[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Notices]
[Pages 12615-12623]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6551]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27497]


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

March 12, 2002.
    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 April 8, 2002, 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 April 8, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

E.ON AG, et al. (70-9985)

    E.ON AG (``E.ON''), a German company; E.ON's subsidiary companies, 
E.ON UK Verwaltungs GmbH (``E.ON UK''), E.ON UK plc, E.ON US 
Verwaltungs GmbH (``E.ON US''), E.ON Holdco (if formed) all located at 
E.ON-Platz 140479, Dusseldorf, Germany; Fidelia, Inc. (``Fidelia''), a 
finance company subsidiary organized in Delaware; E.ON North America 
Inc. (``E.ON NA''); Powergen plc (``Powergen''), a U.K. registered 
holding company; Powergen's direct and indirect wholly owned registered 
holding company subsidiaries, Powergen US Holdings Limited (``Powergen 
US Holdings''), Powergen US Investments, Powergen Luxembourg sarl, 
Powergen Luxembourg Holdings sarl, Powergen Luxembourg Investments 
sarl, Powergen US Investments Corp.(``PUSIC'' and together, ``Powergen 
Intermediate Companies''); Powergen US Funding LLC (``Powergen US 
Funding''), a financing vehicle for Powergen US Holdings, all located 
at 53 New Broad Street, London EC2M 1SL, United Kingdom; LG&E Energy 
Corp. (``LG&E Energy''), a Kentucky holding company exempt from 
registration under section 3(a)(1) of the Act, located at 220 West Main 
Street, Louisville, Kentucky 40232; LG&E Energy's utility subsidiaries 
Louisville Gas and Electric Company (``LG&E'') and Kentucky Utilities 
Company (``KU'' and together, ``Utility Subsidiaries''), One Quality 
Street, Lexington, Kentucky 40507; and LG&E Energy's nonutility 
companies located at 220 West Main Street, Louisville, Kentucky 40232 
(``LG&E Nonutilities,'' together with LG&E Energy and the Utility 
Subsidiaries, ``LG&E Energy Group'' and collectively, ``Applicants'') 
have filed an application (``Application'') under sections 6(a), 7, 
9(a), 10, 12, 13 of the Act and rules 45, 46, 52, 53, 54, 90 and 91 
under the Act. Applicants request authority for various financing 
transactions and service agreements related to the acquisition by E.ON 
of Powergen and its subsidiaries (``Acquisition''). The Commission 
published a notice describing the application for the Acquisition 
(``Acquisition Application'') on December 21, 2001.\1\ Following the 
Acquisition, E.ON intends to register under section 5 of the Act. 
Applicants intend that the LG&E Energy Group be transferred from the 
Powergen intermediate holding companies (``Powergen Intermediate 
Holding Companies'') and held indirectly by

[[Page 12616]]

E.ON US and its subsidiary holding companies (``Intermediate 
Companies'').\2\
---------------------------------------------------------------------------

    \1\ See E.ON AG plc, et al. HCAR No. 27482 (December 21, 2001).
    \2\ The acquisition and transfer of Powergen and the LG&E Energy 
Group are more fully described in the notice to the Acquisition 
Application. Prior to the transfer, Powergen US Holdings, Powergen 
US Investments, Powergen Luxembourg, Powergen Luxembourg Holdings, 
Powergren Luxembourg Investments and Powergen US Investments Corp. 
are referred to as the ``Powergen Intermediate Holding Companies.'' 
After the transfer of PUSIC and the LG&E Energy Group to E.ON US and 
its subsidiaries, Powergen US Holdings, Powergen US Funding and the 
subsidiaries of Powergen US Holdings will be referred to as the 
``Powergen Financing Entities.'' The Intermediate Companies will 
consist of E.ON US, PUSIC and E.ON Holdco, if formed.
---------------------------------------------------------------------------

I. Summary of Financing Proposals

    Applicants seek Commission authorization for certain financing 
activities of E.ON and its subsidiaries (``E.ON Group'') through May 
31, 2005 (``Authorization Period''). In summary, Applicants request 
authority for: (i) Various financings by E.ON, including the issuance 
of common stock and American Depositary Shares (``ADRs''), preferred 
stock, short and long-term debt, currency and interest rate swaps and 
guarantees; (ii) certain financings by (a) the direct and indirect 
holding company parents of LG&E Energy, (b) the LG&E Energy Group and 
(c) E.ON UK plc; (iii) the continuation by LG&E and KU of their 
respective receivables factoring programs; (iv) the creation of money 
pools and certain intercompany financing arrangements; (v) the payment 
of dividends out of capital or unearned surplus; (vi) the LG&E Energy 
Group tax allocation agreement; (vii) changing the terms of any wholly-
owned E.ON Group company's authorized capital stock, the issuance of 
additional shares, or alteration of the terms of any then existing 
authorized security; (viii) the formation of and the issuance by 
financing entities of securities otherwise authorized to be issued and 
sold under this Application or applicable exemptions under the Act; 
(ix) authorization for Powergen, Powergen US Holdings and Powergen US 
Funding to issue certain debt securities; (x) authorization to invest 
in exempt wholesale generators (``EWGs''), as defined in section 32 of 
the Act and foreign utility companies (``FUCOs''), as defined in 
section 33 of the Act and (xi) authorization to invest in energy-
related companies.

II. General Financing Parameters

    Applicants represent that the proposed transactions will be subject 
to the following general terms and conditions (``Financing 
Parameters'') during the Authorization Period:
     The aggregate amount of external debt, equity and 
guarantees issued by E.ON under the authorizations requested in this 
Application will not exceed $75 billion at any one time outstanding 
(``External Financing Limit''). Within the External Financing Limit, 
Applicants propose that no more than $25 billion will consist of equity 
securities (``Equity Sublimit''), no more than $40 billion will consist 
of debt securities (``Debt Sublimit'') and no more than $40 billion 
will consist of guarantees (``Guarantees'').
     The External Financing Limit represents investments in the 
following areas, generally: (i) $25 billion of investments in EWGs and 
FUCOs, (ii) $35 billion of investments in EWGs and FUCOs financed by 
bridge loans (``Bridge Loans'') pending the receipt of proceeds from 
the divestiture of certain non-energy related companies (``TBD 
Subsidiaries''),\3\ (iii) $5.5 billion for investments in TBD 
Subsidiaries pending divestiture, and (iv) $10 billion for investments 
in energy related subsidiaries. In addition to the capital expenditure 
program described above, as of September 30, 2001, E.ON and Powergen 
had debt securities outstanding in the amount of approximately $12.9 
billion and $7.4 billion, respectively. Funds raised under the External 
Financing Limit will be used to refinance, repay, redeem or refund some 
of such debt over the course of the Authorization Period.
---------------------------------------------------------------------------

