[Federal Register Volume 67, Number 163 (Thursday, August 22, 2002)]
[Notices]
[Pages 54504-54506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21427]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27561]


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

August 16, 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 September 10, 2002, to the Secretary, Securities and 
Exchange Commission, Washington, D.C. 20549-0609, and serve a copy on 
the relevant applicant(s) and/or declarant(s) at the address(es) 
specified below. Proof of service (by affidavit or, in 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 DATE, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

National Grid Group plc (70-10067)

    National Grid Group plc (``National Grid'' or ``Applicant''), 15 
Marylebone Road, London NW1 5JD, United Kingdom, a registered holding 
company, has filed a declaration under sections 6(a), 7, and 33 of the 
Act and rules 53 and 54 under the Act.

I. Background

    In connection with its intended acquisition of the approximately 
3.5 billion outstanding ordinary shares of Lattice Group plc 
(``Lattice'') a United Kingdom gas utility holding company, 
(``Merger''), National Grid proposes to issue and sell approximately 
$9.4 billion of its ordinary shares for the purpose of financing the 
acquisition of a foreign utility company as defined in section 33 of 
the Act (``FUCO''). Further, National Grid seeks authority to issue and 
sell an additional amount of

[[Page 54505]]

approximately $7.5 billion of debt and equity securities and to enter 
into guarantees all for the purpose of financing the acquisition of or 
guaranteeing the securities of FUCOs. National Grid currently has FUCO 
investments of approximately $3.1 billion.

A. Merger Parties

1. National Grid
    National Grid was incorporated in England and Wales on July 11, 
2000. Its ordinary shares are listed on the London Stock Exchange and 
its American Depositary Receipts are listed on the New York Stock 
Exchange. As of April 19, 2002 there were 1,776,636,707 ordinary shares 
and one special share outstanding. National Grid employs, in 
conjunction with its subsidiaries, approximately 14,000 employees. As 
of April 19, 2002, National Grid had a market capitalization of 
approximately $12.6 billion.
    National Grid holds ownership interests in various utility and 
nonutility businesses outside the United States through National Grid 
Holdings One plc (``National Grid Holdings One'').\1\ National Grid 
Holdings One's principal business in the United Kingdom (``UK'') is the 
transmission of electricity in England and Wales, which it conducts 
through its wholly owned indirect subsidiary, The National Grid Company 
(``NCG''). National Grid through National Grid Holdings One has 
electric utility businesses located in Argentina and Zambia.\2\ In 
addition, National Grid is engaged in undersea electric transmission 
interconnector projects in Australia, Norway, the Netherlands and 
Ireland that are in various stages of development. National Grid 
conducts its utility and nonutility businesses \3\ in the United States 
through National Grid USA, an indirect, wholly owned registered holding 
company subsidiary of National Grid.
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    \1\ National Grid Holdings One is a FUCO within the meaning of 
section 33 of the Act.
    \2\ National Grid is joint owner of Transener SA, the owner and 
operator of the principal high-voltage electricity system in 
Argentina. In Zambia, National Grid is joint owner of Copperbelt 
Energy Corporation, the former Power Division of the Zambia 
Consolidated Copper Mines.
    \3\ National Grid USA's nonutility subsidiaries, among other 
activities, construct and lease of fiber optic telecommunications 
systems and provide electric utility restructuring and customer 
choice consulting services to nonaffiliated utilities.
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    National Grid USA is engaged, through its subsidiaries, in electric 
distribution to residential, commercial, and industrial customers in 
New England and the distribution and sale of electricity and natural 
gas to residential, commercial, and industrial customers in New York. 
The company owns all of the outstanding stock of the following public-
utility companies: Niagara Mohawk Power Corporation (``Niagara 
Mohawk''), Massachusetts Electric Company, The Narragansett Electric 
Company, Granite State Electric Company, and Nantucket Electric Company 
(collectively, ``Distribution companies''). The Distribution Companies 
deliver electricity to residential, commercial, and industrial 
customers, operate and maintain distribution power lines and 
substations, provide metering, billing, and customer services, design 
and build distribution-related facilities, and provide related products 
and services including energy efficiency programs for customers. 
Niagara Mohawk also provides gas utility service to approximately 
550,000 customers in New York State. National Grid USA also holds 
ownership interests in four other public-utility companies: New England 
Power Company (``NEPCO''), New England Electric Transmission 
Corporation (``NEET''), New England Hydro-Transmission Corporation 
(``N.H. Hydro'') and New England Hydro-Transmission Electric Company, 
Inc. (``Massachusetts Hydro''). NEPCO, a wholly owned subsidiary of 
National Grid USA, operates electricity transmission facilities in the 
states of Massachusetts, Rhode Island, New Hampshire, and Vermont, and 
holds National Grid USA's remaining interests in certain generating 
units (which the company is actively seeking to divest). NEET, another 
wholly owned subsidiary of National Grid USA, owns and operates a 
direct current/alternating current converter terminal facility for the 
first phase of the Hydro-Quebec and New England interconnection 
(``Interconnection'') and six miles of high voltage direct current 
transmission line in New Hampshire. N.H. Hydro, in which National Grid 
USA holds 53.97% of the common stock, operates 121 miles of high 
voltage direct current transmission line in New Hampshire for the 
second phase of the Interconnection, extending to the Massachusetts 
border. National Grid USA holds directly 53.97% of the common stock of 
N.H. Hydro, which operates 121 miles of high voltage direct current 
transmission line in New Hampshire for the second phase of the 
Interconnection, extending to the Massachusetts border. National Grid 
USA also holds directly 53.97% of the voting stock of Massachusetts 
Hydro, which operates a direct current/alternating current terminal and 
related facilities for the second phase of the Interconnection and 
twelve miles of high-voltage direct current transmission line in 
Massachusetts.
2. Lattice
    Lattice is incorporated in England and Wales, and is one of three 
successors to the former British Gas plc. The company's ordinary shares 
are listed on the London Stock Exchange. As of April 19, 2002, there 
were 3,528,149,704 ordinary shares and one special share outstanding. 
Lattice employs, in conjunction with its subsidiaries, approximately 
17,000 employees. As of April 19, 2002, Lattice had a market 
capitalization of approximately $8.8 billion.
    The Lattice system is subdivided into two holding companies: 
Transco Holdings plc (``Transco Holdings'') and Lattice Group Holdings 
Ltc. (``Lattice Group Holdings''). Transco plc (``Transco''), the 
principal subsidiary of Transco Holdings, owns, operates, and develops 
the majority of Great Britain's gas transportation and distribution 
system.
    Through subsidiaries, Lattice Group Holdings: provides advanced 
technology and systems solutions for energy and utility companies; 
provides gas connection services to the gas transportation network 
under a service provider contract with Transco; \4\ provides multi-
utility infrastructure services to industrial and commercial customers 
and developers; manages the Lattice system's non-operational real 
estate portfolio; \5\ offers leasing and vehicle management services; 
provides managed payroll services, pensions administration, accounting, 
business process outsourcing and consulting services; and acquires, 
builds, leases, and manages sites for mobile telecommunications 
operators in the United Kingdom.
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    \4\ Lattice Group Holdings also seeks to provide indirectly 
facilities management services in other non-gas markets.
    \5\ Applicant states that the protfolio consists largely of land 
and buildings either currently or previously occupied by a Lattice 
system company.
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B. Merger

