[Federal Register Volume 68, Number 136 (Wednesday, July 16, 2003)]
[Notices]
[Pages 42147-42150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-17920]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27696]


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

July 9, 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 August 4, 2003 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 August 4, 2003, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

KeySpan Energy Canada Partnership, et al. (70-10126)

    KeySpan Energy Canada Partnership (``KECP'') and KeySpan Energy 
Facilities Limited (``KEFL''), both located at 1700, 400 Third Avenue, 
SW Calgary, Alberta, Canada T2P 4H2 (together, the ``Applicants''), 
nonutility subsidiaries of KeySpan Corporation, a registered holding 
company under the Act, located at One MetroTech Center, Brooklyn, New 
York 11201, have filed an application-declaration (``Application'') 
under sections 9(a) and 10 of the Act and rule 54.

Background

    KECP and KEFL, seek authorization for KECP and/or KEFL to acquire 
voting securities of Rimbey Pipe Line Co. Ltd. (``Rimbey Co.''), 
pursuant to a Letter Purchase Agreement dated February 6, 2003, as 
amended April 3, 2003 (the

[[Page 42148]]

``Transaction''). KECP and KEFL are indirect, wholly-owned nonutility 
subsidiaries of KeySpan Corporation (``KeySpan''), a registered holding 
company under the Act.
    KeySpan registered as a holding company under the Act on November 
8, 2000, as a result of KeySpan's acquisition of Eastern Enterprises 
(now known as KeySpan New England, LLC (``KNE LLC''), which was 
authorized by the Commission by an order issued on November 7, 2000 
(Holding Company Act Rel. No. 27271), as corrected by the order issued 
on December 1, 2000 (collectively, the ``Merger Order'').\1\ In 
addition, on November 8, 2000, the Commission issued an order (Holding 
Company Act Rel. No. 27272), as corrected by the order issued on 
December 1, 2000 (collectively, the ``Financing Order''), authorizing a 
program of external financings, credit support arrangements and related 
proposals for KeySpan and its subsidiaries.
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    \1\ On May 29, 2002, the Commission issued an order approving 
KeySpan and Eastern Enterprises' application in File No. 70-9995 
(Holding Co. Act Rel. No. 27532) for a reorganization of Eastern 
from a Massachusetts business trust to a Massachusetts limited 
liability company (``Conversion Order''). Pursuant to the Conversion 
Order, on May 31, 2002, Eastern and KNE LLC, a newly formed 
Massachusetts limited liability company subsidiary of KeySpan, 
executed an agreement and plan of merger, with KNE LLC as the 
surviving entity and successor-by-merger to Eastern Enterprises.
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    KeySpan is a diversified public-utility registered holding company. 
KeySpan directly or indirectly owns seven public-utility companies in 
the northeastern United States.\2\ In addition, since October 2000, 
KECP, an Alberta, Canada general partnership, and KEFL, an Alberta, 
Canada corporation (formerly known as Gulf Midstream Services 
Partnership and GMS Facilities Limited, respectively), have been 
indirect, wholly-owned subsidiaries of KeySpan. In the Merger Order, 
the Commission approved KeySpan's retention of KECP and KEFL, finding 
that these entities are engaged in ``gas-related activities'' within 
the meaning of the Gas-Related Activities Act of 1990.
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    \2\ The Brooklyn Union Gas Company, d/b/a KeySpan Energy 
Delivery New York, distributes natural gas at retail to residential, 
commercial and industrial customers in the New York City Boroughs of 
Brooklyn, Staten Island and Queens; KeySpan Gas East Corporation, d/
b/a KeySpan Energy Delivery LI, distributes natural gas at retail to 
customers in New York State located in the counties of Nassau and 
Suffolk on Long Island and the Rockaway Peninsula in Queens County; 
KeySpan Generation LLC owns and operates electric generation 
capacity located on Long Island that is sold at wholesale to the 
Long Island Power Authority; Boston Gas Company, d/b/a KeySpan 
Energy Delivery New England, distributes natural gas to customers 
located in Boston and other cities and towns in eastern and central 
Massachusetts; Essex Gas Company, d/b/a KeySpan Energy Delivery New 
England, distributes natural gas to customers in eastern 
Massachusetts; Colonial Gas Company, d/b/a KeySpan Energy Delivery 
New England, distributes natural gas to customers located in 
northeastern Massachusetts and on Cape Cod; and EnergyNorth Natural 
Gas, Inc., d/b/a KeySpan Energy Delivery New England, distributes 
natural gas to customers located in southern and central New 
Hampshire and the City of Berlin located in northern New Hampshire. 
KeySpan, through its subsidiaries, also engages in energy related 
nonutility activities.
