[Federal Register Volume 62, Number 85 (Friday, May 2, 1997)]
[Notices]
[Pages 24141-24144]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11408]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26711]


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

April 25, 1997.
    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

[[Page 24142]]

applications(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 May 19, 1997, 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.

Cinergy Corp., et al. (70-9015)

    Cinergy Corp., a registered holding company (``Cinergy''); Cinergy 
Investments, Inc., a nonutility subsidiary of Cinergy and itself a 
holding company (``Investments''); Cinergy Services, Inc., a nonutility 
subsidiary of Cinergy (``Services''); The Cincinnati Gas & Electric 
Company, a utility subsidiary of Cinergy and itself a holding company 
(``CG&E''); CG&E's utility subsidiaries, Lawrenceburg Gas Company 
(``Lawrenceburg''), The West Harrison Gas and Electric Company (``West 
Harrison''), The Union Light, Heat & Power Company (``Union'') and 
Miami Power Corporation (``Miami''); CG&E's nonutility subsidiaries, 
Tri-State Improvement Company (``Tri-State'') and KO Transmission 
Company (``KO''), all located at 139 East Fourth Street, Cincinnati 
Ohio 45202, and PSI Energy, Inc. (``PSI''), an electric utility 
subsidiary of Cinergy located at 1000 East Main Street, Plainfield, 
Indiana 46168, have filed an application-declaration under sections 
6(a), 7, 9(a), 10 and 12(b) of the Act and rules 40, 43, 45, 52 and 54 
thereunder.
    By order dated August 25, 1995 (HCAR No. 26362) (``1995 Order''), 
the Commission authorized the following transactions through May 31, 
1997: (a) PSI, Union, Lawrenceburg, West Harrison, and Miami 
(collectively, ``Utilities'') were authorized to incur short-term 
borrowings from banks and, in PSI's case, to issue and sell commercial 
paper; (b) Cinergy was authorized to issue guarantees and provide 
letters of credit in connection with short-term bank borrowings of its 
utility and nonutility subsidiaries; and (c) certain applicants were 
authorized to implement a money pool (``Money Pool'') to coordinate and 
provide for their short-term cash and working capital requirements.
    The 1995 Order limited the aggregate principal amount of short-term 
borrowings at any one time outstanding (whether through the Money Pool 
or from banks or the sale of commercial paper) as follows: PSI, $400 
million; Union, $35 million; Lawrenceburg, $3 million; West Harrison, 
$200,000; and Miami, $100,000. The 1995 Order also granted Cinergy 
authority to issue or obtain guarantees and letters or credit to or on 
behalf of its subsidiaries in amounts that, when aggregated with short 
term promissory notes and commercial paper issued by Cinergy, could not 
exceed $375 million. By order dated March 12, 1996 (HCAR No. 26215) 
(``1996 Order''), the limitation with respect to letters of credit, 
short term promissory notes and commercial paper issued or obtained by 
Cinergy was raised to $1 billion.
    Applicants now propose through December 31, 2002: (a) For the 
Utilities to make loans to and incur borrowings from one another under 
the Money Pool, and (b) for Cinergy, CG&E, Cinergy Services, CG&E, Tri-
State and KO to make loans to the Utilities under the Money Pool. The 
interest rate applicable to Money Pool loans of surplus treasury funds 
of Money Pool participants is the CD yield equivalent of the 30-day 
Federal Reserve ``AA'' Industrial Commercial Paper Composite Rate. This 
rate parallels the lenders' effective cost of capital with respect to 
such internal funds. The interest rate applicable to Money Pool loans 
of proceeds from bank borrowings by Money Pool participants or the sale 
of commercial paper by Cinergy, CG&E or PSI is the weighted average of 
the lending companies' cost for such funds. The interest rate 
applicable to Money Pool loans comprised of both types of funds is a 
blended rate equal to the weighted average cost of those funds. All 
Money Market loans would be repayable on demand and in any event not 
later than one year from the date of advance.
    In addition, the Utilities propose to incur short-term bank 
borrowings from third parties and PSI proposes to issue and sell 
commercial paper. Short-term borrowings would mature no later than one 
year from the date of issuance, except in the case of borrowings by 
Union, which would mature no later than two years from the date of 
issuance. Such borrowings would bear interest at a rate no higher than 
the prime rate for commercial bank loans prevailing on the date of such 
borrowing. Commercial paper issued by PSI would have maturities not 
exceeding 270 days and would be sold to dealers at rates not exceeding 
those prevailing at the date of issuance for commercial paper of 
comparable quality and the same maturity.
    Applicants propose that the maximum principal amount of short-term 
borrowings outstanding at any one time by PSI, Union, Lawrenceburg, 
West Harrison and Miami (whether from banks, the Money Pool or, in 
PSI's case, through the sale of commercial paper) not to exceed the 
following amounts: PSI, $400 million; Union, $50 million; West 
Harrison, $200,000; Lawrenceburg, $3 million; and Miami, $100,000. 
Applicants otherwise propose no change to the terms of the Money Pool 
authorized by the 1995 Order.
    Proceeds of any short-term borrowings by the Utilities (whether 
from banks, the Money Pool or, in PSI's case, through the sale of 
commercial paper) would be used by such companies for general corporate 
purposes, including (a) interim financing of capital requirements; (b) 
working capital needs; (c) repayment, redemption, refinancing of debt 
or preferred stock; (d) cash requirements to meet unexpected 
contingencies and payment and timing differences; (e) loans through the 
Money Pool; and (f) other transactions relating to these applicants' 
utility businesses.
    In addition, Cinergy and Investments propose to guarantee, through 
December 31, 2002, the debt or other obligations of (a) certain 
existing Cinergy system companies and (b) companies whose securities 
may be acquired by Cinergy or any of Cinergy's subsidiaries from time 
to time in accordance with rule 58 under the Act. Guaranties issued by 
Cinergy would be subject to the $1 billion aggregate limitation 
specified in the 1996 Order for letters of credit, short term 
promissory notes and commercial paper issued by Cinergy. Guaranties 
issued by Investments would not exceed $250 million at any one time 
outstanding.
    The only existing Cinergy subsidiary on whose behalf Cinergy alone 
seeks authority to issue guarantees is Cinergy Services. The Cinergy 
subsidiaries on whose behalf Cinergy and Investments seek authority to 
issue guarantees are KO, Tri-State, Cinergy Resources, Inc., Cinergy 
Capital & Trading, Inc., Cinergy Technology, Inc. and Enertech 
Associates, Inc.
    Debt financing so guaranteed will not exceed 30 years and will bear 
interest either at a floating rate not in excess of 200 basis points 
over the prime rate,

