[Federal Register Volume 68, Number 153 (Friday, August 8, 2003)]
[Notices]
[Pages 47372-47375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20262]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27707]


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

August 4, 2003.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission under 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 29, 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 29, 2003 the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Xcel Energy, Inc., et al. (70-10152)

    Xcel Energy, Inc. (``Xcel''), 800 Nicollet Mall, Minneapolis, 
Minnesota 55402, a holding company registered under the Act, and its 
wholly owned subsidiaries, NRG Energy, Inc. (``NRG'') and NRG Power 
Marketing, Inc. (``NRG PMI''), both of 901 Marquette Avenue, Suite 
2300, Minneapolis, Minnesota 55402-3265 (collectively, Xcel, NRG and 
NRG PMI are referred to as ``Applicants'' and NRG and NRG PMI are 
referred to as ``NRG Applicants'') file this application-declaration 
(``Application'') under sections 6(a), 7, 11(f), 11(g), 12(a), 12(b), 
12(e), 12(f), and rules 44, 45, 54, 60, 62, 63, and 64 of the Act.
    Applicants seek authorization from the Commission for the 
solicitation regarding the debtor's second amended joint plan of 
reorganization (``Plan'') under chapter 11 of the United States 
Bankruptcy Code (``Bankruptcy Code'').\1\ Specifically, Applicants 
request authorization for the solicitation regarding the Plan \2\ under 
sections 11(f) and 11(g) of the Act, and authorization under section 
12(e) of the Act to solicit consents and approvals from the holders of 
the securities of the Debtors, along with other ancillary and related 
authorizations as are necessary to implement the Plan.
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    \1\ The Application includes the Plan and the third amended 
disclosure statement for debtors' second amended joint plan of 
reorganization pursuant to chapter 11 of the Bankruptcy Code 
(``Disclosure Statement'').
    \2\ On May 14, 2003 (``Petition Date''), NRG and certain of 
NRG's subsidiaries filed voluntary petitions for bankruptcy 
(``Bankruptcy Petition'') under Chapter 11 of the Bankruptcy Code in 
the United States Bankruptcy Court for the Southern District of New 
York (``Bankruptcy Court''). NRG Applicants and certain of NRG's 
other subsidiaries which are debtors in such bankruptcy proceedings 
(``Debtors'').
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    Applicants propose that the Commission issue: (1) An order under 
section 11(f) of the Act approving the Plan and certain related 
transactions under the Plan; \3\ and (2) a report on the Plan under 
section 11(g) to accompany a solicitation of creditors and any other 
interest holders for approval of the Plan in the bankruptcy 
proceedings.\4\
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    \3\ Section 11(f) of the Act provides, in relevant part, that 
``a reorganization plan for a registered holding company or any 
subsidiary company thereof shall not become effective unless such 
plan shall have been approved by the Commission after opportunity 
for hearing prior to its submission to the court.''
    \4\ Section 11(g) of the Act provides, in relevant part, that 
any solicitation for consents to or authorization of any 
reorganization plan of a registered holding company or any 
subsidiary company thereof shall be ``accompanied or preceded by a 
copy of a report on the plan which shall be made by the Commission 
after an opportunity for a hearing on the plan and other plans 
submitted to it, or by an abstract of such report made or approved 
by the Commission.''
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I. Background

    Xcel is a registered holding company that holds the securities of 
six public utility companies that serve electric and/or natural gas 
customers in twelve states.\5\ These six utility subsidiaries 
(collectively, the ``Utility Subsidiaries'') are Northern States Power 
Company, a Minnesota corporation (``NSP-M''); Northern States Power 
Company, a Wisconsin corporation; Public Service Company of Colorado; 
Southwestern Public Service Company; Black Mountain Gas Company; and 
Cheyenne Light, Fuel and Power Company. As previously announced 
publicly, Xcel has entered into a contract to sell Black Mountain Gas 
Company.
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    \5\ The Utility Subsidiaries' service territories include 
portions of Arizona, Colorado, Kansas, Michigan, Minnesota, New 
Mexico, North Dakota, Oklahoma, South Dakota, Texas, Wisconsin, and 
Wyoming.
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    Xcel also engages through subsidiaries in various other energy-
related and nonutility businesses (collectively, ``Nonutility 
Subsidiaries''). The Nonutility Subsidiaries that are directly or 
indirectly owned by Xcel include: NRG; \6\ Seren Innovations, Inc., a