    \3\ E.ON will divest certain businesses which are not energy 
related and use the proceeds of this divestiture to pay down debt 
issued in the interim to finance additional investment in energy 
related companies or utility purchases authorized in separate future 
applications. E.ON's business objective is more fully described in 
the Acquisition Application. E.ON's retainable nonutility companies 
will be referred to as the ``Retained Nonutility Subsidiaries.''
---------------------------------------------------------------------------

     The aggregate amount of short-term external debt issued by 
LG&E Energy under the authorizations requested in this Application will 
not exceed $400 million at any one time outstanding.
     Each of E.ON, LG&E, and KU commit that all long-term debt 
and preferred stock issued by it to unaffiliated parties under the 
authorization requested in this Application will, when issued, be rated 
investment grade by a nationally recognized statistical rating 
organization.
     E.ON and LG&E Energy, each on a consolidated basis, and 
LG&E and KU, individually, will maintain common stock equity as a 
percentage of total capitalization of at least thirty percent, as 
reflected in their most recent annual or semiannual report, in the case 
of E.ON, and, with respect to LG&E Energy, LG&E and KU, quarterly or 
other periodic earnings report, prepared in accordance with United 
States Generally Accepted Accounting Principles (``US GAAP'').
     The effective cost of money on debt financings by E.ON, 
LG&E Energy and the Utility Subsidiaries will not exceed the 
competitive market rates available at the time of issuance for 
securities having the same or reasonably similar terms and conditions 
issued by similar companies of reasonably comparable credit quality.
     The maturity of debt issued by E.ON will not exceed fifty 
years.
     The dividend rate on preferred stock or other types of 
preferred securities issued by E.ON will not exceed, at the time of 
issuance, the rate generally obtainable for preferred securities having 
the same or reasonably similar terms and conditions issued by companies 
of reasonably comparable credit quality, as determined by competitive 
capital markets.

III. Existing Financing Arrangements

A. E.ON's Current Capital Structure

    Applicants state that E.ON shares are listed on all German stock 
exchanges, the Swiss Stock Exchange and as ADRs on the New York Stock 
Exchange. E.ON's financial statements are maintained in accordance with 
U.S. GAAP. As of December 31, 2001, E.ON had 692.0 million common 
shares issued and approximately 687.3 million outstanding shares. E.ON 
recently completed the repurchase of 76.3 million shares, approximately 
ten percent of the company's capital stock and is authorized by its 
shareholders to repurchase up to ten percent of its common stock 
through October 31, 2002. E.ON has cancelled 71.3 million of the 
repurchased shares.

IV. E.ON External Financing

    Applicants propose that E.ON issue and sell securities and 
guarantee the obligations of its subsidiaries in an aggregate amount 
not to exceed the External Financing Limit outstanding at any one time 
during the Authorization Period. Securities would include common stock, 
preferred stock, options, warrants, unsecured long and short-term debt 
including commercial paper, convertible/exchangeable securities, lease 
financing, bank borrowings and securities with call or put options.

A. Equity Securities

    Applicants request authorization for E.ON to issue and sell, from 
time to time during the Authorization Period, common stock: (a) Through

[[Page 12617]]

underwritten public offerings; (b) in private placements; (c) in 
exchange for securities or assets being acquired from other companies; 
(d) under its dividend reinvestment, stock-based management incentive 
and employee benefit plans; (e) through subscription rights or (f) 
through non-underwritten offerings. Applicants also propose that E.ON 
issue and sell options, warrants or other stock purchase rights. The 
authorization to issue and sell common stock would also apply to the 
issuance of common stock directly or through the ADR program and, for 
purposes of this request, the ADRs would not be considered separate 
securities from the underlying common stock.
    Common stock and other equity instruments may be sold through 
underwriting agreements of a type generally standard in the industry in 
Europe or the U.S. Public distributions, if underwritten, may be 
through private negotiation with underwriters, dealers or agents, or 
effected through competitive bidding among underwriters. In addition, 
sales may be made through private placements or other non-public 
offerings to one or more persons. All sales of common stock and other 
equity instruments will be at rates or prices and under conditions 
negotiated, based upon or otherwise determined by competitive capital 
markets.
    Applicants request authority for E.ON to use its common stock as 
consideration for acquisitions authorized under the Act such as the 
exchange of equity securities for securities of the company being 
acquired to provide the seller with certain tax advantages. The E.ON 
ordinary shares to be exchanged may, among other things, be purchased 
on the open market or may be original issue. E.ON ordinary shares used 
to fund an acquisition of a company would be valued at market value 
based upon the closing price on XETRA, Germany's official electronic 
trading system, on the day before the execution of a definitive 
agreement or, in the case of a tender offer, on the day of commencement 
of the offer.
    Applicants also request that E.ON use its common stock and other 
equity instruments to fund employee benefit plans and in connection 
with dividend reinvestment plans currently in existence or that may be 
formed during the Authorization Period. E.ON currently maintains 
various stock-based compensation plans, including some that issue stock 
appreciation rights.

B. Preferred Stock

    Applicants request authority for E.ON to issue preferred stock from 
time to time during the Authorization Period in accordance with the 
applicable Financing Parameters. Preferred stock would have dividend 
rates or methods of determining the same, redemption provisions, 
conversion or put terms and other terms and conditions as E.ON may 
determine at the time of issuance.

C. Debt Securities

1. Long-Term Debt
    Applicants request authority for E.ON to issue and sell long-term 
debt securities from time to time during the Authorization Period in 
accordance with the applicable Financing Parameters. E.ON may also 
maintain and establish long-term bank lines of credit. Subject to the 
Financing Parameters, any long-term debt security would have the 
maturity, interest rate(s) or methods of determining the same, terms of 
payment of interest, redemption provisions, sinking fund terms, and 
other terms and conditions as E.ON may determine at the time of 
issuance.
2. Short-Term Debt
    Applicants request authority for E.ON to engage in short-term 
financing generally available to borrowers with comparable credit 
ratings, as it may deem appropriate in light of its needs and market 
conditions at the time of issuance. Specifically, Applicants request 
authority for E.ON to issue and sell bank lines of credit, 
institutional borrowings, commercial paper and bid notes. Issuance of 
short-term debt will be in accordance with the applicable Financing 
Parameters and will have maturities of less than one year from the date 
of each borrowing.

