[Federal Register Volume 67, Number 109 (Thursday, June 6, 2002)]
[Notices]
[Pages 39073-39076]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14203]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27534]


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

May 31, 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) 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 June 24, 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 June 24, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Energy East Corporation, et al. (70-9901)

    Energy East Corporation (``Energy East''), a registered holding 
company, Eagle Merger Corporation (``Eagle''), both located at P.O. Box 
12904, Albany, New York 12212-2904, and RGS Energy Group, Inc. 
(``RGS''), 89 East Avenue, Rochester, New York 14649-0001 (together, 
``Applicants''), have filed with the Commission a joint application 
under sections 3(a)(1), 9(a), 10, and 11(b) of the Act and rule 54 
under the Act.

I. Summary of Proposal

    As described in more detail below, Energy East proposes that the 
Commission approve: (a) Energy East's acquisition, by means of the 
merger described below (``Merger''), all of the issued and outstanding 
common stock of RGS (``RGS Common Stock''); (b) Energy East's indirect 
acquisition of all

[[Page 39074]]

of the nonutility activities, businesses and investments of RGS; (c) 
Energy East's retention of RGS as an intermediate holding company; (d) 
the operation of post-Merger Energy East as a combination electric and 
gas utility company; (e) the acquisition of shares of common stock of 
New York State Electric & Gas Corporation (``NYSEG''), a wholly owned 
combination gas and electric utility subsidiary of Energy East, by RGS; 
(f) the acquisition by Eagle of RGS; (g) the acquisition of Eagle's 
shares by Energy East; and (h) the exemption of RGS from registration 
as a holding company under section 3(a)(1) of the Act.
    Under the terms of an Agreement and Plan of Merger (``Merger 
Agreement''), dated February 16, 2001,\1\ RGS will be merged with and 
into Eagle, a New York corporation, which will be a wholly-owned 
subsidiary of Energy East at the effective time of the Merger, with 
Eagle being the surviving corporation. Eagle will continue to conduct 
RGS's businesses under the name ``RGS Energy Group, Inc.'' as a direct, 
whollyowned subsidiary of Energy East.
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    \1\ The shareholders of RGS approved the Merger with Energy East 
at a meeting held on June 15, 2001. Energy East and RGS have 
submitted applications requesting approval of the Merger and/or 
related matters to the appropriate state and federal regulators, 
including the New York Public Service Commission, the Federal Energy 
Regulatory Commission, the Nuclear Regulatory Commission, and the 
Federal Communications Commission. Applicants have also made the 
required filings with the Antitrust Division of the United States 
Department of Justice and the Federal Trade Commission under the 
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. 
Applicants state that favorable responses have been received by the 
Applicants from each of these regulators.
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    Energy East would purchase all common shares of RGS for: (i) $39.50 
in cash per share; (ii) shares of Energy East common stock valued at 
$39.50 (subject to restrictions on the maximum and minimum number of 
shares of Energy East common stock to be issued); or (iii) a 
combination of cash and Energy East common stock. Each RGS shareholder 
would be able to elect the form of consideration that the shareholder 
wishes to receive, subject to proration, so that 55 percent of RGS 
shares would be exchanged for cash and 45 percent would be exchanged 
for Energy East common stock.\2\ Each RGS share converted into Energy 
East common stock would receive not less than 1.7626 and not more than 
2.3838 shares of Energy East common stock, depending on the average 
closing price of Energy East common stock during a 20-day trading 
period ending two trading days prior to the effective time of the 
Merger.\3\ In addition, Applicants state that Energy East will assume 
approximately $1.0 billion of RGS's debt.
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    \2\ If RGS shareholders owning more than 55% of RGS shares elect 
to receive cash, the number of RGS shares converted into cash will 
be less than the number elected. Similarly, if RGS shareholders 
owning more than 45% of RGS shares elect to receive Energy East 
shares, the number of RGS shares converted into stock will be less 
than the number elected. For tax reasons more fully explained in the 
Merger Agreement, Energy East may have to increase the number of RGS 
shares converted into Energy East shares and decrease the number of 
RGS shares converted into cash. In the alternative, RGS may elect 
under certain circumstances to have the Merger restructured so that 
Eagle would merge with and into RGS and RGS would be the surviving 
entity.
    \3\ For example, based on Energy East's closing price of $19.14 
on February 16, 2001, RGS shareholders who choose to receive Energy 
East common stock would receive 2.0637 Energy East shares for each 
RGS share.
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    As a result of these transactions, RGS will become a direct 
subsidiary of Energy East. Rochester Gas & Electric Corporation 
(``RG&E''), a gas and electric utility company and subsidiary of RGS, 
and the nonutility subsidiaries of RGS will continue as subsidiaries of 
RGS and will become indirect subsidiaries of Energy East. Applicants 
state that as soon as practicable after the effective time of the 
Merger (but in no event later than five days following the effective 
time), Energy East will transfer all of NYSEG's common stock to RGS, so 
that NYSEG and RG&E can be operated under a combined management 
structure.

