[Federal Register Volume 66, Number 144 (Thursday, July 26, 2001)]
[Notices]
[Pages 39060-39062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-18640]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27428]


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

July 20, 2001.
    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 amendment(s) 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) should submit their views in 
writing by August 14, 2001, 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 the 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 August 14, 2001, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Progress Energy, Inc., et al. (70-9863)

    Progress Energy, Inc. (``Progress Energy''), a registered holding 
company under the Act, Carolina Power & Light Company (``CP&L''), a 
public utility company subsidiary of Progress Energy, Progress Energy 
Ventures, Inc. (``Ventures''), a nonutility intermediate holding 
company subsidiary of Progress Energy, Richmond County Power, LLC 
(``Richmond,''), a wholly owned, inactive subsidiary of CP&L, Florida 
Power Corporation (``Florida Power''), a public utility company 
subsidiary of Progress Energy, North Carolina Natural Gas Corporation 
(``NCNG''), a gas utility subsidiary company of Progress Energy, 
Progress Energy Service Company, LLC (``Services''), a service company 
subsidiary of Progress Energy, Monroe Power Company (``Monroe''), 
subsidiary company of Progress Energy and presently an exempt wholesale 
generator (``EWG'') as defined in section 32 of the Act, and CP&L NewCo 
(``NewCo''), a company to be formed by CP&L, (together, 
``Applicants''), all located at 411 Fayetteville Street Mall, Raleigh, 
North Carolina 27602, have filed an application-declaration 
(``Application'') under sections 3(a)(1), 6(a), 7, 9(a), 10, 11(b)(2), 
12, 13(b), and 32 under the Act and rules 43, 44, 45, 46, 53, 54, 58, 
88, 90 and 91 under the Act.

I. Summary of Requests

    Applicants seek authority for: (1) CP&L to transfer its interests 
in certain electric generation assets \1\ (``Richmond Facility'') to 
Richmond; (2) CP&L to transfer its interests in Richmond to Ventures 
through a series of transactions explained in detail below; (3) 
Richmond to enter in various financing transactions within aggregate 
limitations authorized for the Progress Energy system by order dated 
December 12, 2000 (HCAR No. 27297) (``December Order''); (4) Richmond 
to issue additional types of securities; (5) Ventures to be granted 
exemption from registration under section 3(a)(1) of the Act; (6) the 
retention of Monroe and NewCo as intermediate holding companies; (7) 
Monroe and Newco to be granted exemption from registration under 
section 3(a)(1) of the Act; (8) the acquisition by Richmond of special 
purpose financing subsidiaries (``Richmond Financing Subsidiaries''); 
(9) the addition of Richmond to the utility money pool (``Utility Money 
Pool'') authorized in the December Order; (10) the reservation of 
jurisdiction over the addition of Richmond to the Progress Energy tax 
allocation agreement; and (11) certain service transactions involving 
wholesale generation utility and nonutility subsidiaries under section 
13(b) of the Act.
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    \1\ The Richmond Facility consists of the following assets (or 
rights to acquire such assets): eight GE 7F combustion turbines; six 
heat recovery steam generators; three steam turbines; one station 
service transformer; steam condensers and cooling towers; one gas 
pipeline spur; and a water supply, treatment and transportation 
system. The Richmond Facility assets also include, or will include, 
contracts for wholesale sales of electricity, construction, 
operation and maintenance, fuel, and other contracts, as well as 
governmental permits and approvals and real property interests, 
directly related to and necessary for facility construction and 
operation. As of December 31, 2000, the Richmond assets had a book 
value of $145,324,232.
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A. Restructuring

    Applicants request authority for CP&L to transfer and Richmond to 
acquire the Richmond Facility, with Richmond then becoming a public 
utility subsidiary of CP&L. Applicants further intend that Richmond be 
moved to a different placement in the Progress Energy system through a 
series of transactions (``Restructuring''). The Restructuring is 
expected to take place as follows: (1) Progress Energy will contribute 
its stock in Ventures to Monroe; (2) CP&L will contribute the Richmond 
Facility to Richmond; (3) CP&L will form NewCo as a new, wholly owned 
subsidiary, (4) CP&L will contribute its membership interests in 
Richmond to NewCo in exchange for the acquisition of all NewCo stock; 
(5) CP&L will distribute the NewCo stock to Progress Energy; (6) the 
Monroe stock will be contributed to NewCo; and (7) NewCo will 
contribute the Richmond membership interests down the corporate chain 
to Ventures. Applicants request authority to retain Monroe and NewCo in 
place as intermediate holding companies after the Restructuring in 
order for the Restructuring to be exempt from federal tax under section 
355 of the Internal Revenue Code.

