[Federal Register Volume 67, Number 206 (Thursday, October 24, 2002)]
[Notices]
[Pages 65381-65383]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27119]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27580]


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

October 18, 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 November 12, 2002, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy of 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 November 12, 2002, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Unitil Corporation, et al. (70-10084)

Notice of Proposed Merger of Two Unitil Utility Subsidiaries; Order 
Authorizing Solicitation of Proxies or Consents

    Unitil Corporation (``Unitil''), 6 Liberty Lane West, Hampton, New 
Hampshire 03842-1720, a registered holding company under the Act, and 
tow of its retail electric utility subsidiaries, Concord Electric 
Company (``CECo''), One McGuire Street, Concord, New Hampshire 03301, 
and Exeter & Hampton Electric Company (``E&H''), 114 Drinkwater Road, 
Kensington, New Hampshire 03833, (collectively, ``Applicants''), have 
filed an application-declaration (``Application'') under sections 6, 7, 
9, 10 and 12(c) and 12(e) of the Act and rules 43, 44, 45, 54 and 62 
under the Act.
    The Application seeks approvals relating to the proposed merger of 
CECo and E&H. Applicants propose that E&H will merge into CECo to form 
a single retail electric utility subsidiary of Unitil to the named 
Unitil Energy Systems Inc. (``UES''). Applicants state that the 
proposed merger is one element of Unitil's restructuring proposal under 
the New Hampshire Electricity Restructuring Law (codified as RSA 374-
F). By merging E&H into CECo, the Applicants state that they will 
simplify the corporate structure of Unitil's holding company system and 
achieve cost efficiency and service quality improvements.
    CECo is engaged in the transmission and distribution of electric 
energy at regulated rates to approximately 28,000 customers in Concord 
and the capital region of New Hampshire. CECo is regulated as a public 
utility in New Hampshire. As of June 30, 2002, CECo reported net 
utility plant of $37,417,000 and operating revenues for the 12 months 
ended June 30, 2002 of $52,263,000.
    E&H is engaged in the transmission and distribution of electric 
energy at regulated rates to approximately 41,000 customers in Exeter 
and the seacoast region of New Hampshire. E&H is regulated as a public 
utility by the New Hampshire Public Utilities Commission. As of June 
30, 2002, E&H reported net utility plant of $43,221,000 and operating 
revenues for the 12 months ended June 30, 2002 of $58,053,000.
    The utility operations of CECo and E&H are administered and 
coordinated through Unitil's centralized service company, Unitil 
Service Corp., and each company has, since 1986, secured all of its 
requirements for electric energy from Unitil Power Company (``UPC''), a 
subsidiary generating company of Unitil. The companies have different

[[Page 65382]]

retail tariffs, rates and rate bases. As proposed, the merger will 
result in a new unified rate structure and a single rate base as well 
as the elimination of any inefficiencies and duplicative costs 
resulting from the operation of the companies as two separate entities.
    To accomplish the merger, the companies will enter into an 
agreement approved by their respective boards of directors (``Merger 
Agreement''). Consummation of the transactions proposed in the Merger 
Agreement will be subject to the receipt of all necessary regulatory 
approvals and to approval by the shareholders of each company. As a 
result of the merger, all of E&H's assets and liabilities will, by 
operation of law, become the assets and liabilities of CECo.

