[Federal Register Volume 64, Number 173 (Wednesday, September 8, 1999)]
[Notices]
[Pages 48878-48882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23237]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27071]


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

August 31, 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 
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 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 
application(s) and/or declaration(s)

[[Page 48879]]

should submit their views in writing by September 27, 1999, to the 
Secretary, Securities and Exchange Commission, Washington, D.C. 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 or facts of 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 September 27, 1999, the 
application(s) and/or declaration(s), as filed or as amended, may be 
granted and/or permitted to become effective.

SCANA Corporation (70-9521)

    SCANA Corporation (``SCANA''), 1426 Main Street, Columbia, South 
Carolina 29201, a South Carolina public utility holding company exempt 
from registration under section 3(a)(1) of the Act, has filed an 
application under sections 5, 9(a)(2), 10, and 11 of the Act.
    SCANA proposes to acquire, by means of the transactions described 
below, Public Service Company of North Carolina, Incorporated 
(``PSNC''), a North Carolina corporation and gas public-utility 
company. PSNC would become a wholly owned subsidiary company of SCANA 
and the third public utility company, within the meaning of the Act, 
owned by SCANA. Following its acquisition of PSNC, SCANA would register 
under section 5 of the Act.
    SCANA, PSNC, and their respective subsidiaries have also filed in 
File No. 70-9533 an application-declaration related to financing 
SCANA's proposed registered holding company system and the 
establishment of a service company for that system. A notice of that 
filing is being issued simultaneously with this notice.
    SCANA is engaged primarily in providing electric and gas service to 
customers in South Carolina. SCANA's two current public utility company 
subsidiaries are South Carolina Electric and Gas Company (``SCE&G'') 
and South Carolina Generating Company, Inc. (``GENCO''). SCE&G 
generates and sells electricity to wholesale and retail customers, and 
purchases, sells, and transports natural gas at retail. SCE&G also 
provides public transit service in Columbia, South Carolina. GENCO owns 
and operates the Williams Station generating facility and sells 
electricity solely to SCE&G. As of December 31, 1998, SCANA provided 
electric utility service to 517,447 customers and gas utility service 
to 256,842 customers. As of February 26, 1999, 103,572,623 shares of 
SCANA common stock, no par value, were issued and outstanding. SCANA's 
principal executive office is located in Columbia, South Carolina.
    SCANA has thirteen direct, wholly owned, nonutility subsidiary 
companies that engage in a wide range of energy and telecommunications-
related services. For the year ended December 31, 1998, SCANA had total 
assets of $5.281 billion, net utility assets of $3,787 billion, total 
operating revenues of $1,632 billion, and net income of $115 million. 
SCANA neither owns nor operates any physical properties. As of December 
31, 1998 SCANA employed, in conjunction with its subsidiaries, a total 
of 4,697 full-time employees.
    PSNC is a public utility company franchised to serve a 31-county 
area in North Carolina. It transports, distributes, and sells natural 
gas to approximately 340,000 residential, commercial, and industrial 
customers in 95 cities in North Carolina. In connection with its 
natural gas distribution business, PSNC promotes, sells, and installs 
both new and replacement natural gas appliances and equipment. PSNC has 
seven partially or wholly owned nonutility subsidiaries that engage 
primarily in energy-related activities.
    For the fiscal year ended September 30, 1998, 20,274,332 shares of 
PSNC common stock, $1 par value, were outstanding, and PSNC had total 
