, OCLP be included 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 September 1994 Order.
Central and South West Corp., et al. (70-8469)
Central and South West Corporation (``CSW''), a registered holding
company, CSW Energy, Inc. (``CSW Energy''), a wholly-owned non-utility
subsidiary company of CSW, and five special-purpose, wholly-owned
subsidiary companies of CSW Energy, CSW Sweeny GP, Inc. (``Sweeny GP
I''), CSW Sweeny GP II, Inc. (``Sweeny GP II''), CSW Sweeny LP, Inc.
(``Sweeny LP I''), CSW Sweeny LP II, Inc. (``Sweeny LP II''), and
Sweeny Cogeneration L.P. (``Partnership''), all of 1616 Woodall Rodgers
Freeway, P.O. Box 660164, Dallas, Texas, 75202, have filed a post-
effective amendment, under sections 6(a), 7 and 12(b) of the Act and
rules 45 and 54 thereunder, to an application-declaration filed under
sections 6, 7, 9(a), 10, and 12(b) of the Act and rules 45 and 51
thereunder.
By order dated December 9, 1994 (HCAR No. 26184) the Commission
authorized CSW and CSW Energy to form Sweeny GP I, Sweeny GP II, Sweeny
LP I, Sweeny LP II, and the Partnership, and to incur certain
development expenses not to exceed $20 million in connection with the
investment in and development, construction, ownership and operation of
a qualifying cogeneration facility known as the Sweeny Cogeneration
Project (``Project'').
By order dated May 29, 1996 (HCAR No. 26522), the Commission
authorized the applicants (i) to obtain from third parties (``Project
Lender'') a credit facility (``Credit Facility'') for the construction
and operation of the Project in an amount of up to $250 million, (ii)
to provide advances to the Partnership in an amount not to exceed $250
million in the event the Project could not be financed prior to the
commencement of construction, (iii) to obtain or arrange for
irrevocable standby letters of credit or to issue guarantees of up to
$50 million, and (iv) to provide up to $250 million in equity support
to the Project in the form of an equity support agreement, guarantee or
letter of credit to the Project Lender.
The applicants now seek Commission authorization to provide up to
$250 million in equity support to the Project in the form of an equity
support agreement, guarantee or letter of credit to the interest that
will purchase electric power and thermal energy from the Project.
GPU International, Inc. (70-8913)
GPU International, Inc. (``GPUI'') (formerly Energy Initiatives,
Inc.), One Upper Pond Road, Parsippany, New Jersey 07054, a wholly-
owned nonutility subsidiary company of GPU, Inc. (``GPU''), a
registered holding company, has filed an application under sections
9(a) and 10 of the Act and rule 54 thereunder.
GPUI proposes to enter into a joint venture (``JV''), directly or
through a to-be-formed direct or indirect wholly-owned subsidiary
(``Subsidiary''), with one or more nonaffiliated entities to develop,
manufacture and market stationary electric power systems employing fuel
cell technology. GPUI states that fuel cells produce electricity
directly without combustion, cleanly and with high efficiency. GPUI
believes that fuel cell stationary power plants could become an
attractive low emission source of power, for both utility and
nonutility applications; GPUI notes that fuel cell power plants could
be used by electric distribution companies, such as GPU's electric
utility subsidiary companies, and their commercialization could
generate additional revenues and earnings for the GPU system. GPUI
expects that power systems of 1 kw or more would be included in the
JV's business and that smaller systems might also be included if
otherwise consistent with the concept of ``stationary systems'', those
having a more or less fixed location.
One of the JV partners will be an entity which has been in the
business of developing and marketing fuel cell-based power systems for
several years (``JV Partner''). The JV Partner will license the
relevant technology and provide technical and administrative support to
the JV. GPUI states that the JV will not own or operate any facilities
for the generation, transmission or distribution of electric energy
and, therefore, neither the JV nor any Subsidiary will fall within the
definition of an ``electric utility company'' under section 2(a)(3) of
the Act.
The JV Partner and GPUI are in the process of negotiating the
definitive terms, conditions and structure of the JV. GPUI anticipates
that the JV will take the form of a corporation, partnership or other
limited liability company organized under the laws of a state of the
United States or other appropriate jurisdiction. GPUI also anticipates
that the JV Partner will hold a majority ownership interest in the JV
and that GPUI and other JV participants will receive certain to-be-
agreed upon minority shareholder protective rights. GPUI expects that
its voting interest in the JV will not exceed 9.9%. In connection with
its proposed participation in the JV, GPUI may also receive warrants,
options or other
[[Page 56584]]
similar rights to acquire securities of the JV Partner and a right/
opportunity to acquire securities of joint venture projects to be
formed by the JV Partner, excluding the JV.