Description of Outstanding Equity Securities of CECo and E&H

    CECo currently has 250,000 authorized shares of common stock 
(``CECo Common Stock''), of which 131,745 shares are issued and 
outstanding and owned both of record and beneficially by Unitil; 2,250 
authorized shares of non-cumulative preferred stock (``CECo Non-
Cumulative Preferred Stock''), all of which are issued and outstanding 
and none of which is owned, of record or beneficially, by Unitil; and 
15,000 authorized shares of cumulative preferred stock (``CECo 
Cumulative Preferred Stock''), of which 2,150 shares are issued and 
outstanding in a single series designated the ``8.70% Series,'' none of 
which is owned, of record or beneficially, by Unitil. Holders of the 
CECo Common Stock and the CECo Non-Cumulative Preferred Stock are 
entitled to vote on all matters brought before the shareholders of 
CECo. Each outstanding share is entitled to one vote. The CECo Non-
Cumulative Preferred Stock is not entitled to vote as a separate class. 
The CECo Cumulative Preferred Stock is not entitled to vote on any 
matter, except as may otherwise be authorized or required by the New 
Hampshire Business Corporation Act. Under the Business Corporation Act, 
the CECo Cumulative Preferred Stock will not be entitled to vote on the 
merger and related transactions.
    E&H currently has 197,417 authorized shares of common stock (``E&H 
Common Stock''), of which 195,000 shares are issued and outstanding and 
owned both of record and beneficially by Unitil; and 25,000 authorized 
shares of cumulative preferred stock (``E&H Cumulative Preferred 
Stock''), of which a total of 9,704 shares are issued and outstanding 
in four series as follows: 840 shares of the ``5% Dividend Series,'' 
1,680 shares of the ``6% Dividend Series,'' 3,331 shares of the ``8.75% 
Dividend Series'' and 3,853 shares of the ``8.25% Dividend Series.'' 
None of the E&H Cumulative Preferred Stock is owned, of record or 
beneficially, by Unitil. The E&H Cumulative Preferred Stock is not 
entitled to vote as a separate class, unless such a class vote is 
otherwise authorized or required by the Business Corporation Act. Under 
the Business Corporation Act, each series of the E&H Cumulative 
Preferred Stock will be entitled to vote as a separate class on the 
proposed merger with CECo, since, as described below, the terms of the 
Merger Agreement provide for the issuance to the holders of the E&H 
Cumulative Preferred Stock in exchange for their shares of E&H 
Cumulative Preferred Stock an equal number of shares of CECo Cumulative 
Preferred Stock in four new series which will have the same terms and 
conditions as the existing series of the E&H Cumulative Preferred 
Stock. As part of the Merger Agreement, the board of directors of CECo 
and the holders of CECo Common Stock and CECo Non-Cumulative Preferred 
Stock will approve an amendment to the CECo Articles of Incorporation 
creating the four new series of CECo Cumulative Preferred Stock to be 
issued in the merger to the holders of the E&H Cumulative Preferred 
Stock.
    The authorized and unissued shares of CECo Cumulative Preferred 
Stock may be issued in series by CECo from time to time upon 
authorization of its board of directors, with the terms of each new 
series to be approved by the vote of two-thirds of the outstanding 
shares of CECo Common Stock and CECo Non-Cumulative Preferred Stock.

Terms of the Merger Agreement

    The Merger Agreement requires all of the issued and outstanding 
shares of E&H Common Stock to be converted into a single share of CECo 
Common Stock, and each share of E&H Cumulative Preferred Stock to be 
converted, as explained above, into a share of a new series of CECo 
Cumulative Preferred Stock. The shares of CECo Common Stock, CECo Non-
Cumulative Preferred Stock and CECo Cumulative Preferred Stock issued 
and outstanding immediately prior to the merger will remain outstanding 
and will not be affected by the merger.

Amendments to Debt Indentures

     E&H is party to an Indenture of Mortgage and Deed of Trust dated 
December 1, 1952(``E&H Indenture''), and CECo is party to an Indenture 
of Mortgage and Deed of Trust dated July 15, 1958 (``CECo Indenture''). 
There are currently three series of bonds outstanding under each of the 
indentures. The Applicants propose to consolidate the indentures. All 
of the currently outstanding bonds of E&H and CECo would remain 
outstanding. Bondholders under the new indenture would be secured 
ratably in all of the real property assets of UES on the same terms on 
which they are currently secured in the real property assets of CECo 
and E&H. The consent of each bondholder under the E&H Indenture and the 
CECo Indenture will be necessary to accomplish the proposed 
combination, amendment and restatement of the two indentures. 
Applicants request authority to seek bondholders' consent.
    While the CECo Indenture and the E&H Indenture are largely 
identical instruments, there are differences between them. As part of 
the combination, amendment and restatement process, CECo and E&H 
propose to conform the provisions of the indentures. Any special 
provisions applicable to the separate series of bonds under each 
indenture which are contained in supplemental indentures will be 
preserved in the combination, amendment and restatement of the two 
Indentures. The proposed combination, amendment and restatement will 
not effect any material economic change in the provisions applicable to 
the bonds or any series of the bonds, such as their respective rates of 
interest, maturities, amounts outstanding or redemption features.

Boards of Directors and Shareholder Approvals

    The Merger Agreement must be approved by the boards of directors of 
CECo and E&H. In addition, the Merger Agreement and related amendments 
to CECo's Articles of Incorporation must be approved by the holders of 
CECo Common Stock and CECo Non-Cumulative Preferred Stock, voting 
together as a single class, and by the holders of E&H Common Stock and 
each series of E&H Cumulative Preferred Stock, each voting as a 
separate class. Because Unitil effectively controls the boards of 
directors of each of E&H and CECo since it owns all of the issued and 
outstanding shares of common stock of each company, approval of the 
Merger Agreement and related amendments to CECo's Articles of 
Incorporation by those boards of directors is assured. Approval by the 
holders of CECo Common Stock and CECo Non-Cumulative Preferred Stock is 
also assured since Unitil controls the vote of more than 99% of these 
shares.