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applicable LIBOR or other appropriate index in effect from time to time 
or at a fixed rate not in excess of 300 basis points above the yield at 
the time of issuance of U.S. Treasury obligations of a comparable 
maturity .

Mineral Energy Company (70-9033)

    Mineral Energy Company (``MEC''), 101 Ash Street, San Diego, 
California 92101, a California corporation not currently subject to the 
Act, has filed an application for an order under sections 9(a) and 10 
of the Act authorizing its proposed acquisition of all of the issued 
and outstanding common stock of (1) Pacific Enterprises (``Pacific''), 
a California corporation, and through such acquisition, Pacific's gas 
utility subsidiary, Southern California Gas Company (``SoCalGas''); and 
(2) Enova Corporation (``Enova''), a California corporation, and 
through such acquisition, Enova's combination electric and gas utility 
subsidiary, San Diego Gas & Electric Company (``SDG&E''). Pacific and 
Enova are neighboring California public utility holding companies 
exempt under section 3(a)(1) from all provisions of the Act except 
section 9(a)(2).\1\ MEC also requests an order under section 3(a)(1) 
exempting it from all provisions of the Act, except section 9(a)(2), 
following consummation of the proposed transactions (``Transaction'').
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    \1\ Pacific's section 3(a)(1) exemption was authorized by order 
of the Commission. Pacific Lighting Corp.,  Holding Co. Act Release 
No. 43 (Jan. 13, 1936), exemption continued, Holding Co. Act Release 
No. 17855 (Jan. 11, 1973). Enova claims its section 3(a)(1) 
exemption based on a filing pursuant to rule 2.
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    Pacific's principal subsidiary, SoCalGas,\2\ is a California public 
utility that owns and operates a natural gas distribution, transmission 
and storage system which supplies natural gas in 535 cities and 
communities throughout most of southern California and part of central 
California.\3\ SoCalGas is subject to regulation by the California 
Public Utilities Commission (``CPUC'') with respect to its rates for 
intrastate transportation and retail sales of natural gas. In addition, 
certain of Pacific's subsidiaries are subject to regulation by the 
Federal Energy Regulatory Commission (``FERC'').
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    \2\ Pacific owns all of the issued and outstanding common stock 
of SoCalGas. SoCalGas also has outstanding a class of preferred 
stock, which is listed on the Pacific Stock Exchange.
    \3\ SoCalGas provides gas service to residential, commercial, 
industrial, electric generation and wholesale customers through 
approximately 4.7 million meters in a 23,000 square mile service 
area with a population of approximately 17.4 million people.
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    Pacific is also engaged in a number of energy-related businesses 
through approximately 50 subsidiaries organized into the following five 
business lines: (1) Pacific Energy engages in alternate energy 
development, centralized heating and cooling for large building 
complexes and energy management services; (2) Pacific Interstate 
Company provides interstate and offshore natural transmission to serve 
utility operations; (3) Pacific Enterprises Oil Company owns various 
mineral interests and a working interest in the Aliso Canyon Oil Field; 
(4) Pacific Enterprises International invests in foreign utility-
related businesses; and (5) Ensource engages in gas marketing.
    For the year ended December 31, 1996, Pacific's operating revenues 
on a consolidated basis were approximately $2.603 billion, of which 
approximately $2.076 billion were attributable to sales of natural gas, 
$386 million were attributable to transportation revenues, and $141 
million were attributable to nonutility activities. Consolidated assets 