assets of $618,753,000, operating revenues of $330,672,000, and net 
income of $24,837,000. As of May 11, 1999 it had approximately 1,000 
employees. PSNC owns 750 miles of transmission pipelines, 6,727 miles 
of distribution mains, and ownership and leasehold interests in various 
buildings used in connection with its operations.
    Under an Amended and Restated Agreement and Plan of Merger 
(``Merger Agreement''), dated as of February 16, 1999 and amended and 
restated as of May 10, 1999 by and among PSNC, SCANA, New Sub I, Inc. 
(``New Sub I'') \1\ and New Sub II, Inc. (``New Sub II''),\2\ New Sub I 
will be merged with and into SCANA, with SCANA as the surviving 
corporation (``First Merger''). PSNC will be merged with and into New 
Sub II, with New Sub II as the surviving corporation (``Preferred 
Second Merger'' and, together with the First Merger, ``Mergers'').\3\ 
As a result of the Preferred Second Merger, PSNC will become a wholly 
owned subsidiary company of SCANA.
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    \1\ New Sub I will be incorporated under the laws of South 
Carolina prior to the consummation of the First Merger and will be a 
wholly owned subsidiary of SCANA. SCANA states that at no time will 
New Sub I have any operations other than the activities contemplated 
by the Merger Agreement as necessary to merge New Sub I with and 
into SCANA.
    \2\ New Sub II will be incorporated under the laws of South 
Carolina prior to the consummation of the Preferred Second Merger 
and will be a wholly owned subsidiary of SCANA. SCANA states that at 
no time will New Sub II have any operations other than the 
activities contemplated by the Merger Agreement as necessary to 
merge PSNC with and into New Sub II.
    \3\ The Merger Agreement also provides that, in the event it is 
not possible to consummate the Preferred Second Merger, the parties 
would, subject to certain conditions, carry out an ``alternative 
merger'' transaction in which PSNC would be merged directly into 
SCANA's existing public utility subsidiary, SCE&G. The request for 
approval made in SCANA's application concerns only the Preferred 
Second Merger.
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    The terms of the First Merger provide holders of SCANA common stock 
with an opportunity to exchange their shares for a specified cash 
payment. In the First Merger, each share of SCANA common stock 
outstanding immediately prior to that merger's effective time will be 
converted into the right to receive either (i) $30 in cash or (ii) one 
share of SCANA common stock. This provision is subject to a requirement 
that SCANA pay $700 million in total cash as consideration in the 
Mergers. If the First Merger occurs, it will be consummated prior to 
the consummation of the Preferred Second Merger. The First Merger will 
not involve the acquisition of any securities of a public utility 
company, and SCANA does not seek any Commission approvals in connection 
with the First Merger.
    The terms of the Preferred Second Merger provide holders of PSNC 
common stock with an opportunity to exchange their shares for a 
specified sum of cash, shares of SCANA common stock, or a combination 
of each. Immediately prior to the effective time of the Preferred 
Second Merger, each share of PSNC common stock then outstanding will be 
converted into the right to receive (1) $33.00 in cash, subject to the 
limitation that no more than 50% of the aggregate consideration to be 
paid to PSNC shareholders be in cash, (2) a number of shares of SCANA 
common stock determined according to a formula described below, or (3) 
a combination of cash and shares of SCANA common stock. The ratio by 
which PSNC shares will be exchanged for SCANA shares will be 
established immediately prior to the Preferred Second Merger and will 
be based upon the average market price of SCANA common stock over the 
preceding 20 trading day period. This ratio is subject to the 
limitation that PSNC shareholders will receive no more than 1.45 and no 
less than 1.02 shares of SCANA

