[Federal Register Volume 68, Number 64 (Thursday, April 3, 2003)]
[Notices]
[Pages 16314-16319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8103]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27661]


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

March 28, 2003.
    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 22, 2003, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/

[[Page 16315]]

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 22, 2003, the application(s) and/or declaration(s), as filed or 
as amended, may be granted and/or permitted to become effective.

American Transmission Company, LLC, et al. (70-10108)

    American Transmission Company, LLC (``ATC''), an electric 
transmission public utility company subsidiary of Alliant Energy 
Corporation (``Alliant''), a registered holding company, and ATC 
Management, Inc. (``ATCMI''), a public utility company, corporate 
manager of ATC, and holding company subsidiary of Alliant, claiming 
exemption from registration under section 3(a)(1) by rule 2 of the Act, 
both located at N19 W23993 Ridgeview Parkway, West Waukesha, Wisconsin 
53188 (together, ``Applicants'') have filed an declaration 
(``Declaration'') under sections 6(a) and 7 of the Act and rule 54 
under the Act.

I. Introduction

    In 1999, the state of Wisconsin enacted legislation (``Transco 
Legislation'') that facilitated the formation of for-profit 
transmission companies (``Transcos''). ATC was created under the 
Transco Legislation and ATCMI was created to be the general manager of 
ATC. The legislation obligates these Transcos to construct, operate, 
maintain, and expand transmission facilities to provide adequate, 
reliable transmission services under an open-access transmission 
tariff.

II. ATC and ATCMI

    By order dated December 29, 2000 (HCAR No. 27331) (``December 
Order''), the Commission authorized ATC to acquire the transmission 
assets of the subsidiaries of four investor owned public utility 
holding companies with service areas in Wisconsin and adjacent areas in 
Illinois and Michigan. The following utility companies transferred 
ownership and operation of their transmission assets to ATC in exchange 
for member interests (``Member Interests'') in ATC: Wisconsin Power and 
Light Company (``WPL'') and South Beloit Water, Gas and Electric 
Company (``South Beloit'');\1\ Wisconsin Electric Power Company and 
Edison Sault Electric Company (``Edison Sault''); \2\ Madison Gas and 
Electric Company; \3\ and Wisconsin Public Service Corp.\4\ Wisconsin 
Public Power Inc. (``WPPI''), a Wisconsin municipal electric company, 
contributed cash in exchange for an equity interest in ATC proportional 
to WPPI's load ratio share in Wisconsin.\5\ These entities together are 
referred to as the ``Initial Members.''
    Applicants state that as a limited liability company, ATC may be 
formed to be ``member managed'' or ``manager managed'' according to 
Wisconsin law. Applicants state that it was decided that ATC would be 
``manager managed'' by ATCMI. In the December Order, the Commission 
authorized ATCMI to acquire a nominal interest in ATC and operate as 
the sole manager of ATC. Due to the extent of the operational control 
ATCMI has over the utility assets of ATC, the Commission found that 
both ATC and ATCMI were jurisdictional public utilities under the Act. 
ATCMI is also an intermediate holding company by virtue of its 
ownership interest in ATC and claims exemption from registration by 
rule 2 under section 3(a)(1) of the Act.
    As of December 31, 2002, eighteen more contributors, including 
twelve municipal utilities, six cooperatives, one public power entity, 
and one investor owned utility invested transmission assets and/or cash 
in ATC. These members are referred to as the ``Additional Members,'' 
and along with the Initial Members, the ``Member Utilities.'' Effective 
February 1, 2001, ATC transferred operational control of its facilities 
to the Midwest Independent Transmission System Operator, Inc.
    Applicants state that ATCMI's ownership structure consists of Class 
A non-voting shares and Class B voting shares of stock.\6\ Upon 
transference of transmission assets to ATC, each Member Utility 
purchased Class A shares in proportion to the value of the transmission 
assets it transferred to ATC. In addition, each Initial Member received 
one Class B share of stock.\7\ The December Order indicated that, in 
the future, ATCMI plans to commence an initial public offering 
(``IPO'') of its stock. The Commission reserved jurisdiction over the 
issuance of any equity securities in connection with a potential IPO by 
ATCMI.
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    \1\ See December Order. WPL and South Beloit (which are both 
subsidiary companies of Alliant) are together treated as a single 
member.
    \2\ See Wisconsin Energy Corp., HCAR No. 27329 (Dec. 28, 2000). 
Wisconsin Electric Power Company and Edison Sault Electric Company 
(which are both subsidiaries of Wisconsin Energy Corp., dba We 
Energies, an exempt holding company) are together treated as a 
single member.
    \3\ See Madison Gas and Electric Co., HCAR No. 27326 (Dec. 28, 
2000). As a result of the acquisition, Madison Gas and Electric 
Company is both a public-utility company and an exempt holding 
company.
    \4\ See WPS Resources Corporation, HCAR No. 27330 (Dec. 28, 
2000). Wisconsin Electric Power Company is a subsidiary of WPS 
Resources Corporation, an exempt holding company.
    \5\ WPPI is exempt from all provisions of the Act under section 
2(c).
    \6\ Class B shareholders are currently entitled to approve by 
majority vote: (1) Any amendment to the articles of incorporation 
and (ii) any merger, consolidation, or sale of all or substantially 
all of ATCMI's assets.
    \7\ Applicants stated in the December Order that this structure 
was designed to ensure that the Member Utilities had economic 
interests in proportion to the value of their contribution of assets 
to the ATC, while maintaining the desired per capita voting 
arrangement. South Beloit and Edison Sault did not receive a Class B 
share because their respective corporate parents hold their shares.
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III. Financing