of Pacific and its subsidiaries at December 31, 1996 were approximately 
$5.186 billion, of which approximately $3.237 billion consisted of net 
gas plant and equipment. As of December 31, 1996, Pacific had 
82,013,469 issued and outstanding shares of common stock, no par value 
(``Pacific Common Stock''), and 800,253 outstanding shares of preferred 
stock, no par value (``Pacific Preferred Stock'').
    Enova's principal subsidiary, SDG&E,\4\ is a California public 
utility that generates, purchases and transmits electric energy and 
distributes it through 1.2 million meters to customers in San Diego 
county and an adjacent portion of Orange County, California. SDG&E also 
purchases and distributes natural gas through 700,000 meters to 
customers in San Diego County and transports gas for others in SDG&E's 
service territory.\5\ SDG&E is subject to regulation by the CPUC as a 
public utility with respect to retail electric and gas rates, and by 
the CPUC and FERC with respect to rates for the sale for resale of 
electricity.\6\
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    \4\ Enova owns all of the issued and outstanding common stock of 
SDG&E. SDG&E also has outstanding two classes of preferred stock, 
most of the series of which are listed on the American Stock 
Exchange.
    \5\ SDG&E service area encompasses 4,100 square miles, covering 
two counties and 25 cities, with a population of approximately 3 
million people.
    \6\ SDG&E is also subject to regulation by the Nuclear 
Regulatory Commission with respect to certain nuclear facilities in 
which it has a partial ownership interest.
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    SDG&E has six nonutility subsidiaries, each a California 
corporation. Enova Financial, Inc. invests in limited partnerships 
representing approximately 1100 affordable-housing projects located 
throughout the United States. Califia Company leases computer 
equipment. Enova Energy, Inc. is an energy management consulting firm 
offering services to utilities and large consumers, including gas and 
electric marketing, scheduling services, facilities operation and 
management of customer energy demand and supply. Pacific Diversified 
Capital Company is the parent company of a nonutility subsidiary, Phase 
One Development, Inc., which is engaged in real estate development. 
Enova Technologies, Inc. is in the business of developing new 
technologies generally related to utilities and energy services. Enova 
International was formed to develop and operate natural gas and power 
projects outside the United States. A subsidiary of Enova International 
and a subsidiary of Pacific have entered into a joint venture to build 
and operate a natural gas distribution system in Mexicali, Baja 
California.
    For the year ended December 31, 1996, Enova's operating revenues on 
a consolidated basis were approximately $1.993 billion, of which 
approximately $1.591 billion were attributable to its electric utility 
operations, approximately $348 million were attributable to its gas 
utility operations and approximately $54 million were attributable to 
its energy-related and other operations. Consolidated assets of Enova 
and its subsidiaries at December 31, 1996 were approximately $4.65 
billion of which approximately $2.625 billion consists of net electric 
utility plant and $449 million consists of net gas plant. As of 
December 31, 1996, Enova had 116,628,735 outstanding shares of common 
stock, no par value (``Enova Common Stock''). Enova has no other class 
of equity securities.
    MEC \7\ was incorporated under California law to become a holding 
company for Pacific and Enova following consummation of the Transaction 
in accordance with the terms of an Agreement and Plan of Merger and 
Reorganization, dated as of October 12, 1996, as amended as of January 
13, 1997 (``Merger Agreement''), among MEC, Enova, Pacific, B Mineral 
Energy Sub (``Pacific Sub'') and G Mineral Energy Sub (``Enova 
Sub'').\8\