D. Interest Rate and Currency Risk Management Devices

1. E.ON
    Applicants request authority for E.ON to enter into, perform, 
purchase, and sell financial instruments intended to manage the 
volatility of interest rates and currency exchange rates, including but 
not limited to swaps, caps, floors, collars, and forward agreements or 
any other similar agreements (``Hedging Instruments'').
    In addition, Applicants request authority for E.ON to enter into 
Hedging Instruments with respect to anticipated debt offerings 
(``Anticipatory Hedges''), subject to certain limitations and 
restrictions. Anticipatory Hedges may include: (i) A forward sale of 
U.S. or European Economic Area (``EEA'') Treasury futures contracts; 
U.S. or EEA Treasury obligations and/or a forward swap (each a 
``Forward Sale''); (ii) the purchase of put options on U.S. or EEA 
Treasury obligations (``Put Options Purchase''); (iii) a Put Options 
Purchase in combination with the sale of call options on U.S. or EEA 
Treasury obligations (``Zero Cost Collar''); (iv) transactions 
involving the purchase or sale, including short sales, of U.S. or EEA 
Treasury obligations; or (v) some combination of a Forward Sale, Put 
Options Purchase, Zero Cost Collar, and/or other derivative or cash 
transactions, including, but not limited to structured notes, caps, and 
collars, appropriate for the Anticipatory Hedges.

E. Guarantees

    Applicants request authorization for E.ON to enter into guarantees, 
obtain letters of credit, enter into expense agreements or otherwise 
provide credit support (``Guarantees'') with respect to the obligations 
of the E.ON Group companies as may be appropriate or necessary to 
enable these companies to carry on in the ordinary course of their 
respective businesses. Guarantees, together with other securities 
issued by E.ON, will not exceed the External Financing Limit in an 
aggregate amount outstanding during the Authorization Period. All debt 
guaranteed will comply with the Financing Parameters. Included in this 
amount are Guarantees entered into by E.ON that were previously issued 
for the benefit of the E.ON Group companies.
    Certain Guarantees may be in support of obligations that are not 
capable of exact quantification. Applicants state that E.ON will in 
these cases determine the exposure under a Guarantee for purposes of 
measuring compliance with the External Financing Limit by appropriate 
means including estimation of exposure based on loss experience or 
projected potential payment amounts. E.ON proposes to charge each E.ON 
Group company a fee for each Guarantee provided on its behalf that is 
not greater than the cost, if any, of the liquidity necessary to 
perform the Guarantee and the credit risk assumed by E.ON. As of 
December 31, 2000, E.ON had issued and outstanding Guarantees on behalf 
of E.ON Group companies in an aggregate amount of approximately $0.4 
billion.

F. Profit and Loss Transfer Agreements

    E.ON has entered into profit and loss transfer agreements (``Profit 
and Loss Transfer Agreements'') with certain subsidiaries organized in 
Germany under provisions of the German Stock Corporation Act. A Profit 
and Loss Transfer Agreement automates the

[[Page 12618]]

transfer of profits as well as the balancing of losses between the 
participating companies. Profit and Loss Transfer Agreements are 
commonly done by German companies for tax optimization and are required 
to establish a tax group for German corporate income tax purposes. The 
Profit and Loss Transfer Agreements allow E.ON to direct the management 
of the subsidiaries and to cause the subsidiaries to distribute their 
profits or to hold them as retained earnings. If the subsidiaries have 
losses, E.ON assumes the losses. Like consolidated tax sharing 
agreements among U.S. corporate groups, the profit and loss transfer 
agreements permit income from one company to be offset by losses from 
another, thereby reducing the taxes of the group.
    Applicants request authority for E.ON and the E.ON subsidiaries 
organized in Germany to continue the Profit and Loss Transfer 
Agreements. Applicants propose that the net exposure of E.ON and the 
E.ON subsidiaries organized in Germany under the Profit and Loss 
Transfer Agreements be treated as Guarantees under the External 
Financing Limit. Since the exposure under the Profit and Loss Transfer 
Agreements is not capable of exact quantification, Applicants will 
determine E.ON and the E.ON subsidiaries organized in Germany's 
aggregate exposure under these agreements for purposes of measuring 
compliance with the External Financing Limit by estimation of exposure 
based on prior experience or projected potential payment amounts.

V. E.ON Subsidiary Company Financing

A. TBD Subsidiaries and Retained Nonutility Subsidiaries

    E.ON business strategy is to become a pure energy and utility 
company. As a part of this strategy, E.ON plans to divest the TBD 
Subsidiaries. Pending divestiture, Applicants propose that E.ON 
continue to invest in the TBD Subsidiaries in an aggregate amount not 
to exceed $5.5 billion in order to preserve and protect shareholder 
value and to prevent any diminution in the value or the prospects of 
the business until such time as a sale or other exit strategy can be 
implemented.
    Additionally, Applicants request authorization for the E.ON Group, 
other than the LG&E Energy Group, to finance the TBD Subsidiaries and 
the Retained Nonutility Subsidiaries at market rates where required by 
German law. Where the law does not require market rate financing, the 
E.ON Group, other than the LG&E Energy Group, would finance the TBD 
Subsidiaries and the Retained Nonutility Subsidiaries at the lending 
company's cost of capital. Where market rate financing is required, 
E.ON would determine the appropriate market rate for loans to each TBD 
Subsidiary or Retained Nonutility Subsidiary or among such entities in 
much the same manner practiced by an independent bank. E.ON would 
review the nature of each subsidiary's business, evaluate its capital 
structure, the particular risks to which it is subject, and generally 
prevailing market conditions. E.ON would also evaluate and take into 
account information from third parties such as banks that would 
indicate the prevailing market rates for similar businesses. In 
particular, E.ON will obtain information on the range of rates used by 
one or more banks for loans to similar businesses. Such independent 
third-party information would serve as an index against which an 
appropriate market rate could be determined. This analysis is referred 
to as the ``Market Rate Method.''