    The terms of the Merger are governed by a Scheme of Arrangement 
(``Scheme''). Under the Scheme: (1) The issued shares of Lattice would 
be cancelled, and new shares would be issued to National Grid Holdings 
One; (2) National Grid would issue 0.375 shares of its stock to Lattice 
shareholders in exchange for each Lattice share held; (3) National Grid 
shareholders would retain their shares; and (4) National Grid would be 
renamed National Grid Transco plc (``Grid Transco'') and would retain 
its listings

[[Page 54506]]

on the London and New York stock exchanges. Applicant states that, upon 
completion of the Merger, National Grid and Lattice shareholders would 
hold approximately 57.3% and 42.7%, respectively, of the issued shares 
of Grid Transco.

C. Current Authority

    By order dated January 16, 2002 (HCAR No. 27490), the Commission 
authorized, among other things, National Grid to (1) invest up to 
$5.406 billion in FUCOs; and (2) issue and sell equity and debt 
securities the value of which would not exceed an aggregate amount of 
$6 billion at any one time outstanding (``Aggregate Limit'') through 
September 30, 2004. More specifically, National Grid was authorized to 
issue up to $4.5 billion in equity securities and $5 billion in debt 
securities, subject to the Aggregate Limit.

II. Requested Authority

    As of March 31, 2002, National Grid had invested, in the aggregate, 
approximately $3.104 billion in FUCOs; therefore, National Grid's 
current unused FUCO investment authority is $2.302 billion. The Merger 
alone would require the issuance of approximately $9.4 billion in Grid 
Transco shares, and a corresponding increase in the holding company's 
authorized level of FUCO investment. Consequently, Grid Transco's 
aggregate investment would be approximately $12.5 billion. To effect 
the Merger and maintain flexibility to make other FUCO investments, 
National Grid requests authority, through September 30, 2004, to: (1) 
Issue and sell equity and debt securities and to enter into guarantees 
up to an aggregate limit of $20 billion, subject to the following 
subcategory limits: up to (a) $18 billion in equity securities; (b) $12 
billion in debt securities; and (c) $6 billion in guaranties; and (2) 
invest up to $20 billion in FUCOs.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-21427 Filed 8-21-02; 8:45 am]
BILLING CODE 8010-01-M