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The Merger Agreement provides for the Transaction to be effected by (a) 
a merger of Pacific Sub with and into Pacific, with Pacific remaining 
as the surviving corporation and (b) a merger of Enova Sub with and 
into Envoa, with Enova remaining as the surviving corporation.
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    \7\ MEC's authorized capital consists of 1,000 shares of common 
stock, all of which are issued and outstanding (``MEC Common 
Stock''). Enova and Pacific each own 500 shares.
    \8\ Pacific Sub and Enova Sub, each a California corporation 
with an authorized share capital of 1,000 shares of common stock, no 
par value, were formed solely to facilitate the Transaction. MEC 
owns all of the issued and outstanding shares of common stock in 
each of Pacific Sub and Enova Sub.
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    The application states that the combination of Pacific and Enova is 
expected to provide strategic, financial and other benefits to the 
shareholders of both companies, and their respective employees, 
customers and communities. Such benefits are anticipated to include 
cost savings and cost avoidances derived from the integration of 
corporate functions, corporate programs and field support functions, 
the streamlining of inventories and purchasing economics, and 
consolidation of facilities. The applicants state that the combination 
is timed to coincide with California electric utility deregulation and 
ongoing natural gas utility deregulation and is intended to establish a 
company that, by providing multiple energy products and services to 
customers at lower prices than either company could offer individually, 
will have the ability to compete effectively in the California and the 
rapidly developing national and international markets for energy and 
energy services.
    Upon consummation of the proposed Transaction: (1) Each share of 
Pacific Common Stock \9\ will be canceled and converted into the right 
to receive 1.5038 shares of MEC Common Stock; and (2) each share of 
Enova Common Stock \10\ will be canceled and converted into the right 
to receive one share of MEC Common Stock. The Transaction will not 
affect any other class of common or preferred stock of the parties to 
the Transaction. Thus, any shares of Pacific Preferred Stock and 
preferred stock of SoCalGas and SDG&E outstanding on the date of the 
consummation of the Transaction will remain outstanding preferred stock 
of the same companies.
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    \9\ Shares of Pacific Common Stock owned by Enova, Pacific, MEC 
or any of their wholly-owned subsidiaries and shares as to which 
dissenters' rights are perfected will not be eligible for this 
treatment.
    \10\ Shares of Enova Common Stock owned by Enova, Pacific, MEC 
or any of their wholly-owned subsidiaries and shares as to which 
dissenters' rights are perfected will not be eligible for this 
treatment.
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    Upon completion of the Transaction, Pacific and Enova will become 
subsidiaries of MEC, which will own all of the issued and outstanding 
common stock of each of Pacific and Enova. Pacific and Enova would 
continue to own and operate their primary subsidiaries, SoCalGas and 
SEG&E, respectively.\11\ MEC's Board of Directors will consist of an 
equal number of directors designated by Pacific and Enova. The 
Transaction is expected to qualify as tax-free reorganization under 
section 351 of the Internal Revenue Code of 1986, as amended.
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    \11\ Pursuant to the Merger Agreement, Pacific and Enova have 
formed a joint venture company (``JV Company'') with an initial 
capitalization of $10 million to engage in energy marketing 
activities and provide energy-related services. The JV Company is 
terminable by either party in the event the Merger Agreement is 
terminated.
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    As a result of the Transaction, MEC will be a public-utility 
holding company as defined in section 2(a)(7) of the Act with indirect 
ownership of two public-utility companies, SoCalGas and SDG&E. MEC 
states that following consummation of the Transaction, it will be 
entitled to an exemption from all provisions of the Act except section 
9(a)(2) because it and each of its pubic-utility subsidiaries from 
which it derives a material part of its income will be predominantly 
intrastate in character and will carry on their utility businesses 
substantially within the state of California.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-11408 Filed 5-1-97; 8:45 am]
BILLING CODE 8010-01-M