GPUI states that its aggregate investment in the JV will not exceed
$30 million, and expects to fund the proposed investment through
capital contributions from GPU, internally generated sources at GPUI or
drawdowns by GPUI under existing lines of credit, or any combination of
the foregoing.
GPUI requests authority to acquire an interest in the stationary
fuel cell-based power system business, and to acquire the securities of
a Subsidiary and/or, directly or indirectly, the securities of the JV.
With respect to the acquisition of securities of a Subsidiary and/or
the JV, GPUI requests that the authorization expire upon the first to
occur of December 31, 2000 and the adoption by the Commission of
proposed rule 58 or such other rule, regulation or order as shall
exempt the proposed transactions from section 9(a).
Consolidated Natural Gas Company, et al. (70-8929)
Consolidated Natural Gas Company (``CNG''), CNG Tower, 625 Liberty
Avenue, Pittsburgh, Pennsylvania, 15222-3199, a registered holding
company, and its wholly owned gas public-utility subsidiaries, The East
Ohio Gas Company (``EOG''), 1717 East Ninth Street, Cleveland, Ohio
44114, and West Ohio Gas Company (``WOG''), 319 Market Street, Lima,
Ohio 45802, have filed an application-declaration under sections 6(a),
7, 9(a) and 10 of the Act and rules 43, 44, 45 and 54 thereunder.
CNG proposes to reorganize a portion of its system by merging EOG
and WOG, with EOG as the surviving corporation succeeding to all
powers, privileges, and franchises and subject to all restrictions,
disabilities, liabilities, and duties of both companies. Under the
Agreement and Plan of Merger, each issued and outstanding share of WOG
common stock, $10,000 par value per share, will be cancelled and
extinguished, and each issued and outstanding shares of EOG common
stock, $50 par value, will remain outstanding subsequent to the merger.
The applicants also request for EOG, after the merger, to succeed
to any authorizations granted by the Commission to WOG under the Act
which may still be effective and which therefore should appropriately
survive as to EOG after the merger. Therefore, all promissory notes and
other indebtedness of WOG will become obligations of EOG, and the
capital and retained earnings of WOG will be carried forward as capital
and retained earnings of EOG. All property and all debts due to either
company will be vested in EOG under the proposed merger, and any and
all rights of creditors and all liens upon any property of WOG and EOG
will be preserved unimpaired. The WOG properties to which EOG will
proceed as owner will be recorded on EOG's books of account at the
historical value of such properties as carried on WOG's books.
American Electric Power Company, Inc., et al. (70-8931)
American Electric Power Company, Inc., 1 Riverside Plaza, Columbus,
Ohio 43215, a registered holding company, and its electric utility
subsidiary companies, AEP Generating Company, 1 Riverside Plaza,
Columbus, Ohio 43215; Appalachian Power Company, 40 Franklin Road,
S.W., Roanoke, Virginia 24011; Columbus Southern Power Company, 215
North Front Street, Columbus, Ohio 43215; Indiana Michigan Power
Company, One Summit Square, P.O. Box 60, Fort Wayne, Indiana 46801;
Kentucky Power Company, 1701 Central Avenue, Ashland, Kentucky 41101;
Kingsport Power Company, 40 Franklin Road, S.W., Roanoke, Virginia
24011; Ohio Power Company, 301 Cleveland Avenue, S.W., Canton, Ohio
44701; and Wheeling Power Company, 51 Sixteenth Street, Wheeling, West
Virginia 26003 (collectively, ``Declarants''), have filed a declaration
under section 12(d) of the Act and rules 44 and 54 thereunder.
Declarants request authorization to sell and/or transfer certain
utility assets to customers and noncustomers for a period ending
December 31, 2001 without prior Commission approval. It is stated that
the consideration for the transfers will be not less than the net book
value of the assets and will not exceed $5 million per operating
subsidiary per calendar year and $50 million in any calendar year for
the AEP System. In the case of a lease, the lease payments will be
valued over the term of the lease and be counted against the exemption
amount in the initial year of the lease.
SEI Birchwood, Inc., et al. (70-8935)
SEI Birchwood, Inc. (``SEI Birchwood''), a direct nonutility
subsidiary of SEI Holdings, Inc., a direct nonutility subsidiary of The
Southern Company, a registered holding company, and Birchwood Power
Partners, L.P. (``BPP'') (together, ``Applicants''), a subsidiary of
SEI Birchwood, both located at 900 Ashwood Parkway, Suite 500, Atlanta,
GA 30338, have filed a joint application pursuant to sections 9(a) and
10 of the Act and rule 54 thereunder.