[[Page 47373]]

provider of cable, telephone and high-speed internet access systems and 
an exempt telecommunications company under section 34 of the Act; e 
prime, inc., a marketer of electricity and natural gas; and Eloigne 
Company, an investor in projects that qualify for low-income housing 
tax credits.
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    \6\ In August 2000, Northern States Power Company merged with 
New Century Energies, Inc. to form Xcel. In March 2001, NRG 
completed a public offering of 18.4 million shares of its common 
stock. Following this offering, Xcel owned, indirectly through its 
subsidiary Xcel Energy Wholesale Group Inc. (``Xcel Wholesale''), a 
74% interest in NRG's common stock and class A common stock, 
representing 96.7% of the total voting power of NRG's common stock 
and class A common stock. On June 31, 2002, Xcel, through Xcel 
Wholesale, purchased through an exchange offer the 26 percent of NRG 
common stock held by the public so that it again held 100 percent 
ownership of NRG on December 31, 2002.
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    NRG is an energy company primarily engaged in the ownership and 
operation of power generation facilities and the sale of energy, 
capacity and related products in the United States and internationally. 
NRG PMI is the energy marketing subsidiary of NRG. NRG PMI provides a 
full range of energy management services for NRG's generation 
facilities in its Eastern and Central regions. The Bankruptcy Petition 
included the Plan, which incorporates the terms of the tentative 
settlement announced on March 26, 2003 among NRG, Xcel and members of 
NRG's major creditor constituencies that provides for payments by Xcel 
to NRG and its creditors of up to $752 million. A plan support 
agreement (``Plan Support Agreement'') reflecting the settlement has 
been signed by Xcel, NRG, holders of approximately 40 percent in 
principal amount of NRG's long-term notes and bonds, along with two NRG 
banks who serve as co-chairs of the global steering committee (``Global 
Steering Committee'') for the NRG bank lenders. The Plan Support 
Agreement will become fully effective upon execution by holders of 
approximately an additional ten percent in principal amount of NRG's 
long-term notes and bonds and by a majority of NRG bank lenders 
representing at least two-thirds in principal amount of NRG's bank 
debt.