A. Existing Authorization

    The December Order authorized ATC and ATCMI to engage in various 
financing activities through June 30, 2004 (``Authorization Period'') 
in an aggregate amount not to exceed $900 million as follows: (1) 
Short-term debt financing by ATC not to exceed $125 million in the form 
of borrowings under a revolving credit agreement, issuance of 
commercial paper, or other forms of short term financing; (2) long-term 
debt financing by ATC in the form of debentures or other forms of long-
term debt financing, with the total short- and long-term debt not to 
exceed $400 million; (3) equity financing of up to $500 million in the 
form of preferred stock of ATCMI; and (4) interest rate hedging 
transactions.

B. Current Request

    Applicants now request authority for various financing transactions 
in addition to their outstanding financing authority as follows: 
Applicants request authority for ATCMI to issue and sell preferred 
securities and for ATC to issue long-term and short-term debt in an 
amount not to exceed $710 million at any one time outstanding during 
the Authorization Period Applicants state that short-term debt will not 
exceed $200 million at any one time outstanding. In addition to the 
$710 million of securities as described above, Applicants request 
authorization for ATC to issue Member Interests and ATCMI to issue 
Class A and Class B stock in an aggregate amount of up to $393 million. 
Applicants state that the underwriting fees, commissions or other 
similar remuneration paid in connection

[[Page 16316]]

with the non-competitive issue, sale or distribution of securities 
issued under this Application will not exceed 7% of the principal or 
total amount of the securities being issued.

