[Federal Register Volume 67, Number 64 (Wednesday, April 3, 2002)]
[Notices]
[Pages 15838-15840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-8007]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27512]


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

March 28, 2002.
    Notice is hereby given that the following filings 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) 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 19, 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 19, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Conectiv, et al. (70-9095)

    Conectiv, a registered holding company, Conectiv's public-utility 
subsidiaries: Atlantic City Electric Company (``ACE''); Delmarva Power 
& Light Company (``Delmarva''); Conectiv Atlantic Generation, L.L.C. 
(``CAG''); Conectiv Delmarva Generation, L.L.C. (``CDG''), and Conectiv 
Pennsylvania Generation, Inc. (``CPGI'') (collectively, ``Utility 
Subsidiaries''); and Conectiv's nonutility subsidiaries (``Nonutility 
Subsidiaries'' and with Utility Subsidiaries, ``Subsidiaries''): ACE 
REIT, Inc. (``ACE REIT''); ATE Investment, Inc.; ATS Operating 
Services, Inc.; Atlantic Generation, Inc.; Atlantic Jersey Thermal 
Systems, Inc.; Atlantic Southern Properties, Inc.; Binghamton General, 
Inc., Binghamton Limited, Inc.; Conectiv Bethlehem, Inc.; Conectiv 
Communications, Inc.; Conectiv Energy Holding Company (``CEH''); \1\ 
Conectiv Energy Supply, Inc.; Conectiv Mid-Merit, Inc.; Conectiv 
Operating Services Company; Conectiv Properties and Investments, Inc.; 
Conectiv Resource Partners, Inc.; Conectiv Services, Inc.; Conectiv 
Solutions, LLC; Conectiv Thermal Systems, Inc.; DCI I, Inc.; DCI II, 
Inc.; DCTC-Burney, Inc.; King Street Assurance, Ltd.; Pedrick Gen., 
Inc.; Vineland Limited, Inc.; and Vineland General, Inc., all located 
at 800 King Street, Wilmington, Delaware 19899; and Conectiv Plumbing, 
L.L.C., located at 621 Chapel Avenue, Cherry Hill, New

[[Page 15839]]

Jersey 08034 (collectively, ``Applicants''), have filed a post-
effective amendment (``Post-Effective Amendment'') under sections 6(a), 
7, and 12(b) of the Act and rules 45, 53 and 54 under the Act, to its 
application-declaration previously filed under the Act.
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    \1\ ACE REIT and CEH are registered holding companies under the 
Act.
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I. Background

    By order dated February 26, 1998 (HCAR No. 26833), and by various 
supplemental orders \2\ (collectively, ``Financing Orders''), the 
Commission authorized Conectiv and its subsidiaries to effect certain 
financing transactions through September 30, 2003 (``Authorization 
Period''). These included: (1) The issuance by Conectiv of short-term 
debt in an aggregate amount not to exceed $2 billion, less any amount 
of short-term debt issued by Delmarva under its authorization to issue 
up to $275 million of short-term debt; (2) the issuance by Conectiv of 
up to $250 million of long-term debt with the reservation of 
jurisdiction over an additional $750 million of long-term debt; \3\ (3) 
the reservation of jurisdiction over the issuance by Conectiv of common 
stock which, when combined with any long-term debt issued, does not 
exceed $500 million in the aggregate; \4\ and (4) the issuance by 
Conectiv of guaranties, letters of credit, expense agreements or other 
forms of credit support for the obligations of Subsidiaries in an 
aggregate amount not to exceed $1.5 billion. Conectiv proposes that the 
financing parameters approved in the Financing Orders, except the 
proposal to modify the terms for the allowable cost of funds, discussed 
below, also apply to all the transactions proposed by this Post-
Effective Amendment.
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    \2\ These orders were issued on August 21, 1998 (HCAR No. 
26907); September 28, 1998 (HCAR No. 26921); October 21, 1998 (HCAR 
No. 26930); November 13, 1998 (HCAR No. 26941); December 14, 1999 
(HCAR No. 27111); August 17, 2000 (HCAR No. 27213); June 7, 2001 
(HCAR No. 27415) and March 22, 2002 (HCAR No. 27507).
    \3\ The Commission released this reservation of jurisdiction on 
March 22, 2002. (HCAR No. 27507).
    \4\ Id.
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II. Description of Proposed Transactions

