[Federal Register Volume 62, Number 201 (Friday, October 17, 1997)]
[Notices]
[Pages 54143-54145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27522]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-26764]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
October 10, 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 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 October 31, 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.
Western Resources, Inc. (70-9097)
Western Resources, Inc. (``WRI''), located at 818 Kansas Avenue,
Topeka, Kansas 66612, a Kansas public utility holding company exempt
under section 3(a) pursuant to rule 2 from all provisions of the Act
except section 9(a)(2), has filed an application under sections 9(a)(2)
and 10 of the Act in connection with a proposed sale of its gas utility
operations.
WRI, itself a public utility company, is engaged through its Kansas
Power & Light Company division in the generation, purchase,
transmission, distribution and sale of electric energy in Kansas and
the transportation and sale of natural gas predominantly in Kansas,
with some small operations in Oklahoma. WRI provides retail electric
service to approximately 329,000 customers in Kansas and northeastern
Oklahoma. WRI also provides wholesale electric generation and
transmission services to numerous municipal customers in Kansas, and,
through interchange agreements, to surrounding integrated systems. WRI
provides natural gas service to approximately 648,000 retail customers
in Kansas and northeastern Oklahoma. WRI is regulated as a public
utility with respect to retail electric and gas rates and other matters
by the Kansas Corporation Commission (``KCC'') and with respect to
retail gas rates and other matters by the Oklahoma Corporation
Commission (``OCC''). WRI is also subject to the jurisdiction of the
Federal Energy Regulatory Commission, including jurisdiction with
respect to rates for sales of electricity for resale.
WRI has one utility subsidiary, Kansas Gas and Electric Company
(``KGE'').\1\ KGE provides retail electric service to approximately
277,000 residential, commercial and industrial customers in Kansas and
wholesale electric generation and transmission services to numerous
municipal customers in Kansas and, through interchange agreements, to
surrounding integrated systems. KGE does not own or operate any gas
properties. KGE has one active subsidiary, Wolf Creek Nuclear Operating
Corporation (``Wolf Creek''), a Delaware Corporation which is 47% owned
by KGE and operates the Wolf Creek Generating Station on behalf of the
plant's owners, including KGE.\2\ KGE is regulated as a public utility
company with respect to retail electric rates and other matters by the
KCC. It is also regulated by the Nuclear Regulatory Commission under
the Atomic Energy Act of 1954, as amended, in connection with its
ownership interest in Wolf Creek.
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\1\ WRI has entered into an Agreement and Plan of Merger dated
February 17, 1997 with Kansas City Power & Light Company (``KCPL''),
a public utility company which operates as an electric utility
company in Kansas and Missouri (``KCPL Merger Agreement''). The KCPL
Merger Agreement calls for KCPL to be acquired by WRI, after which,
WRI would claim, or seek an order from the Commission granting, an
exemption under Section 3(a).
\2\ KGE has obtained no-action assurance from the Commission
regarding its ownership interest in Wolf Creek. SEC No-Action Letter
(June 26, 1995).
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WRI also has numerous direct and indirect non-utility subsidiaries,
including (1) Westar Capital, Inc. (``Westar Capital''), a Kansas
corporation that is holding company for certain of WRI's non-regulated
activities,\3\ (2)
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Westar Energy, Inc. (``Westar Energy''), a Kansas corporation that
provides energy related services to large commercial and industrial
customers,\4\ and (3) Mid Continent Market Center, Inc. (``MCMC''), a
Kansas corporation that offers natural gas transportation, wheeling,
parking, balancing and storage services to natural gas procedures.\5\
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\3\ Westar Capital's subsidiaries and affiliates are: (i)
Hanover Compressor Company (offers compression services to the
natural gas industry), (ii) Westar Financial Services, Inc. (funds
activities of other WRI subsidiaries), (iii) Wing Columbia, L.L.C.
(invests in power generation projects in Columbia, South America),
(iv) WestSec, Inc. (engaged in the business of monitored home and
business security systems), (v) Westar Limited Partners, Inc.
(``Westar Limited'') (participates in limited partnerships and
investments related to the business of WRI), (vi) Valence, L.L.C.
(develops, manufactures, produces and distributes electronic parts,
equipment and products), (vii) Thunderbird Limited, III, L.P. (a low
income housing project in which Westar Limited is an 82% limited
partner), (viii) Thunderbird Montery, L.P. (a low income housing
project in which Westar Limited is a 99% limited partner), and (ix)
Oakwood Manor, L.P. (a low income housing project in which Westar
Limited is a 99% limited partner).