[[Page 48880]]

common stock for each share of PSNC common stock.
    The Preferred Second Merger will be accounted for under the 
purchase method of accounting, in accordance with Generally Accepted 
Accounting Principles. As a regulated utility, the assets and 
liabilities of the acquired company, PSNC, will not be revalued to 
estimates of fair value, but will be maintained at their recorded 
amounts. If the Mergers are consummated, SCANA's financial statements 
will reflect effects of transaction adjustments only from the time 
Preferred Second Merger is effective. The First Merger will be treated 
as a reorganization with no change in the recorded amount of SCANA's 
assets and liabilities. The financial statements of SCANA will become 
the financial statements of the surviving corporation in the First 
Merger, and the results of the surviving corporation's operations will 
include the results of PSNC's operations commencing at the time the 
Preferred Second Merger becomes effective.
    Following the Preferred Second Merger, PSNC will become a wholly 
owned public utility company subsidiary of SCANA. The Merger Agreement 
provides that SCANA's principal corporate office will remain in 
Columbia, South Carolina and that PSNC's principal corporate office 
will remain in Gastonia, North Carolina.

SCANA Corporation (70-9533)

    SCANA Corporation (``SCANA''), a South Carolina public utility 
holding company exempt from registration under section 3(a)(1) of the 
Act, and its subsidiaries South Carolina Electric and Gas Company 
(``SCE&G''); South Carolina Generating Company, Inc. (``GENCO''); South 
Carolina Fuel Company, Inc.; South Carolina Pipeline Corporation; SCANA 
Energy Marketing Inc.; SCANA Propane Gas, Inc.; SCANA Propane Storage, 
Inc.; SCANA Communications, Inc.; Servicecare Inc.; Primesouth, Inc.; 
SCANA Resources Development Corporation; SCANA Petroleum Resources, 
Inc.; and SCANA Service Company (``SCANA Service''), all located at 
1426 Main Street, Columbia, South Carolina 29201; Public Service 
Company of North Carolina, Incorporated (``PSNC''), a North Carolina 
public utility company, and its subsidiaries Sonat Public Service 
Company LLC; Clean Energy Enterprises; Cardinal Pipeline Company, LLC; 
Pine Needle LNG Company, LLC; PSNC Blue Ridge Corporation; PSNC 
Cardinal Pipeline Company; and PSNC Production Corporation, all located 
at 400 Cox Road, Gastonia, North Carolina 28054 (collectively 
``Applicants''), have filed an application-declaration under sections 
6(a), 7, 9(a), 10, 12, and 13(b) of the Act and rules 42, 43, 45, 54, 
87, 88, 90, and 91 under the Act.
    SCANA has also filed a related application-declaration in File 
No.70-9521 seeking approvals required to complete its proposed 
acquisition of PSNC (``Merger''). a notice of that filing is being 
issued simultaneously with this notice.
    The Applicants propose to enter into numerous types of financing 
transactions to meet SCANA's capital requirements immediately following 
the Merger and to plan future financing. They request authorization to 
engage in these financing transactions for five years commencing on the 
date of an order issued responding to their application-declaration 
(``Authorization Period'').

1. General Terms and Conditions of Financing

    Financings by each Applicant would be subject to the following 
limitations: (i) the effective cost of money on long-term debt 
securities will not exceed 300 basis points over comparable term U.S. 
Treasury securities, and the effective cost of money on short-term 
securities will not exceed 300 basis points over the comparable term 
London Interbank Offered Rate; (ii) maturity of indebtedness will not 
exceed 50 years; (iii) the underwriting fees, commissions, or similar 
remuneration paid in connection with the issue, sale, or distribution 
of a security will not exceed 5% of the principal amount of the 
financing; and (iv) at all times during the Authorization Period 
SCANA's common equity will be at least 30% of its consolidated 
capitalization.
    The proceeds from the sale of securities in external financing 
transactions would be used for general corporate purposes including: 
(i) the financing, in part, of the capital expenditures of the SCANA 
system; (ii) the financing of working capital requirements of the SCANA 
system; (iii) the acquisition, retirement, or redemption of existing 
securities; and (iv) direct or indirect investment in companies whose 
activities the Commission authorizes in connection with the Merger, as 
well as energy-related and gas-related companies, as defined in rule 
58(b), and exempt telecommunications companies, as defined in section 
34(a) of the Act.

2. External Financing

    SCANA requests authorizations for four types of external financing. 
First it seeks authorization to issue common stock, no par value 
(subject to adjustment to reflect any stock split), up to an aggregate 
amount of 13.6 million shares, including issuances under its benefit 
and dividend reinvestment plans. SCANA also proposes to issue common-
stock options.
    Second, SCANA requests authorization to issue long-term debt 
securities in an amount, when combined with its issuances of common 
stock (other than for benefit or dividend reinvestment plans), not to 
exceed $1.435 billion. the long-term debt securities would consist of 
medium-term notes issued under an indenture.
    Third, SCANA requests authorization to have outstanding at any one 
time up to $950 million of short-term debt, consisting of bank 
borrowings, commercial paper, or bid notes. The short-term debt would 
be used to refund pre-Merger short-term debt, to provide for the 
reissuance of pre-Merger letters of credit, and to provide financing 
for general corporation purposes, working capital requirements, and 
capital expenditures for the Applicants other than SCANA until long-
term financing can be obtained.
    Fourth, SCANA requests authorization to engage in hedging 
transactions intended to manage the volatility of interest rates, 
including interest rate swaps, caps, floors, collars, and forward 
agreements or any other similar agreements. SCANA would employ interest 
rate swaps to manage the risk associated with any of its outstanding 
debt authorized by the Commission.