C. Short-Term Debt

    Applicants request authority for ATC to arrange short term 
financing, including institutional borrowings, commercial paper and 
privately placed notes. Applicants state that the maturity of short-
term debt would not exceed one year and that any short-term debt 
security or credit facility would have designations, aggregate 
principal amount, interest rate(s) or methods of determining the same, 
terms of payment of interest, collateral, redemption provisions, non-
refunding provisions, sinking fund terms, conversion or put terms and 
other terms and conditions as ATC and ATCMI might determine at the time 
of issuance, provided that, in no event, however, would the effective 
cost of money on short-term debt exceed 300 basis points over the 
London Interbank Offered Rate for maturities of one year or less in 
effect at the time.
    Applicants propose that ATC sell commercial paper or privately 
placed notes (``Commercial Paper'') from time to time, in established 
domestic or European commercial paper markets. Commercial Paper may be 
sold at a discount or bear interest at a rate per annum prevailing at 
the date of issuance for Commercial Paper of a similarly situated 
company.
    Applicants propose that ATC maintain back up lines of credit in 
connection with one or more Commercial Paper programs in an aggregate 
amount not to exceed the amount of authorized Commercial Paper, without 
these credit lines counting against the limit on short-term debt 
financing set forth above. Applicants propose that ATC use credit lines 
for general corporate purposes, to support Commercial Paper, to obtain 
letters of credit, or to borrow against, from time to time, as it is 
deemed appropriate or necessary.

D. Long-Term Debt

    Applicants request authority for ATC to issue long-term debt 
securities including notes or debentures under one or more indentures 
or long-term indebtedness under agreements with banks or other 
institutional lenders directly or indirectly. Applicants state that 
ATC's long-term debt may be secured or unsecured. Applicants further 
state that the maturity of long-term debt would not exceed fifty years. 
Applicants assert that specific terms of any borrowings will be 
determined at the time of issuance but that the interest rate on long-
term debt would not exceed 500 basis points over the yield-to-maturity 
of a U.S. Treasury security having a remaining term approximately equal 
to the average life of that debt. Applicants ask the Commission to 
reserve jurisdiction over the issuance of convertible securities except 
as described in section 3 below.

E. Preferred Securities and Equity Interest

    Applicants request authority for ATCMI to issue preferred stock or 
other types of preferred securities. Applicants request authority for 
preferred stock or other types of preferred securities to be issued in 
one or more series with such rights, preferences, and priorities as may 
be designated in the instrument creating each such series, as 
determined by ATCMI's board of directors, or a pricing committee or 
other committee of the board performing similar functions. Preferred 
securities may be redeemable or may be perpetual in duration. 
Applicants state that the dividend rate on any series of preferred 
securities issued by ATCMI would not exceed 500 basis points over the 
yield to maturity of a U.S. Treasury security having a remaining term 
equal to the term of that series of preferred securities at the time of 
issuance. Applicants further state that dividends or distributions on 
preferred securities would be made periodically and to the extent funds 
are legally available for that purpose, but may be made subject to 
terms which allow Applicants to defer dividend payments for specified 
periods. Preferred securities may be sold directly through underwriters 
or dealers in any manner.
    Applicants contemplate that from time to time ATC may require an 
additional equity infusion. In such situations, ATC could reduce the 
amount of distributions to Member Utilities. Each Member Utilities' 
equity would be increased by the amount of the undistributed earnings 
on a pro rata basis. Alternatively, there could be a capital call for 
Member Utilities to make additional cash contributions on a pro rata 
basis. If a Member Utility opts not to make an additional contribution, 
any other Member Utility could make the requested contribution. Member 
Utilities do not, however, have the obligation to make additional 
contributions. Another possibility, therefore, would be for ATC to 
issue preferred securities that are convertible into Member Interests 
and/or Class A shares and/or Class B shares. These convertible 
preferred securities would have a stated par value and dividend rate 
and would be convertible into Member Interests and/or Class A and/or 
Class B shares based on a predetermined ratio or formula. Applicants 
will seek additional authority as may be required in connection with 
the exercise of the conversion feature. Applicants also ask the 
Commission to reserve jurisdiction over the issuance of preferred 
member interests or convertible member interests other than as 
described above.
    In the event Applicants determine to seek capital through equity or 
to acquire new facilities in exchange for equity interests, Applicants 
request authority for ATC to issue Member Interests and ATCMI to issue 
Class A and B shares in an aggregate amount not to exceed $393 million 
plus the face value of any outstanding Member Interests and Class A and 
B shares at any one time outstanding through the Authorization 
Period.\8\
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    \8\ In the case of equity securities, Applicants request that 
the aggregate amount be based on new issuance and exclude issuances 
for any undistributed earnings. Applicants state that as of December 
31, 2002, the value of outstanding Class A and B Shares was 
$103,560. Also at that date, there were 28,127,075 outstanding 
Member Interests. At that time a Member Interest was valued at 
$10.77. The total value of Member Interest was $302,811,729. The 
value on a Member Interest is based on the amount of the initial 
contribution and any undistributed earnings and so will vary from 
time to time.
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    Applicants request authority for ATC to issue Member Interests in 
exchange for cash or the transfer of transmission facilities to ATC by 
current or future Member Utilities. The entities transferring 
transmission assets and their transferring asset values have not yet 
been determined. Applicants further state that in order to maintain its 
50/50 debt to equity ratio; ATC would reimburse the contributors for 
50% of the net book value of the transmission assets contributed. In 
addition, ATCMI will issue to each new Member Utility of ATC, Class A 
shares in an amount that is proportional to that Member Utility's 
interest in the ATC, with a par value of $0.01 per share and a sales 
price of $10 per share.
    Additionally, Applicants state that it is anticipated that ATC will 
issue Member Interests and ATCMI will issue Class A shares to Wisconsin 
Public Service Corporation or its affiliate in exchange for that 
company's contribution of 50% of the ongoing cash requirements of the 
Arrowhead to Weston Transmission Line Project (``Project''). Applicants 
state that current cost estimates are $400 million over the 2002-2004 
period.\9\
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    \9\ Arrowhead-Weston is a 220-mile transmission line connecting 
Duluth, Minnesota, with Wausau, Wisconsin. Applicants state that the 
line is needed to accommodate electric load growth in northern 
Wisconsin and to improve reliability of the electric transmission 
system in the region. Applicants state that this acquisition of 
utility assets is subject to approval by the Public Service 
Commission of Wisconsin and so exempt from section 9(a)(1) under the 
1935 Act.