B. Powergen Financing Entities

    As a result of the legal requirements relating to the Acquisition 
and certain tax considerations, it may be necessary or desirable 
following the consummation of E.ON's Acquisition of Powergen for E.ON 
to delay the transfer of the LG&E Energy Group to the Intermediate 
Companies (``Interim Period'').\4\ During the Interim Period, Powergen 
and the Powergen Intermediate Holding Companies will retain a voting 
interest in the LG&E Energy Group companies and remain registered 
holding companies. Applicants request that during the Interim Period, 
Powergen and the Powergen Intermediate Holding Companies continue to 
have the financing authority presently granted to Powergen in its order 
authorizing the acquisition and financing of the LG&E Group.\5\
---------------------------------------------------------------------------

    \4\ Applicants state that the Interim Period may be up to twelve 
months.
    \5\ See Powergen plc, et al., HCAR No. 27291 (December 6, 2000), 
(``Powergen Order'').
---------------------------------------------------------------------------

    Upon the transfer of the LG&E Energy Group companies to the 
Intermediate Companies, Powergen will continue to own the Powergen 
Financing Entities. Since the Powergen Financing Entities will no 
longer own voting securities in the LG&E Energy Group companies, the 
Powergen Financing Entities will no longer be holding companies under 
the Act and will de-register as holding companies. Because of financial 
and tax considerations, Powergen US Holdings, directly or through its 
financing subsidiary Powergen US Funding, will have external debt 
outstanding. Additionally, Powergen US Holdings will continue to have a 
loan outstanding from Powergen UK.\6\
---------------------------------------------------------------------------

    \6\ Powergen UK is a subsidiary company of Powergen which holds 
Powergen's foreign interests. Powergen UK acquired a note from 
Powergen US Holdings to effect the financing of Powergen's purchase 
of LG&E Energy Group. This transaction is more fully described in 
the Powergen Order.
---------------------------------------------------------------------------

    Applicants request that the Powergen Financing Entities be 
authorized to maintain, repay, refund and otherwise refinance the 
facilities in place as of the date of the transfer of the LG&E Energy 
Group companies to the Intermediate Companies (``Transfer Date''), so 
long as the aggregate principal amount thereof does not at any time 
exceed the amount available under the facilities as of the Transfer 
Date. Applicants further request that the Powergen Financing Entities 
be authorized to loan any proceeds from the facilities to any of the 
Intermediate Companies and LG&E Energy.
    Each of the Powergen Financing Entities requests authorization to 
issue and sell securities to the other Powergen Financing Entities, 
Powergen, E.ON UK, E.ON UK plc, and E.ON, and to acquire securities 
from the other Powergen Financing Entities, the Intermediate Companies 
and LG&E Energy. Each of the Powergen Financing Entities also seeks 
authority to issue guarantees and other forms of credit support to the 
other Powergen Financing Entities, the Intermediate Companies and LG&E 
Energy. The Powergen Financing Entities would not acquire voting 
securities of LG&E Energy, its subsidiaries or the Intermediate 
Companies.
    The Powergen Financing Entities proposed financings would be used 
to finance the capital requirements of the LG&E Energy Group and any 
exempt or subsequently authorized activity acquired in the future. The 
Powergen Financing Entities financing will not be used by the Powergen 
Financing Entities to carry on business activities within the Powergen 
Financing Entities.
    PUSIC, the U.S. parent of the LG&E Energy Group companies, will be 
transferred by the Powergen Intermediate Holding Companies to E.ON US 
in exchange for cash and/or a note. \7\ Applicants request the 
authority for E.ON US to issue this note, expected to be in an amount 
not to exceed the fair

[[Page 12619]]

market value of PUSIC, bear interest at a market-based rate and in 
compliance with the cost of money, maturity and issuance expense 
provisions of the Financing Parameters.
---------------------------------------------------------------------------

    \7\ Applicants state that the consideration to be paid for PUSIC 
will depend on the result of a fair value study that will allocate 
the Powergen purchase price among Powergen and its subsidiaries. The 
study will be conducted subsequent to the completion of the 
Acquisition.
---------------------------------------------------------------------------

    Applicants request that Powergen, E.ON UK plc and E.ON UK be 
authorized to issue and sell securities to E.ON and to their direct and 
indirect parent companies. Applicants also propose that Powergen, E.ON 
UK plc and E.ON UK receive authorization to acquire securities from 
their subsidiaries, including the Powergen Financing Entities, issue 
guarantees and provide other forms of credit support to or for the 
benefit of their subsidiaries. Powergen and E.ON UK would not issue 
securities to third parties.
    Applicants request that E.ON UK plc issue and sell debt securities, 
in particular, medium-term notes, to third parties to finance the 
authorized or permitted activities of the Powergen Group. Debt issued 
by E.ON UK plc may be guaranteed by E.ON. Financing the Powergen Group 
through debt issued by E.ON UK plc is expected to be more cost 
effective due to tax considerations than financing capital needs 
through E.ON or another E.ON subsidiary and then lending the funds to 
E.ON UK plc. Any third party debt issued by E.ON UK plc would comply 
with the cost of money, maturity and issuance expense provisions of the 
Financing Parameters and would be consolidated into E.ON's consolidated 
financial statements and would count against the External Financing 
Limit and the Debt Sublimit.

C. Intermediate Companies

    Applicants propose that E.ON hold its interest in LG&E Energy 
through E.ON US and PUSIC; Intermediate Companies that would be 
registered holding companies under the Act. Each of the Intermediate 
Companies requests authorization to issue and sell securities to the 
other Intermediate Companies and E.ON, and to acquire securities from 
their direct or indirect Intermediate Company subsidiaries, E.ON NA and 
LG&E Energy. Each of the Intermediate Companies also seeks authority to 
issue guarantees and other forms of credit support to or for the 
benefit of direct and indirect Intermediate Company subsidiaries, E.ON 
NA and LG&E Energy. In no case would the Intermediate Companies borrow, 
or receive any extension of credit or indemnity, from any of their 
respective direct or indirect subsidiary companies.
    Upon consummation of the reorganization of the E.ON Group and the 
transfer of PUSIC to E.ON US, E.ON or one of the Intermediate Companies 
may be required to guarantee certain of the debt issued by the Powergen 
Financing Entities according to the terms of the applicable debt 
instruments. Applicants seek authority for the Intermediate Companies 
to issue guarantees and other forms of credit support to or for the 
benefit of the Powergen Financing Entities. Any guarantees issued by 
E.ON and the Intermediate Companies will count against the Guarantee 
Limit.
    Each of the Intermediate Companies is intended to function as a 
financial conduit to facilitate E.ON's U.S. investments. For reasons of 
economic efficiency, the terms and conditions of any securities issued 
by the Intermediate Companies would be market-based determined under 
the Market Rate Method. The Intermediate Company financings would be 
used to finance the capital requirements of E.ON NA and the LG&E Energy 
Group and any exempt or subsequently authorized activity that is 
hereafter acquired. The Intermediate Company financing will not be used 
by the Intermediate Companies to carry on business or investment 
activities within the Intermediate Companies.