II. Parties to the Merger

A. Energy East and Subsidiaries

    Energy East is a registered public utility holding company, which, 
through its subsidiaries, is an energy services and delivery company 
with operations in New York, Connecticut, Massachusetts, Maine, and New 
Hampshire, serving approximately 1,419,000 electricity customers and 
approximately 614,000 natural gas customers. Energy East has corporate 
offices in New York and Maine. Energy East's common stock is publicly 
traded on the New York Stock Exchange under the symbol ``EAS.''
    Energy East holds direct or indirect interests in eight public 
utility companies, each of which is wholly owned by companies within 
the Energy East system unless otherwise noted: (1) NYSEG ; \4\ (2) 
Central Maine Power (``Central Maine''); (3) Maine Electric Power 
Company, Inc. (``MEPCo'') (Central Maine owns 78.3% voting interest in 
MEPCo); \5\ (4) NORVARCO (NORVARCO holds a 50% general partnership 
interest in Chester SVC Partnership, a general partnership which owns a 
static var compensator located in Chester, Maine, adjacent to MEMPCo's 
transmission interconnection; \6\ an electric utility company under the 
Act); (5) Maine Natural Gas, Corporation, (6) Connecticut Natural Gas 
Corporation (``CNGC''); (7) The Berkshire Gas Company (``Berkshire 
Gas''); and (8) The Southern Connecticut Gas Company \7\ (collectively, 
``Energy East Utility Subsidiaries''). Energy East also has a number of 
direct and indirect nonutility subsidiaries, the retention of which 
were either approved or jurisdiction was reserved in the Merger 
Order.\8\
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    \4\ NYSEG, a regulated public utility incorporated under the 
laws of the State of New York, is a combination electric and gas 
utility providing delivery service to approximately 829,000 
electricity customers and approximately 250,000 natural gas 
customers. During the period 1999 through 2001, approximately 83% of 
NYSEG's operating revenue was derived from electricity deliveries, 
with the balance derived from natural gas service.
    \5\ The remaining interests in MEPCo are held by Bangor Hydro 
Electric Company (``Bangor Hydro-Electric'') (approximately 14.2%) 
and Maine Public Service Company (approximately 7.5%).
    \6\ The remaining 50% interest in Chester SVC Partnership is 
held by Bangor Var Company, a subsidiary of Bangor Hydro-Electric.
    \7\ Southern Connecticut Gas is a utility subsidiary whollyowned 
by Connecticut Energy Corporation (``Connecticut Energy''), a direct 
subsidiary of Energy East. Connecticut Energy is an intermediate 
holding company subject to regulation under the Act as a subsidiary 
of a registered holding company and exempt from registration under 
section 3(a)(1) of the Act.
    \8\ Energy East Corporation, et al. HCAR No. 27224 (August 31, 
2000) (``Merger Order'').
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    For the year ended December 31, 2001, electric revenues of 
approximately $2,504,896,000 and natural gas revenues of approximately 
$1,026,124,000 accounted for approximately 67% and 27%, respectively, 
of Energy East's gross operating revenues. Energy East's utility 
operating income and utility net income available for common stock were 
$642,939,000 and $246,720,000, respectively. Consolidated assets of 
Energy East and its subsidiaries as of December 31, 2001, were 
approximately $7.3 billion, consisting of $3.6 billion in net utility 
plant and $3.7 billion in other utility and nonutility assets. For the 
year ended December 31, 2001, consolidated operating revenues, 
operating income and net income for Energy East and its subsidiaries 
were approximately $3,759,787,000, $636,888,000, and $187,607,000, 
respectively.