[[Page 65383]]

    Approval of the Merger Agreement by the holders of E&H Common Stock 
is assured since Unitil controls the vote of these shares. Unitil does 
not, however, control the vote of any outstanding series of E&H 
Cumulative Preferred Stock. Unitil intends to solicit written consents 
in favor of the Merger Agreement and related transactions from the 
holders of each outstanding series of the E&H Cumulative Preferred 
Stock. The solicitation of consent is subject to New Hampshire law and 
the terms of E&H's governance documents. Under Section 7.04 of the New 
Hampshire Business Corporation Act, the holders of E&H Cumulative 
Preferred Stock can take action by unanimous written consent, and E&H's 
governance documents are in agreement. E&H has the right to call each 
outstanding series for redemption under the terms of each series and 
will call for redemption any series which does not consent to the 
Merger Agreement and related transactions. Therefore, the consent of 
the E&H Cumulative Preferred is assured.

Tax and Accounting Consequences of the Merger

    The merger has been structured to qualify for tax purposes as a 
tax-free ``reorganization'' under section 368(a) of the Internal 
Revenue Code. As a result, no gain or loss will be recognized by CECo 
or E&H or the holders of CECo Common Stock, CECo Non-Cumulative 
Preferred Stock, CECo Cumulative Preferred Stock, E&H Common Stock or 
E&H Cumulative Preferred Stock. CECo and E&H expect that the merger 
will qualify as a common control merger for accounting and financial 
reporting purposes. The accounting for a common control merger is 
similar to a pooling of interests. Under this accounting treatment, the 
combination of the ownership interests of the two companies is 
recognized and the recorded assets, liabilities, and capital accounts 
are carried forward at existing historical balances to the consolidated 
financial statements of UES as the surviving company following the 
merger.
    On a pro forma basis and giving effect to the merger, as of June 
30, 2002, UES will have total assets of approximately $112,047,000, 
including net utility plant of $80,638,000, and operating revenues for 
the 12 months ended June 30, 2002 of approximately $110,316,000. UES's 
pro forma consolidation capitalization as of June 30, 2002 (assuming 
the exchange of all of the E&H Cumulative Preferred Stock for new 
shares of UES Cumulative Preferred Stock) will be as follows:
    Common Stock Equity, 28,411,000,000 amount outstanding, 35%.
    Preferred Stock, 1,195,000,000 amount outstanding, 1.5%.
    Short-term Debt, 1,550,000,000 amount outstanding, 1.9%.
    Long-term Debt, 50,000,000,000 amount outstanding, 61.6%.

Money Pool Matters

    CECo and E&H participate in the Until system money pool arrangement 
(``Money Pool'') that is funded, as needed, through bank borrowings and 
surplus funds invested by the participants in the Money Pool and as 
authorized by HCAR Nos. 35-26737 (June 30, 1997); 35-27182 (June 9, 
2000); 35-37207 (Dec. 15, 2000) and 35-27345 (Feb. 14, 2001). 
Participation in the Money Pool, including short-term debt borrowings, 
by CECo and E&H are authorized by the New Hampshire Public Utility 
Commission and, therefore, are exempt under rule 52 of the Act. 
However, borrowings by and loans to Unitil's other utility subsidiary, 
Fitchburg Gas and Electric Light Company (``Fitchburg''), dare not 
exempt. Following the merger, it is proposed that UES be authorized to 
make loans to Fitchburg on the same terms as CECo's and E&H's current 
authorization. All other terms, conditions and limitations under the 
Money Pool orders will continue to apply without change.

Order For Solicitation of Proxies and Contents

    E&H has requested that an order be issued authorizing commencement 
of the solicitation of proxies or consents from the holders of the 
outstanding shares of its preferred stock for the purpose of seeking 
approval of the merger and related transactions and the solicitation of 
consents from bondholders in connection with the proposed indenture 
amendments. It appears to the Commission that the applicants' 
declarations regarding the proposed solicitation of proxies and 
consents should be permitted to become effective immediately under rule 
62(d).
    Fees, commissions and expenses paid or incurred in connection with 
the solicitation of proxies or consents are estimated to be not more 
than $2,000. Unitil further stats that no state or federal commission, 
other than this Commission, has jurisdiction over the solicitation of 
proxies or consents.
    Unitil states, for purposes of rule 54, that the conditions 
specified in rule 53(a) are satisfied and that none of the adverse 
conditions specified in rule 53(b) exist. As a result, the Commission 
will not consider the effect on the Unitil system of the capitalization 
or earnings of any Unitil subsidiary that is an exempt wholesale 
generator or foreign utility company, as each is defined in sections 32 
and 33 of the Act, respectively, in determining whether to approve the 
proposed transactions.
    It is ordered, under rule 62 under the Act, that the declaration 
regarding the proposed solicitation of proxies or consents form the 
holders of outstanding shares of E&H preferred stock for the purpose of 
seeking approval of the merger and related transactions and the 
solicitation of consents from bondholders in connections with the 
proposed indenture amendments become effective immediately, subject to 
the terms and conditions contained in rule 24 under the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27119 Filed 10-23-02; 8:45 am]
BILLING CODE 8010-01-M