\4\ Westar Energy's subsidiaries are: (i) Westar Energy
Investments, Inc. (holds investments of Westar Energy), (ii) Westar
Gas Marketing, Inc. (``Westar Gas Marketing'') (arranges natural gas
purchasing, transportation and delivery for natural gas users),
(iii) Westar Gas Company (gathers and processes natural gas in
Oklahoma and Kansas), (iv) Indian Basin Venture I and II
(collectively, Indian Basin Ventures) (operates a gas processing
plant in New Mexico), (v) Westar Electric Marketing, Inc. (arranges
electric marketing and brokering for commercial and industrial
customers on a wholesale level), and (vi) Westar Business Services,
Inc. (provides energy related services to commercial and industrial
customers).
\5\ MCMC has a subsidiary, Market Center Gathering, Inc., which
facilitates the operation of gas gathering systems.
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For the year ended December 31, 1996, WRI had consolidated
operating revenues of approximately $2,047 billion, approximately $549
million of which was derived from the company's natural gas operations,
approximately $1.197 billion of which was derived from its electric
energy operations and approximately $301 million of which was derived
from its non-utility activities. Consolidated assets of WRI and its
subsidiaries at December 31, 1996 were approximately $6.65 billion,
approximately $4.36 billion of which consisted of identifiable utility
property, plant and equipment. WRI's common stock, $5.00 par value, is
listed on the New York Stock Exchange. There were 65,220,373 shares of
WRI common stock outstanding as of July 30, 1997.
ONEOK, Inc., is a Delaware corporation which, among other things,
operates as a gas utility company (``ONEOK''). ONEOK has its principal
office in Tulsa, Oklahoma. It engages through its divisions and
subsidiaries in several aspects of the energy business, including local
distribution of natural gas. ONEOK is a gas utility company as defined
in Section 2(a)(4) of the Act and is presently neither an associate nor
an affiliate of a public-utility holding company. Oklahoma Natural Gas
Company, a division of ONEOK, and two subsidiaries, ONG Transmission
Company and ONG Sayre Storage Company comprise a fully integrated
intrastate natural gas gathering, storage, transmission and
distribution operation that provides natural gas service to
approximately 730,000 customers, primarily in Oklahoma. The operations
of the division and two subsidiaries are consolidated for ratemaking
purposes by the OCC. ONEOK also engages in a number of non-regulated
energy-related businesses, including natural gas marketing and oil and
gas exploration and production. As of May 31, 1997, there were
27,997,925 shares of ONEOK common stock outstanding. For the year ended
August 31, 1996, ONEOK's operating revenues on a consolidated basis
were approximately $1.224 billion, of which approximately $538 million
was attributable to regulated natural gas distribution activities and
approximately $686 million to gas marketing, gas processing, gas
exploration, gas production and other operations. Consolidated assets
of ONEOK and its subsidiaries at May 31, 1997 were $1.40 billion, of
which approximately $678 million consists of its gas distribution
property, plant and equipment.
WRI requests authorization to acquire up to (1) 9.9% of the
outstanding common stock of WAI, Inc. (WAI), a newly-formed Oklahoma
corporation,\6\ and (2) shares of WAI's non-voting convertible
preferred stock, which, when aggregated with the common stock, may
amount to as much as 45% of the total capital stock of WAI
(collectively, ``WAI Stock''). In return for the WAI Stock, and
pursuant to an amended and restated agreement dated May 19, 1997 (the
``Agreement'') among WRI, WAI and ONEOK, WRI will transfer all of the
assets of its Kansas and Oklahoma gas distribution operations and all
of the outstanding capital stock of its MCMC and Westar Gas Marketing
subsidiaries \7\ (collectively, the ``WRI Gas Business'') to WAI (the
``Asset Transaction'').\8\ ONEOK will then merge with and into WAI,
with WAI as the surviving corporation (the ``Merger,'' and together
with the Asset Transaction, the ``Transactions''), and WAI will be
renamed ONEOK, Inc. (``New ONEOK'').\9\
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\6\ WAI has been formed initially as a wholly-owned subsidiary
of WRI.
\7\ As noted above, MCMC provides natural gas transportation,
wheeling, parking, balancing and storage services to natural gas
producers and Westar Gas Marketing arranges natural gas purchasing,
transportation and delivery for natural gas users.