3. Utility Subsidiary Financing

    The Applicants request authorization for SCE&G, GENCO, and PSNC 
(``Utility Subsidiaries'') to issue up to $300 million in short-term 
debt consisting of commercial paper, unsecured bank loans, and 
borrowings under a SCANA holding company system money pool. These 
issuances of securities would comply with the general terms and 
conditions for financing transactions described above. Any short-term 
borrowings by the Utility Subsidiaries, when combined with short-term 
borrowings by SCANA, would not exceed $1.2 billion at any time during 
the Authorization Period. In addition, the Applicants request 
authorization for the Utility Subsidiaries to enter into hedging 
transactions of the same type under the same conditions as those 
applicable to SCANA.

4. Nonutility Subsidiary Financing

    The Applicants believe that in most cases rule 52(b) under the Act 
would exempt borrowings by any Applicant

[[Page 48881]]

other than SCANA and the Utility Subsidiaries (excluding SCANA, the 
``Nonutility Subsidiaries'') from Commission authorization 
requirements. However, the Nonutility Subsidiaries request that the 
Commission reserve jurisdiction over the issuance to nonassociates of 
securities that are not exempt under rule 52(b). The Nonutility 
Subsidiaries state that when a proposed issuance of a security is not 
exempt under rule 52(b) they will file a post-effective amendment 
requesting the necessary authorization.

5. Other Securities

    SCANA may find it necessary or desirable to issue and sell other 
types of securities during the Authorization Period in addition to 
those specifically enumerated in the application-declaration. SCANA 
requests that the Commission reserve jurisdiction over the issuance of 
additional types of securities.

6. Guarantees

    SCANA requests authorization to enter into guarantees, obtain 
letters of credit, enter into expense agreements, or otherwise provide 
support that its direct or indirect subsidiaries existing at the time 
the Merger is consummated or that are subsequently formed (``System 
Subsidiaries'') need in the ordinary course of their respective 
businesses. The aggregate principal amount of this credit support would 
not exceed $305 million. The debt would comply with the general terms 
and conditions for financing transactions described above.

7. Money Pool

    SCANA and the Utility Subsidiaries request authorization to 
establish a utility money pool, and the Nonutility Subsidiaries request 
authorization to establish a Nonutility money pool. The Utility 
Subsidiaries, to the extent that a transaction is not exempt under rule 
52, request authorization to make unsecured short-term borrowings from 
the utility money pool, contribute surplus funds to the utility money 
pool, and lend and extend credit to (and acquire promissory notes from) 
one another through the utility money pool.
    The Nonutility Subsidiaries may participate in a Nonutility money 
pool. The application-declaration states that rule 52 exempts the 
Nonutility money pool activities of the Nonutility Subsidiaries from 
the Act's prior-approval requirements. SCANA is requesting 
authorization to contribute surplus funds and to lend and extend credit 
to (a) the Utility Subsidiaries through the utility money pool and (b) 
the Nonutility Subsidiaries through the Nonutility money pool.
    SCANA Service will administer the utility and Nonutility money 
pools on an ``at cost'' basis and will maintain separate records for 
each money pool. Surplus funds of the two money pools may be combined 
in common short-term investments, but SCANA Service will maintain 
separate records of these funds. The Applicants request the Commission 
to reserve jurisdiction over participation in a money pool by future 
companies formed by SCANA until a post-effective amendment is filed 
naming the new participant.