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    Together, KECP and KEFL own facilities located in Alberta and 
Saskatchewan through which they operate one of the largest natural gas 
midstream businesses in Canada, consisting of natural gas gathering and 
processing as well as natural gas liquids (``NGL'') processing, 
transportation, storage and marketing. KECP markets natural gas 
products, including natural gas liquids, from numerous producers, to 
customers in the United States and Canada. KECP owns interests in 13 
natural gas processing plants, along with associated raw gas gathering 
facilities, and is the operator of 11 of those plants. It also owns 
interests in NGL fractionation and storage facilities and an NGL 
pipeline. KEFL owns interests in NGL fractionation and storage 
facilities. KECP and KEFL together provide gas gathering and processing 
services to approximately 160 producers.
    KEFL also currently owns 40.6% of the issued and outstanding shares 
of Rimbey Co.,\3\ and operates the facilities owned by Rimbey Co. 
Rimbey Co. is an Alberta, Canada corporation with a total of 9 
shareholders, of which KEFL is the largest.\4\ Rimbey Co. owns the 
Rimbey Pipe Line, a 110 kilometer NGL pipeline, and the Rimbey Edmonton 
Terminal, which consists of propane treating, storage, rail loading and 
truck loading/offloading facilities.
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    \3\ KEFL acquired these shares in 1998, prior to KeySpan's 
registration as a holding company. KEFL's ownership interest in 
Rimbey Co. is an interest in ``natural gas liquids transportation 
facilities,'' i.e., the Rimbey Pipe Line, Rimbey Co.'s primary 
asset.
    \4\ KEFL currently owns 20,303 shares (40.6%) of Rimbey Co. The 
other shareholders and their shareholdings are: EnerPro Midstream 
Inc.--17,766 shares (35.5%); Shell Canada Limited--4,320 shares 
(8.6%); ConocoPhillips Canada Limited--2,610 shares (5.2%); Husky 
Oil Operations Ltd.--2,312 shares (4.6%); Imperial Oil Limited--
1,287 shares (2.6%); BP Canada Energy Resources Company--1,194 
shares (2.4%); Murphy Oil Company Ltd.--135 shares (0.35%); and The 
Great West Life Assurance Co.--73 shares (0.15%).
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    In connection with its business, KECP is a party to two agreements 
with ConocoPhillips Canada Resources Corp. (``ConocoPhillips 
Resources''): a Buy-Sell Agreement dated December 1, 1998, as amended 
(the ``Buy-Sell Agreement''), and a Natural Gas Liquids Purchase and 
Sale Agreement also dated December 1, 1998, as amended (the ``Purchase 
and Sale Agreement'' and together with the Buy-Sell Agreement, the 
``NGL Agreements''). Pursuant to the Buy-Sell Agreement, KECP purchases 
raw natural gas from ConocoPhillips Resources at the inlet points to 
certain gas processing facilities owned by KECP, processes the gas on 
behalf of ConocoPhillips Resources and resells the processed gas and 
certain gas products (exclusive of certain NGLs which are retained by 
KECP) to ConocoPhillips Resources at the outlet points of the relevant 
facilities. Under the Purchase and Sale Agreement, ConocoPhillips 
Resources sells NGLs to KECP at the outlet points of certain natural 
gas processing facilities, some of which are not owned by KECP and at 
which KECP does not provide processing services for ConocoPhillips 
Resources.
    KECP and ConocoPhillips Resources have recently agreed to enter 
into an Amending Agreement which will revise certain price terms of 
each of the NGL Agreements. Consideration for KECP's entry into such 
Amending Agreement is, among other things, the entry into by KECP and 
ConocoPhillips Canada Limited (``ConocoPhillips'')\5\ a February 6, 
2003 Letter Purchase Agreement, amended April 1, 2003, by which 
ConocoPhillips will transfer 2,610 shares of Rimbey Co. (representing 
5.2% of issued and outstanding shares) currently held by ConocoPhillips 
(the ``Rimbey Shares'') to KECP subject to certain conditions described 
below.
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    \5\ ConocoPhillips is an existing Rimbey Co. shareholder and an 
affiliate of ConocoPhillips Resources. See note 4, supra.
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    KECP and ConocoPhillips have agreed that the cash value of the 
consideration for the Amending Agreement associated with the transfer 
of the Rimbey Shares is $2.25 million Canadian. The proposed transfer 
of the Rimbey Shares to KECP is subject to the preferential rights of 
the other Rimbey Co. shareholders to purchase the shares (``Right of 
First Refusal'') at the same aggregate price of $2.25 million Canadian. 
KEFL, as a current shareholder of Rimbey Co., has and could exercise a 
Right of First Refusal.
    ConocoPhillips' transfer of the Rimbey Shares to KECP is 
conditioned upon (i) the failure of other Rimbey Co. shareholders to 
exercise their Rights of First Refusal and (ii) receipt of the approval 
by the Commission sought in this Application.

