[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]


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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.
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    \1\ Holding Company Act Release No. 26856.
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    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.
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    \2\ 26 U.S.C. sec. 42.
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    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\
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    \3\ IEC's service territory includes areas of Iowa, Minnesota, 
Illinois, and Wisconsin.
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    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\
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    \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.
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    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\
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    \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.
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    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\
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    \7\ The general partner would manage the day-to-day operations 
of each property including leasing activities, rent collection and 
property maintenance.
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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.
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    \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.
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    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\
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    \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.
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    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\
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    \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.
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    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.


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    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