[Federal Register Volume 64, Number 98 (Friday, May 21, 1999)]
[Notices]
[Pages 27836-27839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-12932]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27025]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
May 14, 1999.
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 under the Act. All interested persons are referred to the
applications(s) and/or declaration(s) for complete statements of the
proposed transactions(s) summarized below. The application(s) and/or
declarations(s) and any amendments is/are available for public
inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the
applications(s) and/or declaration(s) should submit their views in
writing by June 8, 1999, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549-0609, 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
should identify specifically the issues of facts 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 June 8, 1999, the application(s) and/or declaration(s),
as filed or as amended, may be granted and/or permitted to become
effective.
Interstate Energy Corporation, et al. (70-9323)
Interstate Energy Corporation (``IEC''), a registered public
utility holding company, Alliant Energy Resources, Inc. (``Alliant''),
a wholly owned subsidiary of IEC, and Heartland Properties, Inc.
(``HPI''), a wholly owned subsidiary of Alliant (collectively,
``Applicants''), located at 222 West Washington Avenue, Madison,
Wisconsin, 53703, have filed an application under section 9(c)(3) of
the Act.
By order dated April 14, 1998 (``Merger Order'') \1\ the Commission
authorized IES Industries, Inc., IES Utilities, Inc., and Interstate
Power Company to become subsidiaries of WPL Holdings, Inc. (``WPLH'').
Upon consummation of the merger, WPLH was renamed IEC and IEC was
required to register with the Commission under section 5 of the Act.
---------------------------------------------------------------------------
\1\ Holding Company Act Release No. 26856.
---------------------------------------------------------------------------
The Merger Order authorized, among other things, IEC to retain
WPLH's housing interests. WPLH indirectly owned HPI; a subsidiary
company, established to pursue community development and to qualify for
Low Income Housing Tax Credits (``LIHTC'') under section 42 of the U.S.
Internal Revenue Code (``Code'').\2\ Through direct and indirect
subsidiaries, HPI engaged in the development, ownership and sale of
affordable multi-family housing properties, and provided asset
management services in connection with those properties. The Commission
permitted retention of WPLH's LIHTC properties, reasoning that they
were acquired for tax purposes by an exempt holding company, the
interests were limited and passive, and by nature, tax credits are
self-liquidating. The Commission further found that ownership of WPLH's
LIHTC properties by IEC did not appear to involve any potential
detriments to investors or consumers nor would any demonstrable benefit
be achieved by requiring divestiture of a business that was already
winding down.
---------------------------------------------------------------------------
\2\ 26 U.S.C. sec. 42.
---------------------------------------------------------------------------
Applicants now seek authorization to invest up to $50 million from
time to time for a period of five years to acquire additional LIHTC
properties in the IEC service territory.\3\
---------------------------------------------------------------------------
\3\ IEC's service territory includes areas of Iowa, Minnesota,
Illinois, and Wisconsin.
---------------------------------------------------------------------------
LIHTC are available in the form of equal annual tax credits over a
ten-year term payable over eleven years, with the first and last years
prorated. Under
[[Page 27837]]
section 42 of the Code, no credit is allowed for any taxable year
unless an agreement between the housing project owner and the
applicable state housing credit agency (``Agreement'') is in effect as
of the end of the taxable year. Additionally, section 42 of the Code
requires that the Agreement prohibit any increase in gross rent for a
period ending on the latter of (a) the date specified by the agency in
the Agreement or (b) fifteen years after the date when the building is
placed in service. Housing credit agencies in IEC's service territory,
may, in their agreement with LIHTC property owners, prohibit any
increase in gross rents on LIHTC property for up to thirty years.\4\
---------------------------------------------------------------------------
\4\ Applicants state that given the requirements of section 42
of the Code and the limitations imposed by state housing credit
agencies on LIHTC properties, they may need to maintain investment
interest in each LIHTC property for a period of up to thirty years.
---------------------------------------------------------------------------
Through its subsidiaries, IEC will continue to own LIHTC properties
and will continue to provide investment management services in
connection with those properties. HPI will continue the oversight of
the low-income properties (previously performed by Heartland Asset
Management prior to its dissolution on December 31, 1998) consistent
with the role of a passive investor. HPI will focus its investment
management role on maintaining financial statistics for each property,
ensuring compliance with LIHTC restrictions and conducting on-site
inspections to review management operations. Applicants state that HPI
would not serve as the developer of the properties, but would be a
passive investor with due diligence oversight.