8. Changes in Capital Stock

    The Applicants request authority to change the terms of the 
authorized capital stock of any wholly owned System Subsidiary by an 
amount SCANA or an immediate parent company deems appropriate. the 
application-declaration states that a System Subsidiary would be able 
to change the par value, or change between par and no-par stock, 
without additional Commission approval. Any action of this type by a 
Utility Subsidiary would be subject to, and would be taken only upon 
receipt of, necessary approvals by the state commission in the state or 
states where the Utility Subsidiary is incorporated and doing business.

9. Payment of Dividends

    The Applicants request authorization to pay dividends out of the 
additional paid-in-capital account of PSNC up to the amount of PSNC's 
aggregate retained earnings just prior to the Merger and out of 
earnings before the amortization of the goodwill thereafter.

10. Financing Entities

    The Applicants seek authorization for any Applicant other than 
SCANA to organize new corporations, trusts, partnerships, or other 
entities created for the purpose of facilitating financings through 
issuance of securities to third parties. The Applicants also request 
authority for (1) the issuance of debt instruments by an Applicant 
other than SCANA to a financing entity in return for the financing 
proceeds, (2) the acquisition by an Applicant other than SCANA of 
voting interests or equity securities issued by a financing entity, and 
(3) the guarantee by the Applicant of the financing entity's 
obligations. Each of the Applicants other than SCANA requests 
authorization to enter into expense agreements with its respective 
financing entity, under which it would agree to pay all expenses of 
that entity. Any amounts issued by financing entity to a third party 
would be included in the overall external financing limitation 
authorized for the financing entity's immediate parent.

11. Service Company

    SCANA Service will be incorporated in South Carolina and will act 
as the SCANA holding company system's service company following the 
Merger. It will provide a variety of administrative, management, and 
support services. The Applicants anticipate that SCANA Service will be 
staffed through a transfer of personnel from SCANA, SCE&G, and PSNC. 
The Applicants state that SCANA Service's accounting and cost 
allocation methods will comply with Commission standards for service 
companies in registered holding-company systems, and that its billing 
system will follow the Commission's Uniform System of Accounts for 
Mutual Service Companies and Subsidiary Service Companies. Except as 
permitted by the Act or the Commission, all services that SCANA Service 
provides to affiliated companies will be performed on an ``at cost'' 
basis in accordance with rules 90 and 91.
    To ensure adequate oversight and realize economies of scale, some 
administrative and service functions for the SCANA holding company 
system will be consolidated and provided through SCANA Service. As a 
general rule, the individual system companies will perform those 
services that can best be done at the company level, with SCANA Service 
offering system-wide coordination, strategy, oversight, and other 
services when that proves to be more efficient.

12. Other Services

    SCE&G, PSNC and other associate companies of SCANA request 
authorization to enter into leases of office or other space with 
associate companies. The Utility Subsidiaries may also provide services 
to each other that are incidental to their utility businesses, such as 
maintenance and emergency repairs and the services of personnel with 
special expertise. The Utility Subsidiaries will enter into software 
license agreements with other companies in the SCANA holding company 
system. The Applicants state that all of these agreements and services 
will comply with the requirements of rules 87, 90, and 91.
    SCANA Fuel Company, Inc. (``SCANA Fuel'') enters into contracts 
with SCE&G to provide environmental and fuel-related services. SCANA 
Fuel provides these services ``at cost,'' as determined under rules 90 
and 91.

[[Page 48882]]

13. Tax Allocation Agreement

    The Applicants have requested approval of an agreement to allocate 
consolidated taxes among SCANA and the other Applicants (``Tax 
Allocation Agreement''). The Applicants require this approval because 
the Tax allocation Agreement allows SCANA to retain certain payments 
for tax losses it has incurred, rather than allocate them to the other 
Applicants without payment, as rule 45(c)(5) would otherwise require. 
SCANA will create tax credits through the Merger that are nonrecourse 
to the other Applicants. The Applicants state that SCANA should retain 
the benefits of those tax credits.

    For the Commission by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-23237 Filed 9-7-99; 8:45 am]
BILLING CODE 8010-01-M