The Proposed Transaction

    Applicants now seek authorization for either (a) the acquisition by 
KECP of the

[[Page 42149]]

Rimbey Shares from ConocoPhillips pursuant to the Letter Purchase 
Agreement and amending agreement or (b) the acquisition by KEFL of the 
Rimbey Shares (or its proportionate share thereof, if other 
shareholders also exercise their Rights of First Refusal) as a result 
of the exercise by KEFL, as a current Rimbey Co. shareholder, of its 
Right of First Refusal to purchase the Rimbey Shares in preference to 
their sale by ConocoPhillips to KECP. Authorization is sought in the 
alternative because, while the parties currently contemplate that KECP 
will acquire the Rimbey Shares as set forth in the Letter Purchase 
Agreement, KECP and KEFL may determine that it is appropriate for KEFL 
to acquire the shares by exercise of its Right of First Refusal either 
to consolidate shareholdings in Rimbey Co. in one entity or to protect 
against the acquisition of all of the Rimbey Shares by other Rimbey Co. 
shareholders (by virtue of the exercise of their Rights of First 
Refusal).
    As noted above, the parties have agreed that the cash value of the 
Rimbey Shares is $2.25 million Canadian. At the generally prevailing 
exchange rate of approximately $0.69, that equates to a value of 
approximately $1.55 million in U.S. dollars. After consummation of the 
transaction, and assuming that no other Rights of First Refusal are 
exercised, KEFL and/or KECP together would own a total of 22,913 shares 
(or 45.8% of issued and outstanding shares) in Rimbey Co., an increase 
of 2,610 shares (or 5.2%) over KEFL's existing ownership share of 
Rimbey Co.

KeySpan Corporation, et. al. (70-10136)