Applicants state that acquisition of new LIHTC properties would be
accomplished through the acquisition of limited partnership units in
limited partnerships that are organized specifically to invest in low-
income, multi-family housing projects throughout the IEC service area
(``Acquisition Procedure'') \5\ The limited partnerships are designed
to ensure that the properties qualify for LIHTC and remain in
compliance under section 42 of the Code. Separate limited partnerships
would be established for each qualifying housing development thereby
insulating each investment property from any liabilities that may occur
in the development of the other properties and facilitating compliance
with section 42 of the Code. Prior to investment, each property would
be approved by the Heartland Investment Committee. Applicants have
identified five properties for investment that have already been
awarded tax credits.\6\
---------------------------------------------------------------------------
\5\ The Commission authorized the Acquisition Procedure in the
Merger Order.
\6\ No other specific properties have been identified for future
investment because it is unknown which properties would be awarded
tax credits through the annual competitive tax credit allocation
process.
---------------------------------------------------------------------------
Applicant propose to invest in approximately four to eight
affordable housing limited partnerships per year, as a limited partner.
It is stated that rural communities in the IEC service territory could
support new construction of LIHTC properties averaging 40 units with a
total development cost ranging from $2 million to $4 million. Half of
the total development cost would be supported by community grants,
long-term debt in the form of permanent mortgages, or other debt
financing. The balance of the development cost would be funded by
equity, which would range from approximately $1 million to $2 million
per development. Applicants state that IEC's predominately rural
service territory would benefit from these investments and there will
be a corresponding increase in the demand for utility services.
Further, obtaining tax credits would enable IEC to manage and lower its
income tax expense.
Applicants state that limited partnership agreements (``Partnership
Agreements'') for prospective investments have not been negotiated or
executed, but, are typically negotiated with the third-party developer
in the 30-60 days immediately preceding the time of the investment.
Applicants represent that they would not be the general partner in the
Partnership Agreements, but would only be a limited partner.\7\
---------------------------------------------------------------------------
\7\ The general partner would manage the day-to-day operations
of each property including leasing activities, rent collection and
property maintenance.
---------------------------------------------------------------------------
Sierra Pacific Resources, et al. (70-451)
Sierra Pacific Resources (``Sierra Pacific''), 6100 Neil Road,
Reno, Nevada 89511, a Nevada public utility holding company exempt from
registration under section 3(a)(1) of the Act from all provisions of
the Act except section 9(a)(2), and Nevada Power Company (``Nevada
Power''), 6226 West Sahara Avenue, Las Vegas, Nevada 89146, an electric
utility company (together, ``Applicants''), have filed an application
under sections 9(a)(2) and 10 of the Act.
Sierra Pacific proposes to merge with Nevada Power, with Nevada
Power to become a wholly owned subsidiary of Sierra Pacific
(``Transaction''). The Applicants request an order under section
3(a)(1) of the Act granting Sierra Pacific an exemption from all
provisions of the Act except section 9(a)(2) following consummation of
the Transaction.
The merger will be carried out in a two-step process under the
terms of an Agreement and Plan of Merger dated as of April 29, 1998
(``Merger Agreement''), among Sierra Pacific, Nevada Power, and two
Nevada wholly owned special purpose subsidiary corporations of Sierra
Pacific, Desert Merger Sub, Inc. (``Desert Merger Sub''), and Lake
Merger Sub, Inc. (``Lake Merger Sub''). First, Lake Merger Sub will be
merged into Sierra Pacific, with Sierra Pacific as the surviving
corporation.\8\ Then, Nevada Power will be merged into Desert Merger
Sub, with Desert Merger Sub as the surviving corporation, after which
Desert Merger Sub will change its name to Nevada Power Company. The
purpose of this two-step process is to allow Nevada Power to become a
first-tier subsidiary of Sierra Pacific without generating any adverse
tax consequences for any of the parties.
---------------------------------------------------------------------------
\8\ This step is necessary because, as discussed below, each
share of pre-merger Sierra Pacific common stock may be exchanged for
$37.55 in cash or 1.44 shares of Sierra Pacific common stock. The
exchange of pre-merger stock for cash or stock occurs as a result
and at the time of this first merger.