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[[Page 16317]]

F. Guarantees

    Applicants request authorization to guarantee or assume certain 
obligations of its affiliates or Member Utilities. Accordingly, 
Applicants request authorization to enter into guarantees, obtain 
letters of credit, enter into expense agreements or otherwise provide 
credit support with respect to the obligations of their affiliates or 
Member Utilities in the ordinary course of Applicants' business, in an 
amount not to exceed $125 million outstanding at any one time during 
the Authorization Period.
    Applicants state that certain of the guarantees may be in support 
of obligations that are not capable of exact quantification. In these 
cases, Applicants state that exposure under the guarantee will be by 
appropriate means including estimation of exposure based on loss 
experience or projected potential payment amounts. These estimates will 
be made in accordance with generally accepted accounting principles 
and/or sound financial practices.

G. Financial Representations

    Applicants represent that at all times during the Authorization 
Period, ATCMI and ATC will each maintain common equity of at least 30% 
of its consolidated capitalization. Applicants further represent that, 
other than Class A and Class B shares and Member Interests, no security 
may be issued in reliance upon this order, unless: (i) The security to 
be issued, if rated, is rated investment grade; (ii) all outstanding 
rated securities of the issuer are rated investment grade; and (iii) 
all outstanding rated securities of ATCMI are rated investment grade. 
For purposes of this condition, a security will be considered rated 
investment grade if it is rated investment grade by at least one 
nationally recognized statistical rating organization, as that term is 
used in paragraphs (c)(2)(vi)(E), (F) and (H) of rule 15c3-1 under the 
1934 Act. Applicants request that the Commission reserve jurisdiction 
over the issuance by ATCMI or ATC of any securities that are rated 
below investment grade. Applicants further request that the Commission 
reserve jurisdiction over the issuance of the securities for which 
authority is sought herein or any guarantee authority at any time that 
the conditions set forth in clauses (i) through (iii) above are not 
satisfied.