D. Hedging Transactions

    The Intermediate Companies, the Powergen Intermediate Holding 
Companies and the Powergen Financing Entities propose to enter into 
hedging transactions with E.ON or other Intermediate Companies, 
Powergen Intermediate Holding Companies and Powergen Financing Entities 
to hedge interest rate or currency exposures. These transactions would 
be on market terms and on the same terms applicable to E.ON in section 
IV.D above.

VI. LG&E Energy Group Companies.

A. Loans from E.ON Group Companies

    After the Acquisition, E.ON will restructure its holding in E.ON 
NA, a wholly owned subsidiary, so that it will be held as a direct 
subsidiary of PUSIC. After the restructuring, E.ON NA will be a sister 
company to LG&E Energy. E.ON NA owns Fidelia, a finance company 
subsidiary organized in Delaware. Applicants propose that funds held by 
Fidelia be used to finance the capital needs of the LG&E Energy Group.
    E.ON proposes to finance all or a portion of the capital needs of 
the LG&E Energy Group companies directly or through other E.ON Group 
companies as described above, including the Intermediate Companies. 
Applicants request authority for the LG&E Energy Group companies to 
borrow funds from E.ON Group companies that may have available surplus 
funds. These borrowings would only occur if the interest rate on the 
loan would result in an equal or lower cost of borrowing than the LG&E 
Energy Group company could obtain in a loan from E.ON or in the capital 
markets on its own. Consequently, all borrowings by an LG&E Energy 
Group company from an associate company would be at the lowest of: (a) 
E.ON's effective cost of capital; (b) the lending associate's effective 
cost of capital (if lower than E.ON's effective cost of capital); and 
(c) the borrowing LG&E Energy Group company's effective cost of capital 
determined by reference to the effective cost of a direct borrowing by 
the company from a nonassociate for a comparable term loan that could 
be entered into at the time.
1. LG&E Energy
    Applicants request authorization for LG&E Energy to obtain funds 
externally through sales of short-term debt securities and to have 
outstanding at any time during the Authorization Period external short-
term debt in an aggregate amount of up to $400 million.
    LG&E Energy may engage in short-term financing as it deems 
appropriate in light of its needs and market conditions at the time of 
issuance. Financing could include commercial paper sold in established 
U.S. or European commercial paper markets, lines of credit with banks 
or other financial institutions and debt securities issued under an 
indenture or a note program. All transactions will be at rates or 
prices, and under conditions, negotiated under, based upon or otherwise 
determined by, competitive market conditions. Any securities issued by 
LG&E Energy will comply with the Financing Parameters.
2. Utility Subsidiaries
    Applicants request authorization for the Utility Subsidiaries to 
undertake the following financings.
    (a) Short-Term Financing. Applicants request authorization for LG&E 
and KU to issue debt with maturities of two years or less to one or 
more associate or nonassociate companies in an aggregate principal 
amount at any one time outstanding during the Authorization Period of 
up to $400 million in the case of LG&E and $400 million in the case of 
KU. Short-term financing may include commercial paper sold in 
established U.S. or European commercial paper markets, lines of credit 
with banks or other financial institutions and debt securities issued 
under an indenture or a note program. All transactions will be at rates 
or prices, and under conditions negotiated under, based upon, or

[[Page 12620]]