---------------------------------------------------------------------------
Under the Merger Agreement, each share of pre-merger Sierra Pacific
and Nevada Power common stock will be converted into the right to
receive cash or post-merger Sierra Pacific common stock (``SP Common
Stock''). Each owner of Sierra Pacific common stock prior to the first
merger will be entitled to receive either 1.44 shares of SP Common
Stock or $37.55 in cash in exchange for each share of Sierra Pacific
common stock it owns. Each owner of Nevada Power common stock prior to
the second merger will be entitled to receive either one share of SP
Common Stock or $26.00 in cash in exchange for each share of Nevada
Power common stock it owns. The cash consideration for Sierra Pacific
common stock and Nevada Power common stock represents a five percent
premium per share, respectively, based on the ten-day average share
price of each company's common stock prior to the boards of directors
of Sierra Pacific and Nevada Power approval of the Merger Agreement on
April 29, 1998.
The Merger Agreement provides for special treatment of shareholders
of less than 100 shares. Applicants state that Sierra Pacific will
finance the approximately $460 million necessary to fund the cash
consideration provided for under the Merger Agreement. The exact
sources and precise methods of
[[Page 27838]]
financing this amount have yet to be determined.
The boards of directors of Sierra Pacific and Nevada Power approved
the Transaction on April 29, 1998. A majority of both the Sierra
Pacific and Nevada Power common shareholders approved the Transaction
at separate meetings held on October 9, 1998.
Sierra Pacific owns all of the common stock of Sierra Pacific Power
Company (``SPPC''), an electric and gas utility subsidiary company
incorporated in Nevada. SPPC provides electric service to approximately
287,000 retail customers in northern Nevada and northern California.
SPPC also sells electric power at wholesale. In addition, SPPC
distributes natural gas at retail to approximately 101,000 customers in
the Reno/Sparks area of northwestern Nevada. For the year ended
December 31, 1997. SPPC's electric and gas operating revenues totaled
$611 million, comprised of $540.3 million in electric business and
$70.7 million in natural gas business.
SPPC is subject to the retail ratemaking jurisdiction of the Nevada
Public Utilities Commission (``Nevada PUC'') with respect to its rates
for retails sales of electricity and gas, and to the California Public
Utilities Commission (``CPUC'') with respect to its rates for retail
sales of electricity. Nevada Power is also subject to the jurisdiction
of the Nevada PUC and the CPUC with respect to its terms of service,
issuance of certain securities, siting of and necessity for generation
and certain transmission facilities, accounting and other matters. In
addition, SPPC is subject to regulation by the Federal Energy
Regulatory Commission (``FERC'') under the Federal Power Act with
respect to wholesale electricity sales, the terms and conditions for
providing interstate electric transmission service, and other matters.
SPPC is also subject to applicable federal and state environmental
regulations.
Sierra Pacific is engaged in nonutility business through the
following subsidiaries: Tuscarora Gas Pipeline Company (``Tuscarora'');
Sierra Energy company d/b/a e-three (``e-three''); Lands of Sierra,
Inc. (``LOS''); and Sierra Pacific Energy Company (``SPEC''). Tuscarora
was formed to enter into a partnership with a subsidiary of
TransCanada, a nonaffiliated Canadian natural gas transportation
company, to develop, construct and operate a natural gas pipeline to
serve Reno, northern Nevada and northeastern California. e-three
provides energy related products and services both inside and outside
SPPC's service territory. LOS develops and manages nonutility property
in Nevada and California. SPEC is developing a customer information
system for the energy industry, and provides certain products and
services in Nevada through a partnership.
For the year ended December 13 1997, Sierra Pacific's operating
revenues on a consolidated basis were approximately $663 million, of
which approximately $52 million were attributable to nonutility
activities. Consolidated assets of Sierra Pacific and its subsidiaries
at December 31, 1997, were approximately $1.9 billion, of which
approximately $1.4 billion consisted of net utility plant and
equipment.
Nevada Power is a public utility company incorporated in Nevada,
that provides retail electric service to more than 1.3 million
customers predominately in Clark County, Nevada, with limited service
provided to the Federal Department of Energy in Nye County, Nevada.