SEI Birchwood and Cogentrix/Birchwood Two, L.P. (``Cogentrix
Two''), a nonassociate limited partnership, each hold a 2% general and
48% limited partnership interest in BPP (together, ``Owners''). BPP
owns a 237 MW coal-fired cogeneration power plant in Virginia
(``Plant''). The Plant produces electricity for sale at wholesale to
Virginia Electric and Power Company under a long-term contract. The
Plant also produces and delivers steam to a 36-acre greenhouse complex
(``Greenhouse Facility'') located on a site that is adjacent to the
Plant. The Plant and Greenhouse Facility (together, ``Project'') were
constructed as integrated parts of a single project that was intended
to qualify as a cogeneration ``qualifying facility'' (``QF'') under the
Public Utility Regulatory Policies Act of 1978, as amended (``PURPA'').
The Federal Energy Regulatory Commission (``FERC'') certified the
Project on the basis, among others, that it would use steam produced by
BPP for the Greenhouse Facility operations in quantities sufficient to
satisfy the operating standards applicable to QFs under PURPA
regulations.\1\
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\1\ 18 C.F.R. 292.602.
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In addition, SEI Birchwood and BPP have each been determined by
FERC to be an ``exempt wholesale generator'' (``EWG''), as that term is
defined in section 32 of the Act. To become an EWG under section 32,
the Applicants had to demonstrate that they would be engaged
exclusively in the business of owning and operating an eligible
facility and selling electricity at wholesale. In order to meet the
``exclusively engaged'' requirement, the Greenhouse Facility is held by
Greenhost, Inc. (``Greenhost''), a Delaware special purpose
corporation, whose common shares are owned by a nonassociated, indirect
subsidiary of CT Corporation (``CT''). CT is not associated with the
Applicants nor Cogentrix Two.
Under the Project financing arrangements with the Owners of the
Plant, Greenhost incurred an obligation to pay that portion of the
total debt for the Project that went to finance the cost of
constructing the Greenhouse Facility, and separately entered into a
site lease and steam sales agreement with BPP (``Lease''). Payments
under the Lease are designed to match the proportional payments of
principal and interest on Greenhost's indebtedness. Greenhost operates
the Greenhouse Facility under a long-term facility and site sublease
[[Page 56585]]
(``Sublease'') with a nonassociated third-party (``Sublessee''). As a
part of these interrelated transactions, the Applicants and Cogentrix
Two obtained certain rights and security interests which enable them to
terminate the Lease, take possession of the Greenhouse Facility, and/or
acquire the shares of Greenhost in the event of defaults by Greenhost
and the Sublessee.
In 1996, the Sublessee experienced financial losses and currently
is in default on its Sublease obligations. The parties to these
agreements have entered into a settlement agreement respecting all
claims and terminating the Sublease. Under the settlement, SEI
Birchwood and Cogentrix Two may acquire 50% of the common shares of
Greenhost for a nominal consideration. Alternatively, BPP may acquire
100% of Greenhost's shares and hold it as a subsidiary. Greenhost's
outstanding indebtedness will remain in place, and the Greenhouse
Facility will continue to be used for the purposes for which it was
built and operated by a third-party.
GPU, Inc., et al. (70-8937)
GPU, Inc. (``GPU''), a registered holding company, and its wholly
owned subsidiary service company, GPU Service, Inc. (``GPUS''), each of
100 Interpace Parkway, Parsippany, New Jersey 07054, and GPU's
subsidiary companies GPU International, Inc. (``GPUI'') One Upper Pond
road, Parsippany, New Jersey 07054, and GPU Generation, Inc.
(``GENCO''), 1001 Broad Street, Johnstown, Pennsylvania 15907
(collectively, ``Applicants'') have filed an application-declaration
with this Commission under sections 6(a), 7, 9(a), 10, 12(b) and 13(b)
of the Act and rules 45, 54, 90 and 91 thereunder.
As more fully described below, Applicants propose to engage,
through one or more direct or indirect subsidiaries, in the business of
brokering and marketing electricity, gas and other energy commodities,
including, without limitation, oil, natural gas and coal (``Energy
Commodities''), and in providing incidental related services to
customers, such as fuel management, storage and procurement services.
GPU and GPUI propose to acquire the securities of one or more newly
formed subsidiaries (``Energy Subsidiaries'') and to make cash capital
contributions to the Energy Subsidiaries.\2\ GPU and GPUI propose to
invest, in the aggregate, no more than $20 million in the Energy
Subsidiaries prior to December 31, 2000, either by acquisition of
securities or by making capital contributions. The authorization with
respect to the acquisition of securities of any Energy Subsidiaries
shall expire upon the first to occur of either (i) December 31, 2000,
or (ii) the adoption by the Commission of proposed rule 58 (HCAR No.