\8\ Applicant states that transfer of the WRI Gas Business to
New ONEOK will improve the efficiency of WRI's gas utility
operations, will be in the public interest and the interests of
investors and consumers and will not be detrimental to the proper
functioning of the resulting holding company system.
\9\ Pursuant to a Registration Rights Agreement to be entered
into by WRI and New ONEOK upon closing of the Transactions, the
outstanding shares of ONEOK common stock (``ONEOK Common Stock'')
will be converted on a one-for-one basis into the right to receive
shares of New ONEOK common stock (``New ONEOK Common Stock''). Each
share of New ONEOK Common Stock will be issued together with the
corresponding number of associated rights to purchase one one-
hundredths of a share of Series C Preferred Stock of New ONEOK.
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Immediately following the Merger, the New ONEOK board of directors
and management will be the same as that of ONEOK prior to the Merger,
except for (i) the expansion of the board from 14 to 16 directors to
allow the appointment two directors designated by WRI \10\ and (ii) the
appointment of five persons who are currently officers of WRI with
respect to the WRI Gas Business (including officers of MCMC and Westar)
as additional officers of New ONEOK, with comparable
responsibilities.\11\ New ONEOK will be subject to regulation with
respect to rates and other corporate matters by KCC and OCC.
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\10\ Only one of the two directors may be an officer, director
or employee of WRI or its subsidiaries. The two directors to be
designated by WRI approximate the number of directors it could elect
in ordinary circumstances, based on its 9.9% common equity interest,
if cumulative voting applied. No board member designated by WRI will
serve on the New ONEOK board nominating committee, or chair any
other committee of New ONEOK's board.
\11\ Under certain circumstances, following the occurrence of a
``Regulatory Change,'' WRI has the right to designate additional
directors providing for aggregate representation of up to one-third
of the New ONEOK Board.
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Upon consummation of the Transactions, on a fully diluted basis,
after giving affect to the Transactions and based on the number of
shares of ONEOK Common Stock outstanding as of December 12, 1996, WRI
will hold 2,966,702 shares of New ONEOK Common Stock and 19,317,584
shares of Series A Convertible Preferred Stock of New ONEOK,\12\
representing up to 9.9%
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of the New ONEOK Common Stock outstanding before conversion of any of
the Series A Convertible Preferred Stock into New ONEOK Common Stock
and up to 45% of the New ONEOK Common Stock that would be outstanding
after conversion of all such stock. The present shareholders of ONEOK
Common Stock will hold shares of New ONEOK Common Stock representing at
least 90.1% of the New ONEOK Common Stock then outstanding and not less
than 55% of the New ONEOK Common Stock that would be outstanding after
conversion of all of the Series A Convertible Preferred Stock to be
held by WRI.
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\12\ Shares of Series A Convertible Preferred Stock are non-
voting, except that they vote with the New ONEOK Common Stock (and
any other class or series of stock which may be similarly entitled
to vote with the holders of New ONEOK Common Stock) as a single
class with respect to certain extraordinary matters such as
transactions constituting a Change in Control (as defined in the
Shareholder Agreement) or proposed changes to New ONEOK's
Certificate or Incorporation or By-Laws. The Series A Convertible
Preferred Stock is convertible, at the option of the holder, in
whole or in part, at any time following the occurrence of a
Regulatory Change (as defined in the Shareholder Agreement), into
New ONEOK Common Stock at the rate of one share of New ONEOK Common
Stock for each share of Series A Convertible Preferred Stock (as
adjusted to reflect any stock split or similar events). In addition,
any shares of the Series A Convertible Preferred Stock transferred
by WRI to any person other than WRI or its affiliates is required to
be converted into New ONEOK Common Stock.
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WRI and New ONEOK will enter into a shareholder agreement
(``Shareholder Agreement''), upon the closing of the Transactions,
which will place certain restrictions on WRI's actions as a New ONEOK
shareholder during the term of the Shareholder Agreement.\13\ Among
other things, the Shareholder Agreement will provide that the
``Shareholder Group'' (defined as WRI, its affiliates, partners and
certain other persons and groups contemplated by Section 13(d) of the
Securities Exchange Act of 1934) will be prohibited from acquiring (1)
any Voting Securities (as defined in the Shareholder Agreement) that
would cause the Shareholder Group to have more than a 9.9% Voting
Ownership Percentage,\14\ prior to the occurrence of a Regulatory
Change (as defined in the Shareholder Agreement),\15\ or (2) any
securities that would, at any time, cause the Shareholder Group's Total
Ownership Percentage \16\ to exceed the Maximum Ownership Percentage
specified in the Shareholder Agreement.\17\ The Shareholder Agreement
gives the Shareholder Group certain ``top-up'' and ``dilutive
issuance'' rights that enable the Shareholder Group to ensure that the
Voting Ownership Percentage does not fall below 9.9% and the Total
Ownership Percentage does not fall below the Maximum Ownership
Percentage. The Shareholder Agreement will also impose certain
restrictions on WRI's ability to vote \18\ or transfer the securities
of New ONEOK.