Progress Energy, Inc. and Piedmont Natural Gas Company, Inc. (70-10115)

    Progress Energy, Inc. (``Progress Energy''), a registered holding 
company, 410 South Wilmington Street, Raleigh, NC 27602, and Piedmont 
Natural Gas Company, Inc. (``Piedmont''), a gas utility company, 1915 
Rexford Road, Charlotte, NC 28211, have filed a joint application-
declaration under sections 3(a)(2) and 12(d) of the Act and rules 44 
and 54 under the Act.
    Progress Energy seeks approval to sell all of the issued and 
outstanding common stock of North Carolina Natural Gas Company 
(``NCNG'') and its 50% share of the common stock of Eastern North 
Carolina Natural Gas Company (``Eastern NCNG'') and preferred stock and 
other rights and interests in Eastern NCNG that it holds to Piedmont. 
Piedmont requests an order under section 3(a)(2) of the Act exempting 
it and its subsidiaries from all provisions of the Act except section 
9(a)(2).
    Progress Energy is a registered holding company that owns, directly 
or indirectly, all of the issued and outstanding common stock of two 
electric utility subsidiary companies, Carolina Power & Light Company 
(``CP&L'') and Florida Power Corporation (``Florida Power''). CP&L 
generates, transmits, purchases and sells electricity in parts of North 
Carolina and South Carolina. Florida Power generates, transmits, 
purchases and sells electricity in parts of Florida. Together, CP&L and 
Florida Power provide electric utility service to approximately 2.7 
million retail, commercial and industrial customers in an area having a 
population of more than 9 million people.
    Progress Energy also owns all of the issued and outstanding common 
stock of NCNG, a gas utility company which serves approximately 176,000 
residential, commercial, industrial and municipal customers primarily 
in eastern and south central North Carolina. NCNG's facilities include 
more than 1,000 miles of transmission pipeline and more than 2,900 
miles of distribution mains.
    NCNG has three direct, wholly-owned, non-utility subsidiaries: Cape 
Fear Energy Corporation (``Cape Fear''), which was previously engaged 
in purchasing natural gas for resale to large industrial and commercial 
users and the municipalities served by NCNG, as well as the business of 
providing energy management services, but is now inactive; NCNG 
Cardinal Pipeline Investment Corporation, which holds a 5% membership 
interest in Cardinal Pipeline Company, LLC, an intrastate pipeline; and 
NCNG Pine Needle Investment Corporation, which holds a 5% membership 
interest in Pine Needle LNG Company, LLC, which owns a liquefied 
natural gas project in North Carolina.\10\
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    \10\ Prior to the proposed sale of NCNG to Piedmont, the common 
stock of Cape Fear will be transferred by NCNG to Progress Energy or 
another non-utility subsidiary of Progress Energy. The other two 
companies will remain as subsidiaries of NCNG.
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    Progress Energy also owns 50% of the issued and outstanding common 
stock and 100% of the Series A preferred stock of Eastern NCNG, a North 
Carolina company that was granted a certificate of public convenience 
and necessity by the North Carolina Utilities Commission to construct a 
new natural gas distribution system and provide gas service to 
customers in 14 counties in eastern North Carolina. Albermarle Pamlico 
Economic Development Corporation (``APEC''), a North Carolina nonprofit 
corporation created to encourage infrastructure and economic 
development in eastern North Carolina, owns the remaining 50% of 
Eastern NCNG's issued and outstanding common stock.
    For the twelve months ended December 31, 2002, Progress Energy had 
total operating revenues of $7,945,120,000, of which $6,600,689,000 
(83.08%) were derived from electric utility operations and 
$1,344,431,000 (16.92%) from other, unregulated, businesses, including 
sales of electricity by Progress Energy's exempt wholesale generator 
subsidiaries. At December 31, 2002, Progress Energy had total 
consolidated assets of $21,352,704,000, including net utility plant of 
$10,656,234,000. (As of December 31, 2002, NCNG's results of operations 
and assets and liabilities were reported as ``discontinued operations'' 
and, therefore, are not included in Progress Energy's year-end 
consolidated operating revenues and utility plant accounts.)
    Piedmont, a North Carolina corporation, is a gas utility company 
that is engaged in the distribution of natural gas to 740,000 
residential, commercial and industrial customers in parts of North 
Carolina, South Carolina and Tennessee.
    For the fiscal year ended October 31, 2002, Piedmont reported on a 
consolidated basis total operating revenues of $832,028,000, net 
operating revenues (operating revenues less cost of gas) of 
$335,794,000, operating income of $90,127,000, and net income of 
$62,217,000 (including net income, reported on an equity basis, from 
non-utility businesses). At October 31, 2002,