otherwise determined by, competitive market conditions.
    (b) Receivables Factoring Program. LG&E and KU propose to continue 
their receivables factoring program, authorized by the Powergen Order. 
LG&E formed and made capital contributions to LG&E Receivables, LLC 
(``LG&E Receivables'') and KU has formed and made capital contributions 
to KU Receivables, LLC (``KU Receivables''). Applicants request 
authorization for LG&E Receivables and KU Receivables to pay dividends 
or other distributions to the extent the dividends or other 
distributions may be considered to be paid out of capital or unearned 
surplus. Applicants also request that the Commission authorize the 
intercompany notes issued by LG&E Receivables and KU Receivables to 
LG&E and KU, respectively.
    (c) Guarantees. The Utility Subsidiaries seek authorization to 
guarantee the obligations of their subsidiaries (other than EWGs, 
exempt telecommunications companies as defined under section 34 of the 
Act (``ETCs'') or FUCOs) to the extent not exempt under rule 45 under 
the Act. Guarantees would not exceed $200 million in the case of LG&E 
and $200 million in the case of KU. Certain guarantees may be in 
support of obligations that are not capable of exact quantification. 
The Utility Subsidiaries will in these cases determine the exposure 
under a guarantee for purposes of measuring compliance with the above 
limits by appropriate means including estimation of exposure based on 
loss experience or projected potential payment amounts. The Utility 
Subsidiaries propose to charge each subsidiary a fee for each guarantee 
provided on its behalf that is not greater than the cost, if any, of 
the liquidity necessary to perform the guarantee and the credit risk 
assumed by the Utility Subsidiary. Guarantees issued by the Utility 
Subsidiaries would not be secured by any utility assets.
    (d) Hedging Instruments. The Utility Subsidiaries request 
authorization to enter into Hedging Instruments and Anticipatory Hedges 
on the same terms applicable to E.ON in section IV.D above.
3. Intercompany Loans Among the LG&E Energy Group
    The activities of LG&E Energy and its nonutility subsidiaries 
(``Nonutility Subsidiaries'') are financed, in part, through 
intercompany loans. The source of funds for the operations of LG&E 
Energy and the Nonutility Subsidiaries include internally generated 
funds and proceeds of external financings.
    Applicants request authorization for LG&E Energy and the Nonutility 
Subsidiaries to loan funds to the Nonutility Subsidiaries in a net 
principal amount at any one time outstanding during the Authorization 
Period not to exceed $1 billion. The authorization for intrasystem 
financing requested in this paragraph excludes financing that is exempt 
under rules 45(b) and 52. LG&E Energy will not borrow funds from its 
subsidiary companies. Terms and conditions of intercompany loans 
available to the Nonutility Subsidiaries will be materially no less 
favorable than the terms and conditions of loans available to the 
borrowing company from third-party lenders. The interest rate on 
intercompany loans payable by the borrower will be equal to the lending 
company's cost of capital. All intercompany loans will be payable on 
demand or have a maturity of less than fifty years from the date of 
issuance.
4. LG&E Energy Group Guarantees
    The LG&E Energy Group has in place certain guarantees and other 
credit support arrangements and request authority for these 
arrangements to remain in place following the Acquisition. These 
guarantees and credit support arrangements, described fully in the 
Application, have been previously authorized by order or are permitted 
under the Act and rules under the Act.
    Applicants request authorization for LG&E Energy and the Nonutility 
Subsidiaries to enter into guarantees, extend credit, obtain letters of 
credit, enter into guaranty-type expense agreements and otherwise to 
provide credit support for the obligations from time to time of the 
LG&E Energy Group companies during the Authorization Period. Guarantees 
issued by LG&E Energy would not exceed an aggregate principal amount of 
$1.5 billion and Guarantees issued by the Nonutility Subsidiaries would 
not exceed an additional aggregate principal amount of $1.5 billion, in 
each case based on the amount at risk, outstanding at any one time, 
exclusive of any guarantees or credit support arrangements existing on 
the date of the Acquisition and exclusive of guarantees that may be 
exempt under rule 45(b). The request for Guarantee authorization is 
separate from E.ON's External Financing Limit or E.ON's Guarantee Limit 
and is also separate from the guarantee authorization sought by the 
Utility Subsidiaries. Any securities issued by the LG&E Energy Group 
companies which are guaranteed or otherwise covered by credit support 
arrangements, will either be issued pursuant to a Commission order or 
under an applicable exemption under the Act.
    Any Guarantees or other credit support arrangements outstanding at 
the end of the Authorization Period shall continue until expiration or 
termination in accordance with their terms. The amount of Guarantees 
outstanding at any one time shall not be counted against the aggregate 
respective limits applicable to external financings or the limits on 
intra-system financing requested elsewhere herein. The guarantor will 
not charge a fee for any Guarantee that would exceed the guarantor's 
cost of obtaining the liquidity necessary to perform the Guarantee for 
the period of time the Guarantee remains outstanding and the credit 
risk assumed by the guarantor. To the extent that the exposure under 
any Guarantee is not capable of exact quantification, the guarantor 
will estimate its exposure based on loss experience or projected 
potential payment amounts.
5. Money Pools
    Applicants request authorization to operate three money pools. The 
utility money pool (``Utility Money Pool'') would include only the 
Utility Subsidiaries as borrowers from, and lenders to, the pool. E.ON, 
E.ON NA, Fidelia and LG&E Energy may be additional members of the 
Utility Money Pool, but they would participate only as lenders to the 
pool. LG&E Energy Services Inc. (``LG&E Services'') will act as the 
administrator of the Utility Money Pool.
    The U.S. nonutility money pool (``U.S. Nonutility Money Pool'') 
would include the Nonutility Subsidiaries as borrowers from and lenders 
to the pool. E.ON, E.ON NA, Fidelia and LG&E Energy would be additional 
members of the U.S. Nonutility Money Pool, but they would participate 
only as lenders to the pool. LG&E Services, the service company 
subsidiary of LG&E Energy, will act as the administrator of the U.S. 
Nonutility Money Pool.
    The Utility Subsidiaries and certain of the Nonutility Subsidiaries 
currently participate in money pools approved by the Commission in the 
Powergen Order. Applicants request that the Commission authorize the 
existing money pools through December 31, 2003, to provide a period of 
time to implement the new money pools.
    Applicants also request authorization to form and operate an E.ON 
nonutility money pool (``E.ON Nonutility Money Pool'') on the terms 
described herein. The E.ON Nonutility Money Pool may include all E.ON 
Group companies as

[[Page 12621]]

borrowers from and lenders to the pool, except E.ON, the Intermediate 
Companies, the Powergen Intermediate Holding Companies and the LG&E 
Energy Group companies. E.ON, the Intermediate Companies and the 
Powergen Intermediate Holding Companies would participate only as 
lenders to the E.ON Nonutility Money Pool.
    The daily outstanding balance of all borrowings from the Utility 
Money Pool during any month will accrue interest at the rate, as 
published in the Wall Street Journal on the last business day of the 
prior calendar month for high grade 30-day commercial paper issued by 
major corporations and sold through dealers (``WSJ Rate'') plus an at-
cost allocation of LG&E Services'' cost of managing the money pool. The 
interest rate paid on loans to the Utility Money Pool would be the 
weighted average of the WSJ Rate earned on loans to pool participants 
and the interest rate earned by the pool on surplus deposits invested 
in high-quality short-term readily marketable instruments.
    LG&E Services would administer the Utility Money Pool on an ``at 
cost'' basis and maintain the records for the pool. The determination 
of whether a participant in a money pool has surplus funds to lend to 
the pool or should borrow from the pool would be made by each 
participant's chief financial officer or treasurer, or by a designee 
thereof, on the basis of cash flow projections and other relevant 
factors, in that participant's sole discretion. No party would be 
required to effect a borrowing through a money pool if it is determined 
that it could (and had the authority to) effect a borrowing at a lower 
cost directly from banks or through the sale of its own commercial 
paper.
    The Utility Subsidiaries' borrowings from the Utility Money Pool 
would be counted against their overall short-term borrowing limits 
stated above. The U.S. Nonutility Money Pool will be operated on 
substantially the same terms and conditions as the Utility Money Pool.
    The E.ON Nonutility Money Pool would be administered by E.ON at no 
charge or by E.ON NA or its special purpose subsidiary at cost. The 
interest rate charged by the pool would be set according to the Market 
Rate Method and surplus funds would be invested in the same manner 
proposed for the Utility Money Pool. The interest rate paid on deposits 
to the E.ON Nonutility Money Pool will be a weighted average of the 
rates charged borrowers and the money pool investment rate.

VII. Acquisition, Redemption, or Retirement of Securities

    The Applicants request authorization for each company in the E.ON 
Group other than EWGs, FUCOs, and ETCs to acquire, redeem, or retire 
its securities or those of its direct and indirect subsidiaries, which 
securities may be either outstanding presently or issued and sold in 
the future from time to time during the Authorization Period. These 
transactions will be undertaken at either the competitive market prices 
for the securities or at the stated price for those securities, as 
applicable.

