[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