B. RGS and Subsidiaries

    RGS is the parent company of Rochester Gas & Electric Corporation 
(``RG&E''), a gas and electric utility company serving upstate New 
York. Incorporated in 1998 in the State of New York, RGS became the 
holding company

[[Page 39075]]

for RG&E on August 2, 1999.\9\ RGS is a public utility holding company 
by virtue of its owning all of the common shares of stock of RG&E, a 
public utility company as defined in the Act. RGS, through its 
subsidiaries, is an energy generation and delivery, products and 
services company with operations in New York. RGS's common stock is 
publicly traded on the New York Stock Exchange under the symbol 
``RGS.'' Pursuant to Commission order granting its request for an 
exemption under section 3(a)(1) of the Act, RGS is currently exempt 
from registration as a holding company.\10\ Applicants request in this 
filing that the Commission find that RGS continues to be exempt from 
registration as a holding company under section 3(a)(1) of the Act, 
following the consummation of the Merger and its acquisition of NYSEG.
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    \9\ Rochester Gas and Electric Holdco, HCAR No. 26991 (March 16, 
1999).
    \10\ Id.
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    RG&E is engaged principally in the business of generating, 
purchasing, transmitting and distributing electricity, and purchasing, 
transporting and distributing natural gas. RG&E's service territory 
includes nine counties in upstate New York. RG&E's service territory 
has an area of approximately 2,700 square miles and a population of one 
million people. RG&E provides delivery service to approximately 353,000 
electric customers and 289,000 natural gas customers. The larger cities 
in which RG&E serves both electric and natural gas customers are 
Rochester and Canandaigua. As of December 31, 2001, RG&E had 1,993 
employees.
    In addition to its utility subsidiary, RGS has the following direct 
and indirect nonutility subsidiary companies: (1) Energetix, Inc., 
(``Energetix'')\11\ a wholly-owned subsidiary of RGS, which offers 
electricity and natural gas services to retail customers throughout New 
York; and (2) RGS Development Corporation which pursues unregulated 
business opportunities in the energy marketplace and provides energy 
systems development and management services.
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    \11\ Energetix has authorization from FERC to engage in sales 
for resale of electricity at market-based rates and it owns no 
generation, transmission or distribution facilities. Energetix's 
subsidiary companies are Griffith Oil Co., Inc., an oil and propane 
distribution company in New York, and Avrimac Corporation, which 
through its subsidiaries sells propane and a limited selection of 
electric and gas appliances in Western and Central New York. 
Energetix and its subsidiaries have 602 employees and operate 29 
customer service centers.
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    RGS also holds Griffith Oil Company (``Griffith''), a wholly owned 
subsidiary of Energetix, which sells propane, heating oil and gasoline 
to approximately 123,000 customers in New York.
    RGS has the following indirect nonutility subsidiaries that are 
currently inactive:\12\ New York Nuclear Operating Company LLC 
(``NYNOC''),\13\ a partially owned subsidiary of RG&E formed to 
investigate the operation of nuclear power plants; Moore Brothers, a 
wholly owned subsidiary of Griffith, formed to import petroleum 
products into New Jersey; McKee Road, a wholly owned subsidiary of 
Griffith formed to hold terminal property and other real estate 
property related to utility operations; \14\ Griffith Energy, a wholly 
owned subsidiary of Griffith, and Sugar Creek Corporation, a wholly 
owned subsidiary of Energetix acquired in conjunction with RGS's 
acquisition of Griffith.
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    \12\ In the event that Energy East seeks to reactivate any of 
the inactive companies after the consummation of the Merger, Energy 
East states that it will file a post-effective amendment seeking 
authorization to engage in the proposed activities if such 
authorization is required under the Act.
    \13\ RG&E holds a 20.24% interest in NYNOC.
    \14\ McKee Road currently holds no real property.
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    RGS also has an indirect subsidiary outside the United States, 
Burnwell Gas Corporation of Canada (``Burnwell''), which is a wholly 
owned subsidiary of Griffith. Burnwell, located in Stevensville, 
Ontario, is a company through which various Burnwell subsidiaries 
purchase propane. Avrimac Corporation (``Avrimac''), a wholly-owned 
subsidiary of Griffith, through its subsidiaries (Seimax Gas, Burnwell 
Gas of Red Creek, Burnwell Gas of Alden, Burnwell Gas Distributors, 
Burnwell Gas of Franklinville, Burnwell Gas of Dansville and Burnwell 
Gas of Newark), sells propane and a limited selection of electric gas 
appliances in Western and Central New York. Seimax Garage Corporation, 
another Avrimac subsidiary, provides repair services to the Burnwell 
Companies' truck fleet.
    For the year ended December 31, 2001, electric revenues of 
approximately $728,099,000 and gas revenues of approximately 
$311,377,000 accounted for approximately 70% and 30%, respectively, of 
RGS's consolidated gross utility revenues. RGS's utility operating 
income and utility net income available for common stock were 
$134,565,000 and $69,950,000, respectively. Consolidated assets of RGS 
and its subsidiaries as of December 31, 2001, were approximately $2.5 
billion, consisting of $1.2 billion in net utility plant and $1.3 
billion in other utility and nonutility assets. For the year ended 
December 31, 2001, consolidated operating revenues, operating income 
and net income for RGS and its subsidiaries were approximately 
$1,530,492,000, $137,328,000 and $73,040,000, respectively.