VIII. Financing Entities

    Applicants request authorization for the E.ON Group companies, 
except the EWGs, FUCOs and ETCs, to organize new, or use existing, 
corporations, trusts, partnerships, or other entities created for the 
purpose of facilitating financings through their issuance to third 
parties of income preferred securities or other securities authorized 
or issued under an applicable exemption. Request is also made for these 
financing entities (``E.ON Financing Entities'') to issue these 
securities to third parties in the event the issuances are not exempt 
under rule 52. Additionally, Applicants request authorization with 
respect to (a) the issuance of debentures or other evidences of 
indebtedness to an E.ON Financing Entity in return for the proceeds of 
the financing; (b) the acquisition of voting interests or equity 
securities issued by the E.ON Financing Entity to establish ownership 
of or to return funds to the financing entity and (c) the guarantee of 
the E.ON Financing Entity's obligations in connection with the 
securities issued. Applicants also request authority for E.ON Group 
Companies to enter into expense agreements with their respective E.ON 
Financing Entity under section 13 of the Act and to pay all expenses of 
the entity. All expense reimbursements would be at cost.
    Any amounts issued by an E.ON Financing Entity to third parties 
under the authority requested in this Application would be counted 
against the External Financing Limit or any other applicable limit for 
the immediate parent of the E.ON Financing Entity. The underlying 
intra-system mirror debt and parent guarantee will not, however, count 
against the applicable financing or guarantee limits.

IX. Changes in Capital Stock of Subsidiaries

    The portion of a subsidiary's aggregate financing to be effected 
through the sale of equity securities to a direct or indirect parent 
company during the Authorization Period cannot be determined at this 
time. The proposed sale of capital securities may in some cases exceed 
the capital stock of a given subsidiary authorized at the date of the 
Merger, in which case the limit will be increased. In addition, a 
subsidiary may choose to use other forms of capital securities 
including common stock, ordinary shares, preferred stock, other 
preferred securities, options and/or warrants convertible into common 
or preferred stock rights and similar securities. Applicants request 
authority to increase the amount or change the terms of any wholly 
owned subsidiary's authorized capital securities, as needed to 
accommodate the sale of additional equity, without additional 
Commission approval. The terms that may be changed include dividend 
rates, conversion rates and dates, and expiration dates. Applicants 
state that the Financing Parameters will continue to be satisfied 
following the change in terms of any capital security issued by a 
subsidiary.

X. Tax Allocation Agreement

    Applicants ask the Commission to approve the agreement among 
certain E.ON Group companies to file a consolidated tax return (``Tax 
Allocation Agreement''). Approval is necessary because the Tax 
Allocation Agreement provides for the retention by the U.S. parent of 
the US tax filing group (i.e., PUSIC or certain of its subsidiaries) of 
certain tax attributes resulting from payments it has made, rather than 
the allocation of these losses to the subsidiaries in the U.S. tax 
filing group without compensation as would otherwise be required by 
rule 45(c)(5). In this matter, PUSIC is seeking to retain only the 
benefit of tax losses that have been generated by it in connection with 
financing the acquisition of LG&E Energy.

XI. Payment of Dividends Out of Capital or Unearned Surplus

    Applicants will use the purchase method of accounting for the 
Acquisition. Under this method of accounting, the premium to be paid to 
acquire Powergen will result in a substantial amount of goodwill for 
the E.ON Group. Goodwill will not be amortized but will be subject to 
annual impairment tests and will reduce future consolidated net income. 
In addition, accounting rules require that the premium paid in an 
acquisition utilizing the purchase method of accounting be ``pushed 
down'' to the books of the acquired company, which

[[Page 12622]]

in this case would be the Powergen Group. The effect of a ``push down'' 
is to eliminate the retained earnings of the acquired company and to 
increase its additional paid-in capital. However, under applicable 
exceptions to the general rule, the premium paid in the acquisition 
will be ``pushed down'' to LG&E Energy, but will not be pushed down to 
the Utility Subsidiaries or any other subsidiary of LG&E Energy.
    Applicants request authorization for the E.ON subsidiaries other 
than EWGs, FUCOs, ETCs, and Utility Subsidiaries, to pay dividends with 
respect to its common stock or fund the redemption or repurchase of 
stock out of capital and unearned surplus (including revaluation 
reserve), to the extent permitted under applicable corporate law from 
time to time through the Authorization Period.