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\13\ The Shareholder Agreement terminates under certain
circumstances described in Article V of the agreement.
\14\ ``Voting Ownership Percentage'' means the Voting Power (as
defined in the Shareholder Agreement) represented by New ONEOK
Common Stock and shares of any other class of capital stock of New
ONEOK then entitled to vote in the election of directors (not
including Convertible Preferred Stock) (''Voting Securities'')
beneficially owned by the person whose voting ownership percentage
is being determined.
\15\ The Shareholder Agreement states that a ``Regulatory
Change'' will be deemed to have occurred upon the receipt by WRI of
an opinion of counsel (which counsel must be reasonably acceptable
to New ONEOK) to the effect that either (1) the 1935 Act has been
repealed, modified, amended or otherwise changed or (2) WRI has
received an exemption, or, in the unqualified opinion of WRI's
counsel, is entitled without any regulatory approval to claim an
exemption, or has received an approval or no-action letter from the
Commission or its staff under the 1935 Act or has registered under
the 1935 Act, or any combination of the foregoing, and as a
consequence of (1) and/or (2), WRI may fully and legally exercise
such rights under the Shareholder Agreement as take effect in the
period after the Regulatory Change has occurred.
\16\ ``Total Ownership Percentage'' means the Voting Power (as
defined in the Shareholder Agreement) which would be represented by
the Securities Beneficially Owned (as defined in the Shareholder
Agreement) by the Person whose Total Ownership Percentage is being
determined if all shares of Convertible Preferred Stock (as Defined
in the Shareholder Agreement), or other Securities convertible into
Voting Securities (as defined in the Shareholder Agreement),
Beneficially Owned by such Person were converted into shares of
Common Stock (or other Voting Security.
\17\ The Shareholder Agreement defines ``Maximum Ownership
Percentage'' as a Total Ownership Percentage of 45%, less the Voting
Power (as defined under the Shareholder Agreement) represented by
all Voting Securities (as defined in the Shareholder Agreement)
transferred by the Shareholder Group during the term of the
Shareholder Agreement, including the Voting Power represented by any
shares of Convertible Preferred Stock which were converted into
shares of New ONEOK Common Stock contemporaneously with such
transfer pursuant to the terms of the Shareholder Agreement.
\18\ Among other things, the Shareholder Agreement provides
that, with respect to the election of directors to New ONEOK's board
of directors, WRI will vote all New ONEOK Common Stock held by it in
accordance with the recommendation of New ONEOK's nominating
committee. The New ONEOK nominating committee recommends nominees to
fill vacancies on the board, establishes procedures to identify
potential nominees, recommends criteria for membership on the board,
and recommends the successor chief executive officer when a vacancy
occurs. The New ONEOK By-laws provide that the chief executive
officer of New ONEOK must be elected by the affirmative vote of 80%
of the directors of New ONEOK.
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Applicant states that the proposed Transactions satisfy all of the
requirements of Sections 9(a)(2) and 10 under the Act.\19\ In addition,
WRI and ONEOK have requested a no-action letter from the Commission in
connection with the proposed Transactions seeking assurances that WRI's
ownership interest in New ONEOK will not cause NEW ONEOK to be deemed a
``subsidiary'' of WRI or WRI to be deemed a ``holding company'' under
the Act.
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\19\ Section 9(a)(2) makes it unlawful, without approval of the
Commission under Section 10, ``for any person * * * to acquire,
directly or indirectly, any security of any public utility company,
if such person is an affiliate * * * of such company and of any
other public utility or holding company, or will by virtue of such
acquisition become such an affiliate.'' Commission approval under
Section 9(a)(2) is required because WRI (which is already an
affiliate of its subsidiary, KGE) will become an affiliate of New
ONEOK as a result of the proposed Transactions.
For the Commission, pursuant to delegated authority, by the
Division of Investment Management.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-27522 Filed 10-16-97; 8:45 am]
BILLING CODE 8010-01-M