II. The Plan of Reorganization

A. Overview of the Plan
    Applicants request authorization for solicitation regarding the 
Plan under sections 11(f) and 11(g) of the Act, and authorization under 
section 12(e) to solicit consents and approvals from the holders of the 
securities of NRG, along with other ancillary and related 
authorizations to implement the Plan. The Plan submitted to the 
Bankruptcy Court by the Debtors is structured to: (i) Permit the 
Debtors to reorganize and emerge from bankruptcy; (ii) maximize the 
recovery of the Debtors' creditors on their capital investment; (iii) 
fix the exposure and/or commitment of Xcel to the Debtors and their 
creditors; and (iv) eliminate the direct and indirect equity ownership 
of Xcel in NRG and its subsidiaries. NRG believes that consummation of 
the Plan will best facilitate its business and financial restructuring 
and is in its best interests and in the best interests of its creditors 
and other parties in interest.
    Applicants state that the purpose of the Plan is to provide NRG 
with a capital structure that can be supported by cash flows from 
operations. To this end, NRG will reduce its debt and reduce its annual 
interest payments. Applicants state that the Debtors believe that the 
reorganization contemplated by the Plan affords holders of claims the 
greatest opportunity for realization on the Debtors' assets and thus is 
in the best interests of such holders. If the Plan is not confirmed, 
the Debtors believe that they will be forced to either file an 
alternate plan of reorganization or liquidation under chapter 11 or 
liquidate under chapter 7 of the Bankruptcy Code. In either event, the 
Debtors believe that NRG's unsecured creditors (including the holders 
of public debt) would realize a less favorable distribution of value, 
or, in certain cases, none at all, for their claims. In addition, any 
alternative other than confirmation of the Plan could result in 
extensive delays and increased administrative expenses resulting in 
smaller distributions to the holders of claims.
    Applicants state that upon implementation of the Plan, the 
ownership interests, direct and indirect, of Xcel in NRG and its 
subsidiaries will terminate. In addition, Xcel and its subsidiaries 
(other than NRG and its subsidiaries) (``Xcel Entities'') will have 
limited obligations going forward with respect to the Debtors. Xcel 
believes that Xcel's disaffiliation with the Debtors is beneficial to 
Xcel and its investors.
    According to Applicants, NRG is restructuring its operations to 
become a domestic based owner-operator of a fuel-diverse portfolio of 
electric generation facilities engaged in the sale of energy, capacity 
and related products. NRG is working toward this goal by selective 
divestiture of non-core assets, consolidation of management, 
reorganization and redirection of power marketing philosophy and 
activities and an overall financial restructuring that will improve 
liquidity and reduce debt. NRG does not anticipate any new significant 
acquisitions or construction, and instead will focus on operational 
performance and asset management. NRG has already made significant 
reductions in expenditures, business development activities and 
personnel. Power sales, fuel procurement and risk management will 
remain a key strategic element of NRG's operations. NRG's objective 
will be to optimize the fuel input and the energy output of its 
facilities within an appropriate risk and liquidity profile. Despite 
NRG's focus on domestic electric generation, NRG will continue to hold 
international assets until it can optimize the divestiture of such 
assets.
B. Settlement Agreement
    Applicants state that in connection with the implementation of the 
Plan, Xcel will enter into a settlement agreement (``Settlement 
Agreement'') with NRG. The Settlement Agreement constitutes the 
definitive documentation in respect of the settlement terms agreed to 
in the Plan Support Agreement. Under the Settlement Agreement and the 
Plan, Xcel will pay up to $752 million to NRG and its creditors to 
settle all claims of NRG against Xcel, including all claims under the 
Plan Support Agreement, and in return for releases of claims against 
Xcel from NRG, the other debtors in the Proceedings and NRG's 
creditors. The terms of the Settlement Agreement between NRG and Xcel 
require that the order of the Bankruptcy Court confirming the Plan 
provide that the right of any holder of an equity unit to acquire 
shares of Xcel common stock terminate as of the Petition Date.
    Applicants state that, in general terms, the Settlement Agreement 
provides for the following: (i) Payment by Xcel of $250 million in 
exchange for the release of claims and causes of action which NRG may 
have in respect of the Plan Support Agreement; and (ii) payment by Xcel 
of up to $390 million (``Release-Based Amount'') in exchange for 
releases of Xcel and certain injunctions for the benefit of Xcel. In 
addition, under a Separate Bank Release Agreement between Xcel and the 
lenders under the NRG Credit Facilities, Xcel would agree to pay $112 
million (``Separate Bank Settlement Payment'') for the benefit of the 
lenders under the NRG Credit Facilities in exchange for such lenders' 
release of claims against Xcel.
C. Treatment of Creditors Under the Plan
    According to Applicants, the Plan generally classifies the 
creditors of, and other investors in, the NRG Applicants into several 
classes. In general terms, the Plan provides for the treatment of the 
creditors of the NRG Applicants, as follows:
    (i) Holders of priority claims will receive payment in full;
    (ii) Holders of unsecured claims against any NRG Applicant, which 
are

[[Page 47374]]