B. Richmond Financing Subsidiaries

    Applicants request authority for Richmond to acquire the securities 
and organize one or more Richmond Financing Subsidiaries to issue 
Preferred Securities, Debentures, Short-Term Debt and Long-Term Debt. 
The Richmond Financing Subsidiaries will be organized solely to issue 
securities to support Richmond's businesses. Applicants state that the 
Richmond Financing Subsidiaries will dividend, loan, or otherwise 
transfer proceeds of a financing only to Richmond.

[[Page 39061]]

C. Richmond Financing Requests

    Applicants request authority for Richmond to issue and sell 
directly, or indirectly through the Richmond Financing Subsidiaries, 
preferred securities (``Preferred Securities''); debentures 
(``Debentures''); short-term debt (``Short-Term Debt''); and long-term 
debt (``Long-Term Debt''), which may be in the form of secured 
guarantees (``Secured Guarantees''), unsecured guarantees (``Unsecured 
Guarantees''), and notes (``Notes'').
1. Preferred Securities
    Applicants request authority for Richmond to issue Preferred 
Securities in one or more series with rights, preferences, and 
priorities as may be designated in the instrument creating each series, 
as determined by Richmond's board of directors. All Preferred 
Securities will be redeemed no later than fifty years after the date of 
issuance. The dividend rate on any series of Preferred Securities will 
not exceed, at the time of each issuance, the greater of (a) 500 basis 
points over the yield to maturity of a U.S. Treasury security having a 
remaining term equal to the term of the series of Preferred Securities 
and (b) a rate that is consistent with similar securities of comparable 
credit quality and maturities issued by other companies.
2. Debentures
    Debentures will have maturities ranging from one to fifty years. 
The interest rate on Debentures will not exceed, at the time of each 
issuance, the greater of (a) 300 basis points over U.S. Treasury 
securities having comparable maturities and (b) a gross spread over 
U.S. Treasury securities that is consistent with similar securities of 
comparable credit quality and maturities issued by other companies. The 
maturity dates, interest rates, redemption and sinking fund provisions 
and conversion features, if any, with respect to the Debentures of a 
particular series, as well as any associated placement, underwriting or 
selling agent fees, commissions and discounts, if any, will be 
established by negotiation or competitive bidding. Applicants state all 
Debentures will be maintained at investment grade as established by a 
nationally recognized statistical rating organization.
    The amount of Preferred Securities and Debentures issued by 
Richmond and those issued by the Richmond Financing Subsidiaries which 
are guaranteed by Richmond, will count toward, and will not exceed, the 
$3.8 billion aggregate limitation on Preferred Securities and 
Debentures authorized by the Commission for issuance by Progress Energy 
in the December Order.
3. Short-Term Debt
    Applicants request authority for Richmond to issue Short-Term Debt, 
which may take the form of commercial paper, promissory notes, and/or 
other forms of indebtedness that will be sold to dealers at the annual 
discount rate prevailing at the date of the sale for commercial paper 
of comparable quality and maturities. Short-Term Debt may also include 
notes and other forms of indebtedness under lines of credit from banks. 
Applicants state that commercial paper Short-Term Debt will mature in 
one year or less from the date of issuance and borrowing under lines of 
credit will mature in two years or less from the date of the borrowing. 
The effective cost of money on Short-Term Debt will not exceed, at the 
time of issuance, 300 basis points over the London Interbank Offered 
Rate for maturities of one year or less. The amount of Short-Term Debt 
that Applicants propose Richmond will incur will count toward, and will 
not exceed, the $1 billion aggregate limitation on Short Term Debt 
authorized for Progress Energy by the Commission in the December Order.
4. Long Term Debt
    Applicants request authority for Richmond to issue Long-Term Debt 
in an amount not to exceed $1 billion of indebtedness at any one time 
during the Authorization Period. Applicants request authority for 
Richmond to issue and reissue notes with a maturity of up to 20 years.
    (a) Secured and Unsecured Guarantees. In connection with the 
request to issue Long-Term Debt, Applicants request authority for 
Richmond to issue Secured Guarantees or Unsecured Guarantees on similar 
obligations of affiliate or associate companies, and in particular, the 
Progress Energy system EWGs. Security for Secured Guarantees may 
include a security interest in all of Richmond's rights, title, and 
interest to its present and future assets, including all project 
agreements and permits relating to the Richmond Facility to which 
Richmond is a party and all of Richmond's goods, inventory, equipment, 
revenues, accounts, and all amounts maintained therein, receivables, 
and all Richmond's other property, assets, and revenues. The interest 
rate on Richmond's Long-Term Debt will not exceed, at the time of 
issuance, 500 basis points over the yield to maturity of a U.S. 
Treasury Note having comparable maturities. Secured and Unsecured 
Guaranties by Richmond will not be counted against either the Progress 
Energy or the Progress Energy nonutility subsidiary guaranty limit 
authorized under the December Order.\2\
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    \2\ Although it will be an electric utility company under 
section 2(a)(3) of the Act, Applicants expect that Richmond will 
sell electric power only at wholesale. Therefore, Richmond will not 
be a public utility for purposes of state law, and no state 
commission will have jurisdiction over financing transactions 
requested in this application-declaration. Applicants may not use 
rule 52 to exempt these financing transactions under the Act.
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D. Utility Money Pool