[[Page 16318]]

Piedmont had $1,445,088,000 in total consolidated assets, including net 
utility plant of $1,158,523,000.
    Progress Energy and Piedmont entered into a Stock Purchase 
Agreement, dated October 16, 2002, under which Progress Energy agreed 
to sell and Piedmont agreed to purchase all of the issued and 
outstanding common stock of NCNG, $0.10 par value per share (``NCNG 
Shares''), and all of the shares of common stock and Series A preferred 
stock of Eastern NCNG that are held by Progress Energy, representing, 
respectively, 50% and 100% of the total number of shares of common 
stock and Series A preferred stock that are issued and outstanding 
(together, ``ENCNG Shares''). In addition, Piedmont will assume all of 
Progress Energy's rights and obligations under a subscription letter, 
dated January 5, 2001, under which Progress Energy is committed to 
purchase from Eastern NCNG the remaining authorized but unissued shares 
of Series A preferred stock, and a shareholders' agreement, dated as of 
January 5, 2001, by and among Eastern NCNG, Progress Energy and APEC 
(``ENCNG Rights and Obligations''). Progress Energy requests approval 
under section 12(d) of the Act for the sale and transfer of the NCNG 
Shares, the ENCNG Shares and the ENCNG Rights and Obligations to 
Piedmont (``Transaction'').
    Under the Stock Purchase Agreement, Piedmont has agreed to pay 
$417,500,000 in cash for the NCNG Shares, plus or minus the working 
capital on the balance sheet of NCNG for the end of the most recent 
month immediately preceding the closing of the Transaction. In 
addition, Piedmont has agreed to pay $7,500,000 for the ENCNG Shares 
and the ENCNG Rights and Obligations.
    Progress Energy states the sale of NCNG and Eastern NCNG will 
enable Progress Energy to strengthen its balance sheet and focus itself 
on its core electric utility business. Progress Energy states that the 
cash proceeds of the Transaction will be used by Progress Energy to pay 
down debt.
    Piedmont states that, immediately following the purchase of the 
NCNG Shares, it will cause NCNG to be merged with and into Piedmont, 
with Piedmont as the surviving corporation. Piedmont will acquire and 
hold Eastern NCNG as a 50%-owned subsidiary company and will therefore 
become a holding company within the meaning of section 2(a)(7)(A) of 
the Act with respect to Eastern NCNG. Accordingly, Piedmont requests 
that the Commission issue an order under section 3(a)(2) of the Act 
exempting Piedmont and its subsidiary companies as such from all 
provisions of the Act, except section 9(a)(2). Piedmont states that, 
following the Transaction, Piedmont will remain predominantly a public-
utility company whose operations will be confined to North Carolina, 
its state of incorporation, and South Carolina and Tennessee, which are 
contiguous to North Carolina.