III. Proposed Merger and Subsequent Corporate Structure

    Pursuant to the Merger Agreement, RGS will merge with and into 
Eagle, with Eagle being the surviving corporation. Eagle will continue 
to conduct RGS's businesses under the name ``RGS Energy Group, Inc.'' 
as a direct, wholly owned subsidiary of Energy East.
    As a result of Applicants' proposed transactions, RGS will become a 
direct subsidiary of Energy East. RG&E and RGS's nonutility 
subsidiaries will continue as subsidiaries of RGS and will become 
indirect subsidiaries of Energy East. As soon as practicable after the 
effective time of the Merger (but in no event later than five days 
following the effective time), Energy East will transfer all of NYSEG's 
common stock to RGS and NYSEG and RG&E will be operated under a 
combined management structure.
    Energy East expects to pay RGS shareholders approximately $750 
million in cash consideration. Energy East intends to fund the cash 
consideration with the proceeds from the issuance of long-term debt and 
trust preferred securities.\15\
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    \15\ Applicants have filed a post-effective amendment with the 
Commission under the Act with respect to ongoing financing 
activities, intra-system services and other matters pertaining to 
Energy East and RGS after the Merger. (SEC File No. 70-9609).
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Cinergy Corp. (70-10015)

    Cinergy Corp. (``Cinergy''), 139 East Fourth Street, 24AT2, 
Cincinnati, Ohio 45202, a Delaware corporation and registered holding 
company, has filed an application-declaration (``Application'') under 
sections 6(a), 7, 9(a), 10, and 11(b)(1) of the Act and rule 54 under 
the Act.
    Cinergy requests authority through March 31, 2007 (``Authorization 
Period'') to (A) engage, indirectly through new or existing nonutility 
subsidiaries \16\ to provide infrastructure services (as described 
below) (``Infrastructure Services'') both within and outside the United 
States, and (B) specifically Cinergy proposes to invest up to $500 
million from time to time through the Authorization Period in one or 
more new or existing companies that derive or will derive substantially 
all of their operating revenues from the sale of Infrastructure 
Services (``IS

[[Page 39076]]

Subsidiaries''). Infrastructure Services will specifically include:
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    \16\ Any such subsidiaries would be held as direct or indirect 
subsidiaries of Cinergy, provided that none of the subsidiaries 
would be held as direct or indirect subsidiaries of CG&E or PSI or 
any other Cinergy utility subsidiary.
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     Design, construction, retrofit and maintenance of utility 
transmission and distribution systems, including erection of 
transmission towers and poles, trenching and burying of underground 
conduits, construction and maintenance of substations and electrical 
vaults, storm restoration services involving electrical transmission 
and distribution systems, and splicing, installation and repair of 
electrical conductors;
     Installation and maintenance of natural gas pipelines and 
laterals, water and sewer pipelines, and underground and overhead 
telecommunications networks; and
     Installation and servicing of meter reading devices and 
related communications networks, including fiber optic cable.

Cinergy requests that the Commission reserve jurisdiction over any such 
sales of Infrastructure Services in any country other than the United 
States and Canada pending completion of the record. Investments in any 
IS Subsidiary may take the form of an acquisition, directly or 
indirectly, of the stock or other equity securities of a new subsidiary 
or of an existing company and any subsequent purchases of additional 
equity securities and any loans or cash capital contributions to any 
such company. In addition, any guarantee provided by Cinergy in respect 
of any payment or performance obligation of any IS Subsidiary will be 
counted against the proposed investment limit. Cinergy will fund 
investments in IS Subsidiaries using available cash or the proceeds of 
financing, as authorized by Commission order dated June 23, 2000 (HCAR 
No. 27190) (``June 2000 Order''). Any guarantees provided by Cinergy in 
respect of any IS Subsidiary would also count against Cinergy's current 
guarantee authority in the June 2000 Order.
    Any Infrastructure Services performed by any IS Subsidiaries for 
any associate, utility companies (as such terms are defined under the 
Act) will be conducted at cost and otherwise in accordance with the 
service agreements approved by Commission order dated May 4, 1999 (HCAR 
No. 27016).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-14203 Filed 6-5-02; 8:45 am]
BILLING CODE 8010-01-U