A. Summary of Requests 

    In \5\ addition to the existing financing authority granted in the 
Financing Orders, Applicants request the following in this Post-
Effective Amendment: (1) Authorization for Conectiv, CEH, any 
subsidiary of CEH or a financing entity established by CEH (including 
any entity established to construct and finance generation assets) \6\ 
(collectively, CEH, any subsidiary of CEH and any financing entity 
established by CEH are referred to as the ``Genco Financing Entities'') 
to issue external long-term and short-term debt for the purpose of 
financing existing and prospective generation assets (collectively, 
``Genco Financing''), in an amount not to exceed $1.5 billion 
outstanding at any one time (the ``Genco Financing Limit'') during the 
Authorization Period; \7\ (2) authorization for CEH to guarantee the 
obligations of its direct and indirect subsidiaries to third parties 
and for the Genco Financing Entities to issue guaranties to external 
lenders in support of their financing activities in an aggregate amount 
not to exceed $1.0 billion (``CEH Guarantee Limit'') during the 
Authorization Period; (3) authorization for the Genco Financing 
Entities to enter into financial risk management arrangements 
(``Hedging Transactions'') during the Authorization Period; (4) 
modification of the allowable effective cost of money to 500 basis 
points above comparable term U.S. Treasury securities in the case of 
long-term debt securities, and to 500 basis points above comparable 
term London Interbank Offered Rate (``LIBOR'') in the case of short-
term debt securities, from the 300 basis points above either U.S. 
Treasury securities or LIBOR, as approved in the Financing Orders; and 
(5) authorization for Conectiv to refund up to $150 million of long-
term debt scheduled to mature during the Authorization Period.
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    \5\ The Commission has pending before it an application-
declaration proposing a merger between Pepco Holdings, Inc. (``Pepco 
Holding'') and Conectiv. (HCAR No. 27511) (March 26, 2002). Also 
pending before the Commission is a financing U-1 filed by Pepco 
Holdings and Conectiv (``Financing U-1'') requesting, among other 
things, post-merger financing transactions. All authorizations 
sought in this Post-Effective Amendment will count against any 
limits aproved by the Commission in the Financing U-1. Conective 
states that it is requesting the authorizations in this Posr-
Effective Amendment in the even that financing or investment 
opportunities arise prior to the Commission approving the proposed 
merger.
    \6\ The Commission previously authorized the Subsidiaries to 
organize new comporations, partnerships or other entities for the 
purpose of facilitating financings. Any such entities established 
for purposes of facilitating Genco Financing willl be wholly owned 
direct subsidiaries of CEH. (HCAR No. 26833) (February 26, 1998).
    \7\ Applicants request that the Commission reserve jurisdiction 
over the issuance of up of $700 million of Genco Financing pending 
completion of the record.
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B. Proposed Increases in Short-Term and Long-Term-Debt Authority

    Applicants request authorization to issue external long-term and 
short-term debt which, when combined with outstanding short-term debt 
securities issued, will not exceed $1.5 billion during the 
Authorization Period. Applicants intend that short-term debt will be 
issued during the construction of mid-merit generation plants \8\ and 
will be replaced by permanent long-term financing at a later date. 
Types of short-term debt securities may include, but not be limited to, 
borrowings under one or more revolving credit facilities or bank loans, 
commercial paper, short-term notes and bid notes. Applicants state that 
the specific terms of any short-term borrowings will be determined by 
the Genco Financing Entities at the time of issuance and will comply in 
all regards with the financing parameters (as adjusted in any order 
issued in this filing) authorized in the Financing Orders. The maturity 
of any short-term debt issued will not exceed 364 days or, if the 
notional maturity is greater than 364 days, the debt security will 
include put options at appropriate points in time to cause the security 
to be accounted for as a current liability under United States 
generally accepted accounting principles.
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    \8\ Conectiv states that, due to certain state restructuring 
requirements, it intends to retain and develop additional flexible, 
low-cost mid-merit generation to address competitive opportunities 
in the Mid-Atlantic region. The mid-merit market consists of 
electric generating plants that are fuel-flexible, with the ability 
to start up and shut down quickly based on customer demand, weather 
conditions and price fluctuations.
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    Applicants state that the types of long-term debt securities issued 
by the Genco Financing Entities may include, but not be limited to, 
notes, medium-term notes or debentures under one or more indentures or 
long-term indebtedness under agreements with banks or other 
institutional lenders. Applicants further state that the Genco 
Financing Entities may also enter into project finance arrangements 
which will be secured by property of CEH or a subsidiary of CEH, and 
would be non-recourse to Conectiv. Any long-term debt security would 
have such designation, aggregate principal amount, 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 the Genco Financing Entities may determine at the time of 
issuance. Any long-term debt: (1) May be convertible into any other 
securities; (2) will have maturities ranging from one to 50 years; (3) 
may be subject to optional and/or mandatory redemption, in whole or in 
part, at par or at various premiums above the principal amount thereof; 
(4) may be entitled to mandatory or optional sinking-fund provisions; 
(5) may provide for reset of the coupon pursuant to a remarketing

[[Page 15840]]

arrangement; (6) may be subject to tender to the issuer for repurchase 
or be subject to the obligation of the issuer to repurchase at the 
election of the holder or upon the occurrence of a specified event; and 
(7) may be called from existing investors by a third party.

C. Proposed Increase in Conectiv Guaranties

    In addition to the guaranty authority granted in the Financing 
Orders, Conectiv requests authorization to enter into guaranties, 
obtain letters of credit, enter into support or expense agreements or 
otherwise provide credit support with respect to the obligations of 
CEH's direct and indirect subsidiaries and for Genco Financing Entities 
to issue guaranties to external lenders in support of their financing 
activities (``CEH Guarantees'') during the Authorization Period in an 
aggregate amount up to $1.0 billion. The CEH Guarantees will not exceed 
the CEH Guarantee Limit at any time during the Authorization Period.