26313, June 20, 1995) or such other rule, regulation or order as shall
exempt the proposed transactions from section 9(a) of the Act.
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\2\ Applicants state that, under rule 52, the subsequent
issuance of additional securities by Energy Subsidiaries and their
acquisition is exempt from prior Commission approval under the Act.
Applicants further state that rule 45(b)(4) exempts from prior
Commission approval the making of cash capital contributions to the
Energy Subsidiaries.
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Applicants also request the authority for Energy Subsidiaries to
issue debt. Debt financing of any Energy Subsidiaries will not exceed a
term of 15 years and will bear interest and carry fees at negotiated
rates based on prevailing market conditions. Applicants represent that
such issuance of debt will be exempt from prior Commission approval
under the Act pursuant to rule 52.
GPU also requests authority through December 31, 2000 to guarantee
the debt and other obligations of any Energy Subsidiaries. Such other
obligations of Energy Subsidiaries may take the form of bid bonds or
performance or other direct or indirect guarantees of contractual or
other obligations. The maximum amount of debt and other obligations
proposed to be guaranteed at any one time is $150 million.
Applicants state that the Energy Subsidiaries would engage in such
activities without regard to the location or identity of customers or
source of revenues; provided, however, that (i) unless additional
approvals are obtained from the Federal energy Regulatory Commission
under the Federal Power Act, the Energy Subsidiaries will not sell
electricity to GPU's electric utility subsidiaries, and (ii) the Energy
Subsidiaries will not make any sales of electricity or natural gas to
retail customers in any state unless authorized or permitted to make
such sales under the laws of that state.
It is also proposed that Energy Subsidiaries may, from time to time
through December 31, 2000, invest up to $50 million at any one time
outstanding to acquire or construct physical assets that are incidental
and reasonably necessary in the day-to-day conduct of marketing
operations, such as oil and gas storage facilities, gas or coal
reserves, or a pipeline spur that is needed in order to make deliveries
of fuel to an industrial customer.
To minimize financial exposure of Energy Subsidiaries and of GPU
resulting from its guarantees, it is proposed that Energy Subsidiaries
utilize risk mitigation measures to balance overall portfolio position
in order to limit the financial impact of any loss that may be
sustained on any particular commodity transaction due to adverse market
price movements or counterparty defaults. Such measures may include
entering into offsetting physical delivery contracts, the purchase and
sale of derivative instruments, such as options and futures contracts,
for purposes of hedging a physical position, and an appropriate mix of
long and short-term contracts. In addition, Energy Subsidiaries may
purchase or sell commodity-based derivative instruments, such as
electricity or gas futures contracts and options of electricity or gas
futures, such as are traded on the New York Mercantile Exchange, and
gas and oil price swap agreements in order to hedge positions under
existing contracts for physical delivery. Energy Subsidiaries will use
market hedging measures solely to minimize risk.
Price risk exposure may also be hedged under a purchase or sale
contract by taking an opposite position to that purchase or sale.
Similarly, in a portfolio of purchase and sales contracts, risk may
also be limited through an appropriate mix of long-term and short-term
contracts, and diversification of the mix of customers and suppliers
regionally and across industry lines. Finally, GPU will endeavor to
limit risk exposure through contract provisions (i.e., liquidated
damages) that would place a ceiling on the amount of damages payable
when performance failure occurs and/or exclude consequential damages.
Authorization is also sought for any Energy Subsidiary to enter
into arrangements with GPUS and GENCO, pursuant to which personnel and
other resources may be made available to the Energy Subsidiaries, upon
request, to support the Energy Subsidiaries in connection with their
authorized activities. Pursuant to these arrangements, GPUS and GENCO
will provide, account for and bill their services to the Energy
Subsidiaries, utilizing a work order system, on a full cost
reimbursement basis in accordance with rules 90 and 91 under section
13(b) of the Act. It is stated that no more than 5% of the total
employees of the GPU System will, at any one time, directly or
indirectly render services to the Energy Subsidiaries in connection
with the Energy Commodities Business.
GPU states that, absent further order of the Commission, none of
the Energy Subsidiaries will own or operate facilities used for the
distribution of gas at retail or facilities used for the
[[Page 56586]]
generation, transmission, or distribution of electric energy for sale.
Furthermore, it is stated that the Energy Subsidiaries will limit their
activities to ensure that they do not come within the definitions of
either ``electric utility company'' or ``gas utility company,'' as
defined by sections 2(a)(3) and 2(a)(4) of the Act, respectively.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-28003 Filed 10-31-96; 8:45 am]
BILLING CODE 8010-01-M