Gulf Power Company (70-10117)

    Gulf Power Company (``Gulf''), One Energy Plaza, Pensacola, Florida 
32520, a wholly owned electric utility subsidiary of The Southern 
Company (``Southern''), a registered holding company under the Act, has 
filed an application-declaration (``Application'') under sections 6(a), 
7, 9(a), 10 and 12(d) of the Act and rule 54 under the Act.
    Gulf proposes to incur, from time to time or at any time on or 
before March 31, 2006 (``Authorization Period''), obligations in 
connection with the issuance and sale by public instrumentalities of 
one or more series of pollution control revenue bonds (``Revenue 
Bonds'') in an aggregate principal amount of up to $180,000,000. Gulf 
further proposes to issue and sell, from time to time or at any time on 
or before the Authorization Period, one or more series of its senior 
debentures, senior promissory notes or other senior debt instruments 
(individually, ``Senior Note'' and collectively, ``Senior Notes''), one 
or more series of its first mortgage bonds and one or more series of 
its preferred stock in an aggregate amount of up to $450,000,000 in any 
combination of issuance.
    The Revenue Bonds will be issued for the benefit of Gulf to finance 
or refinance the costs of certain air and water pollution control 
facilities and sewage and solid waste disposal facilities at one or 
more of Gulf's electric generating plants or other facilities located 
in various counties. It is proposed that each such county or the 
otherwise appropriate public body or instrumentality (``County'') will 
issue Revenue Bonds to finance or refinance the costs of the 
acquisition, construction, installation and equipping of said 
facilities at the plant or other facility located in its jurisdiction 
(``Project''). It is proposed that the Revenue Bonds will mature not 
more than 40 years from the first day of the month in which they are 
initially issued and may, if it is deemed advisable for purposes of the 
marketability of the Revenue Bonds, be entitled to the benefit of a 
mandatory redemption sinking fund calculated to retire a portion of the 
aggregate principal amount of the Revenue Bonds prior to maturity.
    Gulf proposes to enter into a Loan or Installment Sale Agreement 
with each County (``Agreement''), issuing such Revenue Bonds. Under the 
Agreement, the issuing County will loan to Gulf the proceeds of the 
sale of the County's Revenue Bonds, and Gulf may issue a non-negotiable 
promissory note (``Note''), or the County will undertake to purchase 
and sell the related Project to Gulf. The proceeds from the sale of the 
Revenue Bonds will be deposited with a Trustee (``Trustee'') under an 
indenture to be entered into between the County and the Trustee 
(``Trust Indenture''), under which the Revenue Bonds are to be issued 
and secured, and will be applied by Gulf to payment of the cost of 
construction of the Project or to refund outstanding pollution control 
revenue obligations.
    The Trust Indenture and the Agreement may give the holders of the 
Revenue Bonds the right, during such time as the Revenue Bonds bear 
interest at a fluctuating rate or otherwise, to require Gulf to 
purchase the Revenue Bonds from time to time, and arrangements may be 
made for the remarketing of any such Revenue Bonds through a 
remarketing agent. Gulf also may be required to purchase the Revenue 
Bonds, or the Revenue Bonds may be subject to mandatory redemption, at 
any time if the interest thereon is determined to be subject to federal 
income tax. Also in the event of taxability, interest on the Revenue 
Bonds may be effectively converted to a higher variable or fixed rate, 
and Gulf also may be required to indemnify the bondholders against any 
other additions to interest, penalties and additions to tax.
    In order to obtain the benefit of ratings for the Revenue Bonds 
equivalent to the rating of Gulf's first mortgage bonds outstanding 
under the indenture dated as of September 1, 1941 between Gulf and JP 
Morgan Chase Bank (formerly The Chase Manhattan Bank), as trustee, as 
supplemented and amended (``Mortgage''), Gulf may determine to secure 
its obligations under the Note and/or the Agreement by delivering to 
the Trustee, to be held as collateral, a series of its first mortgage 
bonds (``Collateral Bonds''). The aggregate principal amount of the 
Collateral Bonds would be equal to either: (i) The principal amount of 
the Revenue Bonds or (ii) the sum of such principal amount of the 
Revenue Bonds plus interest payments thereon for a specified period.
    As a further alternative to, or in conjunction with, securing its