    Applicants request authority for Richmond to participate in the 
Progress Energy utility money pool (``Utility Money Pool'') established 
under authority granted in the December Order. Applicants propose that 
Richmond, CP&L and NCNG would lend to each other, as well as borrow 
from Progress Energy, Florida Power and each other, and for Florida 
Power and Progress Energy to lend to Richmond, CP&L and NCNG, through 
the Utility Money Pool. Applicants request authority for Richmond to 
borrow through the Utility Money Pool up to $250 million at any time 
outstanding. Loans will be repayable on demand and, in any event, not 
later than one year after the date of the loan. All other items, 
conditions and operational arrangements of the Utility Money Pool will 
remain as described in the December Order.

E. Proposed Service Agreements With Service Company and Retail 
Companies

    Applicants propose that Progress Energy Service Company, LLC 
(``Services''), a service company approved by order dated November 27, 
2000 (HCAR No. 27284) (``November Order'') under section 13 of the Act 
and rule 88 under the Act, will provide a wide range of services to 
Richmond on an as-needed basis in accordance with the Progress Energy 
system utility service agreement (``Utility Service Agreement'') also 
approved in the November Order. Personnel employed by the Retail 
Companies also will provide certain services to Richmond according to 
utility service agreements in the form of the Utility Service Agreement 
and/or according to an operating agreement (``Operating Agreement'') 
between Richmond and Florida Power and CP&L (together ``Retail 
Companies'') or pursuant to other arrangements that comply with section 
13(b) of the Act and the Commission's rules under the Act concerning 
system services. Personnel employed by the Retail Companies will 
provide, consistent with section 13(b)

[[Page 39062]]

and the Commission's service company rules, rule 53(a)(3), and the 
Commission's authorization in CP&L Energy, Inc., Holding Co. Act 
Release No. 27284 (Nov. 27 2000), similar operations services under the 
Operating Agreement to EWGS that may be developed and owned, directly 
or indirectly, by Progress Energy Ventures.
    Services and the Retail Companies will render services to Richmond, 
at cost computed in accordance with section 13(b) and rules 90 and 91 
under the Act. These services will include general executive and 
advisory services; power operations; general engineering; design 
engineering; purchasing; accounting, finance and treasury services; tax 
counseling; counseling on insurance and pensions; other corporate 
services relating to rates, budgeting, public relations, employee 
relations, systems and procedures; and other services with respect to 
business and operations.

F. Income Tax Allocation Agreement

    Applicants proposed that Richmond participate in the Progress 
Energy income tax allocation agreement currently subject to a 
reservation of jurisdiction by the Commission under the December Order.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-18640 Filed 7-25-01; 8:45 am]
BILLING CODE 8010-01-M