XII. Nonutility Reorganizations

    Applicants propose to restructure E.ON's nonutility holdings, 
including those in the LG&E Energy Group, from time to time as may be 
necessary or appropriate in the furtherance of the E.ON Group's 
authorized nonutility activities and to maintain and support investment 
in the E.ON TBD Subsidiaries pending divestiture. To that end, E.ON 
requests authorization to acquire, directly or indirectly, the equity 
securities of one or more intermediate subsidiaries (``Development 
Subsidiaries'') organized exclusively for the purpose of acquiring, 
financing, and holding the securities of one or more existing or future 
nonutility subsidiaries. Development Subsidiaries may also provide 
management, administrative, project development and operating services 
to these entities.
    Restructuring could involve the acquisition of one or more new 
special-purpose subsidiaries to acquire and hold direct or indirect 
interests in any or all of the TBD Subsidiaries and the E.ON Group's 
existing or future authorized nonutility businesses. Restructuring 
could also involve the transfer of existing subsidiaries, or portions 
of existing businesses, among the E.ON Group companies and/or the 
reincorporation of existing subsidiaries in a different jurisdiction. 
This would enable the E.ON Group to consolidate similar businesses, to 
participate effectively in authorized nonutility activities, and to 
position the E.ON TBD Subsidiaries appropriately for eventual sale 
without the need to apply for or receive additional Commission 
approval.
    The nonutility restructuring authorization sought herein works 
together with the authorization to invest up to $5.5 billion in the TBD 
Subsidiaries. For example, E.ON's German subsidiary Viterra has a 
portfolio of primarily low-income housing properties. To put Viterra in 
a better position to be sold, it may be desirable to package certain 
existing properties into one or more corporations for a separate sale 
and also to acquire selected commercial or upscale residential 
properties that complement Viterra's existing holdings. A more balanced 
portfolio of properties may be more attractive to a potential purchaser 
and increase the likelihood of structuring a successful sale.
    Development Subsidiaries may be corporations, partnerships, limited 
liability companies or other entities in which E.ON, directly or 
indirectly, might have a 100% interest, a majority equity or debt 
position, or a minority debt or equity position. Development 
Subsidiaries would engage only in businesses to the extent the E.ON 
Group is authorized, whether by statute, rule, regulation or order, to 
engage in those businesses (including the businesses of the E.ON TBD 
Subsidiaries pending divestiture). E.ON commits that the reorganization 
authorization requested in this Application will not result in the 
entry by the E.ON Group into a new, unauthorized line of business.
    Development Subsidiaries would be organized for the purpose of 
acquiring, holding and/or financing the acquisition of the securities 
of or other interest in one or more EWGs, FUCOs, subsidiaries exempt 
under rule 58 (``Rule 58 Subsidiaries''), energy related subsidiaries 
(``Energy Related Subsidiaries''), ETCs or other non-exempt nonutility 
subsidiaries. Development Subsidiaries may also engage in development 
activities (``Development Activities'') and administrative activities 
(``Administrative Activities'') relating to the permitted businesses of 
the nonutility subsidiaries.
    Development Activities will include due diligence and design 
review; market studies; preliminary engineering; site inspection; 
preparation of bid proposals, including, in connection therewith, 
posting of bid bonds; application for required permits and/or 
regulatory approvals; acquisition of site options and options on other 
necessary rights; negotiation and execution of contractual commitments 
with owners of existing facilities, equipment vendors, construction 
firms, power purchasers, thermal ``hosts,'' fuel suppliers and other 
project contractors; negotiation of financing commitments with lenders 
and other third-party investors; and such other preliminary activities 
as may be required in connection with the purchase, acquisition, 
financing or construction of facilities or the acquisition of 
securities of or interests in new businesses. Administrative Activities 
will include ongoing personnel, accounting, engineering, legal, 
financial and other support activities necessary to manage E.ON's 
investments in nonutility subsidiaries.
    A Development Subsidiary may be organized, among other things, (a) 
to facilitate the making of bids or proposals to develop or acquire an 
interest in any EWG, FUCO, Rule 58 Subsidiary, Energy Related 
Subsidiary, ETC or other non-exempt nonutility subsidiary; (b) after 
the award of the bid proposal, to facilitate closing on the purchase or 
financing of the acquired company; (c) at any time subsequent to the 
consummation of an acquisition of an interest in any company in order, 
among other things, to effect an adjustment in the respective ownership 
interests in business held by E.ON and non-affiliated investors; (d) to 
facilitate the sale of ownership interests in one or more acquired 
nonutility companies; (e) to comply with applicable laws of foreign 
jurisdictions limiting or otherwise relating to the ownership of 
domestic companies by foreign nationals; (f) as a part of financial 
optimization or tax planning to limit E.ON's exposure to German, U.S. 
and foreign taxes or (g) to further insulate E.ON and its utility 
subsidiaries from operational or other business risks that may be 
associated with investments in nonutility companies.
    Development Activities will be funded in accordance with rules 
45(b) and 52(b) under the Act or as authorized in this Application. To 
the extent that E.ON provides funds or guarantees directly or 
indirectly to a Development Subsidiary that are used for the purpose of 
making an investment in any EWG, FUCO or Rule 58 Subsidiary, the amount 
of these funds or guarantees will be included in E.ON's ``aggregate 
investment'' in these entities, as calculated in accordance with rules 
53 or 58, under the Act as applicable.
    To the extent these transactions are not exempt from the Act or 
otherwise authorized or permitted by rule, regulation or order of the 
Commission, Applicants request that authorization for the Development 
Subsidiaries to provide management, administrative, project development 
and operating services to direct or indirect subsidiaries at cost in 
accordance with section 13 of the Act and the rules, including rules 90 
and 91 under the Act. Applicants also propose, however, that under 
certain circumstances Development Subsidiaries would provide services 
and

[[Page 12623]]

sell goods at fair market prices, under an exemption from the at-cost 
standard of section 13(b) of the Act and rules 90 and 91 under the Act, 
when the company receiving the goods or services is:
    (1) A FUCO or foreign EWG that does not derive any income, directly 
or indirectly, from the generation, transmission or distribution of 
electric energy for sale within the United States;
    (2) An EWG that sells electricity to nonassociate companies at 
market-based rates approved by the Federal Energy Regulatory Commission 
(``FERC'');
    (3) A ``qualifying facility'' under the Public Utility Regulatory 
Policy Act of 1978 (``PURPA'') that sells electricity to industrial or 
commercial customers for their own use at negotiated prices or to 
electric utility companies at their ``avoided cost,'' as defined under 
PURPA;
    (4) A domestic EWG or ``qualifying facility'' that sells 
electricity to nonassociate companies at cost-based rates approved by 
FERC or a state commission; and
    (5) A Rule 58 Subsidiary or any other authorized subsidiary that: 
(a) Is partially owned, provided that the ultimate purchaser of the 
goods or services is not an associate public utility company or an 
associate company that primarily provides goods and services to 
associate public-utility companies; (b) is engaged solely in the 
business of developing, owning, operating and/or providing goods and 
services to nonutility companies described in items (1) through (4), 
above or (c) does not derive, directly or indirectly, any material part 
of its income from sources within the United States and is not a 
public-utility company operating within the United States.

XIII. Energy Related Subsidiaries

    E.ON is in the process of a significant program of divestiture of 
its nonutility businesses. E.ON expects to receive proceeds from 
business divestitures in excess of $20 billion within the next five 
years, including the proceeds of sales already made. Applicants propose 
that E.ON invest the divestiture proceeds to build its existing, 
permitted nonutility businesses, and acquire additional interests in 
EWGs, FUCOs and permitted nonutility businesses located primarily 
outside of the United States.

XIV. EWG/FUCO-Related Financings

    E.ON requests authorization to issue and sell securities in an 
aggregate amount of up to $25 billion for the purpose of financing 
investments in EWGs and FUCOs in the Acquisition Application. E.ON also 
proposes to invest an additional $35 billion in EWGs and FUCOs 
available from the divestiture of the TBD Subsidiaries. Both of these 
amounts are included within the External Financing Limit.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-6551 Filed 3-18-02; 8:45 am]
BILLING CODE 8010-01-P