[[Page 16319]]

obligations through the issuance of the Collateral Bonds, Gulf may: (i) 
Cause an irrevocable Letter of Credit or other credit facility 
(``Letter of Credit'') of a bank or other financial institution to be 
delivered to the Trustee; and/or (ii) cause an insurance company to 
issue a policy (``Policy'') guaranteeing the payment of the Revenue 
Bonds. In the event that the Letter of Credit is delivered to the 
Trustee as an alternative to the issuance of the Collateral Bonds, Gulf 
may also convey to the County a subordinated security interest in the 
Project or other property of Gulf as further security for Gulf's 
obligations under the Agreement and the Note.
    The effective cost to Gulf of any series of the Revenue Bonds will 
not exceed the greater of (i) 200 basis points over comparable term 
U.S. Treasury securities, or (ii) a gross spread over such Treasury 
securities which is consistent with comparable securities. Such 
effective cost will reflect the applicable interest rate or rates and 
any underwriters' discount or commission.
    Gulf also proposes to issue and sell, at any time during the 
Authorization Period: One or more series of its (a) Senior Notes; (b) 
first mortgage bonds (``First Mortgage Bonds''); and (c) preferred 
stock in an aggregate amount of up to $450 million, in any combination 
of issuance. The Senior Notes will have a maturity that will not exceed 
approximately 50 years. The interest rate on each issue of Senior Notes 
may be either a fixed rate or an adjustable rate to be determined on a 
periodic basis by auction or remarketing procedures, in accordance with 
formula or formulae based upon certain reference rates, or by other 
predetermined methods. The Senior Notes will be direct, unsecured and 
unsubordinated obligations of Gulf ranking pari passu with all other 
unsecured and unsubordinated obligations of Gulf. The Senior Notes will 
be effectively subordinated to all secured debt of Gulf, including its 
First Mortgage Bonds. The Senior Notes will be governed by an indenture 
or other document. The effective cost of money to Gulf on the Senior 
Notes will not exceed the greater of (i) 300 basis points over 
comparable term U.S. Treasury securities, or (ii) a gross spread over 
such Treasury securities which is consistent with comparable 
securities.
    The First Mortgage Bonds will have a term of not more than 40 years 
and will be sold for the best price obtainable, but not less than 98% 
or more than 101\3/4\% of the principal amount, plus any accrued 
interest. Gulf may enhance the marketability of the First Mortgage 
Bonds by purchasing an insurance policy to guarantee the payment when 
due of the First Mortgage Bonds.
    Gulf proposes that each issuance of Gulf's preferred stock, par or 
stated value of up to $100 per share (``new Preferred Stock''), will be 
sold for the best price obtainable (after giving effect to the 
purchasers' compensation) but for a price to Gulf (before giving effect 
to such purchasers' compensation) of not less than 100% of the par or 
stated value per share.
    Gulf states that it may determine to use the proceeds from the sale 
of the Revenue Bonds, the Senior Notes, the First Mortgage Bonds and 
the new Preferred Stock to redeem or otherwise retire its outstanding 
senior notes, first mortgage bonds, pollution control bonds and/or 
preferred stock. Gulf also proposes that it may use the proceeds from 
the sale of the Senior Notes, the First Mortgage Bonds and new 
Preferred Stock, along with other funds, to pay a portion of its cash 
requirements to carry on its electric utility business. Gulf further 
states that it may determine to use the proceeds from the sale of the 
Revenue Bonds, the Senior Notes, the new Bonds and the new Preferred 
Stock to redeem or otherwise retire its outstanding senior notes, first 
mortgage bonds, pollution control bonds and/or preferred stock if such 
use is considered advisable.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-8103 Filed 4-2-03; 8:45 am]
BILLING CODE 8010-01-P