Both Clark County and Nye County are located in southern Nevada. Nevada
Power also sells electric power at wholesale.\9\
---------------------------------------------------------------------------
\9\ Nevada Power currently has a total generating capacity of
1,964 MW of power. Applicants have committed to the Nevada PUC that
upon consummation of the Transaction they will divest their
generation assets. Applicants state that they expect to complete the
divestiture in the year 2000 after they receive all of the necessary
regulatory approvals, including FERC approval of rate schedules for
the sale of power by the new owners of the divested generation
units.
---------------------------------------------------------------------------
Nevada Power is subject to the retail ratemaking jurisdiction of
the Nevada PUC for retail sales of electricity as well as terms of
service, issuance of certain securities, siting of and necessity for
generation and certain transmission facilities, and accounting and
other matters. Nevada Power is also subject to regulation by FERC under
the Federal Power Act with respect to wholesale electricity sales, the
terms and conditions for providing interstate electric transmission
service, and other matters. Nevada Power is also subject to applicable
federal and state environmental regulations. Nevada Power is engaged in
nonutility businesses through subsidiaries that do not generate any
material revenue.\10\
---------------------------------------------------------------------------
\10\ These subsidiaries include: Commonsite, Inc, NVP Capital I
and II, Nevada Electric Investment Company (``NEICO''), Northwind
Las Vegas L.L.C. (``LV''), Northwind Aladdin, LLC (``Aladdin''), e-
three CES, Genwal Coal Co., and Castle Valley Resources, Inc.
Commonsite Inc. is a Nevada corporation which owns real estate
occupied by Reid Gardner 4. a coal fired plant owned jointly by
Nevada Power and the California Department of Water Resources. NVP
Capital I and II are Delaware corporations that issue Quarterly
Income Preferred Securities. NEICO is a subsidiary that has
conducted energy-related activities. LV and Aladdin are joint
ventures fifty percent and twenty-five percent owned, respectively,
by NEICO with UTT Nevada, Inc., a nonaffiliate, owning the remaining
percentages. LV now develops opportunities for district heating and
cooling within Nevada. Aladdin will construct, own and operate
district heating and cooling facilities at the Aladdin casino
complex, currently under construction, e-three CES is a joint
venture fifty percent owned by NEICO, with e-three, a wholly owned
subsidiary of Sierra Pacific, owning the other fifty percent, e-
three CES was formed to enter into performance contracts and similar
energy-related services in southern Nevada. Genwal Coal Co.,
formerly involved in coal mining activities, whose assets were sold
on January 1, 1995, and Castle Valley Resources, Inc., which was the
sales arm of Genwal Coal Co., are both inactive.
Nevada Power also owns the following limited liability company
subsidiaries which Nevada power states have not yet engaged in any
business activities: Alkan Mining Company, a Nevada corporation
wholly owned by NEICO; Nevada Power Services, LLC; Nevada Power
Choices, LLC; Nevada Power Solutions, LLC; Las Vegas Energy LLC;
Nevada Solutions, LLC, Power Choice, LLC; Nevada Power Energy
Services, LLC; and Nevada Choices, LLC.
---------------------------------------------------------------------------
For the year ended December 31, 1997, Nevada Power's utility
operating revenues on a consolidated basis were approximately $799
million. Consolidated assets of Nevada Power and its subsidiaries at
December 31, 1997, were approximately $2.3 billion, of which
approximately $1.7 billion consisted of net electric plant and
equipment.
Applicants state that the Transaction is expected to provide
efficiencies and economies which will benefit the public, investors and
consumers. Among other things, Applicants state that, following the
Transaction, the combined company will have the ability to compete more
effectively in unregulated markets and serve customers more cost-
effectively in regulated markets. Applicants also note that they will
be better positioned to take advantage of operating economies and
efficiencies through, among other measures, joint development and
marketing of competitive new products and services, provision of
integrated energy solutions for wholesale and retail customers, joint
management and optimization of their respective corporate functions,
programs, retail services, customer support functions, and inventories
and purchasing economies.
Applicants have requested an order under section 3(a)(1) granting
Sierra Pacific, after consummation of the Transaction, an exemption
from all sections of the Act except section 9(a)(2). In support of the
request, Applicants contend that, after the Transaction, Sierra Pacific
will remain predominately an intrastate (i.e., Nevada) holding company
that will not derive any material part of its income from non-Nevada
public utility operations.
[[Page 27839]]
For the Commission by the Division of Investment Management,
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-12932 Filed 5-20-99; 8:45 am]
BILLING CODE 8010-01-M