    KeySpan Corporation (``KeySpan''), KeySpan Energy Corporation 
(``KeySpan Energy''), KeySpan Services, Inc. (``KSI''), KeySpan 
Business Solutions, Inc. (``KeySpan Business Solutions'') and Paulus, 
Sokolowski and Sartor LLC (``PS&S'') (collectively, the 
``Applicants''), each at 201 Old Country Road, Suite 300, Melville, New 
York, 11747 have filed a declaration with the Commission under sections 
9(a) and 10 of the Act and rule 54 under the Act.
    KeySpan is a registered holding company under the Act.\6\ KeySpan 
Energy is a direct wholly-owned subsidiary of KeySpan. KSI is a direct, 
wholly-owned nonutility subsidiary of KeySpan Energy. KeySpan Business 
Solutions is a direct wholly-owned subsidiary of KSI. PS&S is a direct, 
wholly-owned nonutility subsidiary of KeySpan Business Solutions. PS&S 
proposes to acquire all of the issued and outstanding stock of Bard, 
Roa + Athanas Consulting Engineers, Inc. (``BR+A''), an unaffiliated 
Massachusetts corporation (the ``Transaction'').
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    \6\ KeySpan, a New York corporation, was formed in May 1998 as a 
result of the business combination of KeySpan Energy Corporation, 
the parent of Brooklyn Union Gas Company, and certain businesses of 
the Long Island Lighting Company. KeySpan owns six natural gas 
public utility companies, one electric public utility company and 
various other non-utility companies.
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    By order dated April 24, 2003, the Commission released jurisdiction 
over the retention by KSI of certain nonutility subsidiaries.\7\ These 
subsidiaries engage in energy-related activities that have been found 
retainable under rule 58 of the Act or Commission precedent. In the 
KeySpan Order, the Commission authorized KSI, over the next five years, 
either on a stand alone basis or through other methods, to increase the 
percentage of energy-related revenues of PS&S so that its revenues are 
substantially energy-related as defined by Commission rule and/or 
precedent.
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    \7\ See KeySpan Corporation, et al., Holding Company Act Rel. 
No. 27670 (April 24, 2003) (``KeySpan Order'').
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    Applicants submit that the purpose of the Transaction is to 
increase the percentage of energy-related revenues of PS&S and its 
subsidiaries, consistent with the KeySpan Order. Applicants represent 
that, based on historical data, subsequent to the Transaction, the 
percentage of energy-related engineering revenues for KSI subsidiaries 
would be increased from 65% to approximately 81% of total business 
revenues. In addition, the Applicants state that consummation of the 
Transaction will produce tangible benefits to the public, investors and 
consumers by adding to the KeySpan system's ability to compete with 
exempt holding company systems in the electric and/or gas utility 
industry, as well as nonutility companies engaged in similar lines of 
energy-related businesses, and enhance the ability of PS&S to obtain 
new clients in the energy sector within KeySpan's existing geographic 
footprint.
    KSI is the holding company of KeySpan's interests in a number of 
nonutility, ``energy-related'' companies as such term is defined in 
rule 58(b)(1) of the Act or pursuant to Commission precedent. PS&S is 
one such energy-related subsidiary company engaged in the business of 
engineering and consulting services relating to the design and 
permitting of energy management systems, office environments and 
equipment installations and modifications. PS&S' clients consist 
primarily of large industrial customers such as utilities, corporate 
offices, hotels, laboratories, warehouses, pharmaceutical companies, 
hospitals, universities and power plants primarily located in New York, 
Pennsylvania and New Jersey. PS&S also serves as a general 
environmental and engineering consultant to major utility companies in 
New Jersey.
    Applicants indicate that BR+A is an unaffiliated Massachusetts 
corporation in the business of providing engineering services primarily 
related to the: (1) Mechanical, electrical and plumbing components of 
heating, ventilating and air conditioning systems; (2) design, 
construction, installation, maintenance and service of new and retrofit 
heating, ventilating, and air conditioning, electrical and power 
systems, motors, pumps, lighting, water, and plumbing systems for non-
associated industrial and commercial customers; and (3) sale, 
installation and servicing of electric and gas appliances. BR+A's 
principal office and operating location is in Boston, Massachusetts and 
the majority of its clients are based in the Northeast. BR+A also 
maintains sales and field support offices in New York, Philadelphia, 
Baltimore, Chicago and Los Angeles.
    PS&S intends to acquire all of the issued and outstanding shares of 
BR+A common stock from its ten individual shareholders who collectively 
own 100% of BR+A. The acquisition of BR+A will be undertaken pursuant 
to the terms of a stock purchase agreement (the ``Agreement''). 
Pursuant to the Agreement, BR+A will be purchased for: (1) $32 million 
in cash, with an additional $3 million to be deposited into an escrow 
account and held for adjustment based on a subsequent determination of 
whether BR+A has met certain financial criteria at the time of closing, 
and (2) payment of up to $14.7 million in contingent consideration, 
subject to BR+A's performance in meeting certain target levels of net 
operating earnings (excluding interest income) before payment of 
interest and income taxes, depreciation and amortization for the years 
2003 to 2008. Subsequent to the consummation of the acquisition, BR+A 
will become a direct, wholly-owned subsidiary of PS&S and will be 
converted to a limited liability company.
    PS&S will obtain the funds necessary to complete the Transaction 
from two sources. Thirty-five percent of the purchase price will be 
obtained from a loan from KeySpan to KSI to KeySpan Business Solutions 
to PS&S. The loan will have a maturity equal to the estimated useful 
life-span of the long-lived assets acquired in the Transaction. The 
interest rate on the loan will match the interest rate being paid by 
KeySpan

[[Page 42150]]

on already existing debt with a similar maturity. The balance of the 
funds needed by PS&S to complete the Transaction will be obtained from 
a capital contribution from KeySpan to KeySpan Energy to KSI to KeySpan 
Business Solutions to PS&S.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-17920 Filed 7-15-03; 8:45 am]
BILLING CODE 8010-01-P