D. Proposed Hedging Transactions

    Applicants request authorization for the Genco Financing Entities 
to enter into, perform, purchase and sell financial instruments 
intended to reduce or manage the volatility of interest rates, 
including but not limited to interest rate swaps, caps, floors, collars 
and forward agreements or any other similar agreements. Hedges may also 
include the issuance of structured notes (i.e., a debt instrument in 
which the principal and/or interest payments are indirectly linked to 
the value of an underlying asset or index), or transactions involving 
the purchase or sale, including short sales, of U.S. Treasury or Agency 
obligations or LIBOR based swap instruments (collectively referred to 
as ``Hedge Instruments''). Applicants state that the transactions would 
be for fixed periods and stated notional amounts. Applicants further 
state that CEH would employ interest rate derivatives as a means of 
prudently managing the risk associated with any of its outstanding debt 
issued pursuant to this authorization or an applicable exemption by, in 
effect, synthetically: (1) Converting variable-rate debt to fixed-rate 
debt; (2) converting fixed-rate debt to variable-rate debt; and (3) 
limiting the impact of changes in interest rates resulting from 
variable-rate debt. In no case will the notional principal amount of 
any interest rate swap exceed that of the underlying debt instrument 
and related interest rate exposure. Transactions will be entered into 
for a fixed or determinable period. Applicants further state that the 
Genco Financing Entities will not engage in speculative transactions. 
The Genco Financing Entities will only enter into agreements with 
counterparties whose senior debt ratings, as published by a nationally 
recognized rating agency, are greater than or equal to ``BBB,'' or an 
equivalent rating (``Approved Counterparties'').
    In addition, the Genco Financing Entities request authorization to 
enter into interest rate Hedging Transactions with respect to 
anticipated debt offerings (``Anticipatory Hedges''), subject to 
certain limitations and restrictions. Such Anticipatory Hedges would 
only be entered into with Approved Counterparties, and would be 
utilized to fix and/or limit the interest rate risk associated with any 
new issuance through: (1) A forward sale of exchange-traded Hedge 
Instruments (a ``Forward Sale''); (2) the purchase of put options on 
Hedge Instruments (a ``Put Options Purchase''); (3) a Put Options 
Purchase in combination with the sale of call options Hedge Instruments 
(a ``Zero Cost Collar''); (4) transactions involving the purchase or 
sale, including short sales, of Hedge Instruments; or (5) 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. Anticipatory Hedges may be executed on-exchange 
(``On-Exchange Trades'') with brokers through the opening of futures 
and/or options positions traded on the Chicago Board of Trade, the 
opening of over-the-counter positions with one or more counterparties 
(``Off-Exchange Trades''), or a combination of On-Exchange Trades and 
Off-Exchange Trades. CEH or its subsidiaries will determine the optimal 
structure of each Anticipatory Hedge transaction at the time of 
execution. Each of the Genco Financing Entities may decide to lock in 
interest rates and/or limit their exposure to interest rate increases.

E. Modification of Terms for Allowable Cost of Money

    Conectiv states that in order to provide flexibility in times of 
high interest rate volatility, it requests that the financing 
parameters authorized in the Financing Orders be modified, from the 300 
basis points above either U.S. Treasury securities or LIBOR, to state 
that the effective cost of money on long-term debt borrowings occurring 
pursuant to the authorizations granted under this Post-Effective 
Amendment will not exceed the greater of (1) 500 basis points over the 
comparable-term U.S. Treasury securities or (2) a gross spread over 
U.S. Treasuries that is consistent with similar securities of 
comparable credit quality and maturities issued by other companies. The 
effective cost of money on short-term debt borrowings issued under 
authorizations granted in this Post-Effective Amendment will not exceed 
the greater of (1) 500 basis points over the comparable-term LIBOR or 
(2) a gross spread over LIBOR that is consistent with similar 
securities of comparable credit quality and maturities issued by other 
companies.

F. Refunding of Existing Long-Term Debt

    In addition, pursuant to the Financing Orders, Conectiv issued $250 
million of long-term debt securities. Prior to the expiration of the 
Authorization Period, $150 million of these long-term debt securities 
are scheduled to mature by their terms. Conectiv requests authorization 
to issue up to $150 million of long-term debt securities for the 
purpose of refunding maturing long-term debt. Applicants state that 
specific terms of any issuances, such as maturity dates, interest 
rates, redemption and sinking fund provisions, tender or repurchase and 
conversion features, if any, with respect to the long-term securities 
of a particular series, will be determined by Conectiv at the time of 
issuance and will comply in all regards with the financing parameters 
authorized in the Financing Orders (as adjusted in any order issued in 
this filing).

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-8007 Filed 4-2-02; 8:45 am]
BILLING CODE 8010-01-U