equal to or less than $50,000 or is reduced to $50,000 at the election 
of the holder of such claim, will receive cash in the amount of such 
claim;
    (iii) Holders of secured claims against the NRG Applicants will 
receive either the collateral securing such claim or cash in an amount 
equal to the net proceeds realized upon the sale of such collateral, or 
as may otherwise be agreed upon by the Debtors and the claimant;
    (iv) Each holder of NRG's unsecured debt and claims will receive 
its pro rata share of senior notes of Reorganized NRG,\7\ common stock 
of Reorganized NRG, (``New NRG Common Stock'') and, if such holder 
makes the election on its ballot to release Xcel from claims or such 
holder is bound by a final order of the Bankruptcy Court to releases of 
claims against Xcel as provided in the Plan, equal to its pro rata 
share of the Release-Based Amount;
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    \7\ Reorganized NRG refers to NRG, or any successor thereto by 
merger, consolidation or otherwise, as contemplated by the Plan.
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    (v) Each of the holders of unsecured claims against NRG PMI will 
receive its pro rata share of senior notes of Reorganized NRG and New 
NRG Common Stock;
    (vi) Intercompany claims among the Debtors and between the Debtors 
and certain of NRG's other subsidiaries will be divided into two 
classes: (1) Claims that will be cancelled without any distribution to 
the holders and (2) claims that will be reinstated on the Effective 
Date (as described below);
    (vii) Any and all outstanding equity interests in NRG will be 
canceled without consideration; and
    (viii) NRG will retain its 100% ownership in NRG PMI.
    The Plan contains a mechanism that would allow holders of unsecured 
debt and claims against NRG and NRG PMI to elect to receive equity 
instead of cash and/or debt, or cash and/or debt instead of equity. 
Reallocation will occur to the extent there are willing parties on each 
side.\8\
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    \8\ The reallocation procedure is completely voluntary, and no 
party can be required or compelled to take part in the reallocation 
procedure. Creditors who do not participate in the reallocation 
procedure will receive the distribution to which they are otherwise 
entitled under the distribution provisions of the Plan.
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    Applicants state that, generally, the claims of the Xcel Entities 
against the Debtors would receive one of two different types of 
treatment under the Plan. As to claims of approximately $32 million 
arising prior to January 31, 2003, Xcel has agreed to settle such 
claims in exchange for a promissory note to be issued by NRG to Xcel in 
the original principal amount of $10 million (``Xcel Note''). The 
estimated recovery on account of such claims is approximately 31%.
    According to Applicants, any intercompany claims of Xcel against 
NRG or any of its subsidiaries arising from the provision of 
intercompany goods or services after January 31, 2003, will be paid in 
full in cash in the ordinary course. Payments on Guarantees and 
indemnities made by Xcel after January 31, 2003, will be reimbursed in 
full by NRG on the effective date of the Plan (``Effective Date''). The 
ownership interests, direct and indirect, of Xcel in NRG and its 
subsidiaries will terminate. According to Applicants, the new stock and 
other securities to be issued by the NRG Applicants under the Plan are 
as follows:
    (i) The New NRG Common Stock shall consist of 100,000,000 shares of 
new common stock, par value $0.01 per share. The New NRG Common Stock 
(subject to dilution for management incentive plan) will be distributed 
on a pro rata basis to holders of NRG's unsecured debt and claims and 
holders of unsecured claims against NRG PMI;
    (ii) Reorganized NRG will also issue senior notes which shall (a) 
be in an initial principal amount of $500,000,000, (b) accrue interest 
at a rate of 10% per annum if payable in cash or 12% per annum if 
payable in kind, and (c) mature on the seventh anniversary of the 
issuance. The senior notes are to be distributed on a pro rata basis to 
holders of NRG's unsecured debt and claims and holders of unsecured 
claims against NRG PMI; and
    (iii) The Xcel Note shall (a) be a non-amortizing promissory note 
in an initial principal amount of $10 million, (b) accrue interest at a 
rate of 3% per annum and (c) mature 2\1/2\ years after the effective 
date of the Plan.
D. Third Amended Disclosure Statement
    The Plan was filed with the Bankruptcy Court along with the 
disclosure statement accompanying the Plan (``Disclosure Statement''). 
Applicants state that under section 1125 of the Bankruptcy Code, the 
Debtors may not solicit votes for acceptances of the Plan until the 
Bankruptcy Court approves the Disclosure Statement as containing 
information of a kind, and in sufficient detail, adequate to enable 
creditors to make an informed judgment whether to vote for acceptance 
or rejection of the Plan. According to Applicants, the Bankruptcy Court 
held a hearing on the Disclosure Statement on June 30, 2003, and is 
continuing its review of the Disclosure Statement.
    Upon receipt of requisite approvals of the Disclosure Statement, 
the Debtors will solicit votes on the Plan. According to Applicants, 
the solicitation process is expected to take approximately 45 days. 
After the votes are cast, a confirmation hearing will be scheduled and 
notice of the hearing will be provided to creditors and parties-in-
interest. Creditors and parties-in-interest will have an opportunity to 
object to the confirmation of the Plan at the confirmation hearing. At 
the confirmation hearing, the Bankruptcy Court must determine whether 
the confirmation of the Plan meets the requirements of section 1129 of 
the Bankruptcy Code. If the Bankruptcy Court determines that the Plan 
meets the requirements of section 1129, the Bankruptcy Court should 
confirm the Plan.
    The Debtors may alter, amend or modify the Plan under section 
1127(a) of the Bankruptcy Code at any time prior to the confirmation 
hearing, with the written consent of the Unsecured Creditors Committee, 
the Global Steering Committee and Xcel. The Debtors may alter, amend or 
modify any exhibits to the Plan under section 1127(a) of the Bankruptcy 
Code at any time prior to the confirmation hearing, with the written 
consent of the Unsecured Creditors Committee, the Global Steering 
Committee and Xcel. After the confirmation of the Plan by the 
Bankruptcy Court, and prior to substantial consummation of the Plan 
with respect to any Debtor as defined in section 1102 of the Bankruptcy 
Code, any Debtor may, with the written consent of the Unsecured 
Creditors Committee, the Global Steering Committee and Xcel, under 
section 1127(b) of the Bankruptcy Code, institute proceedings in the 
Bankruptcy Court to remedy any defect or omission or reconcile any 
inconsistencies in the Plan, the Disclosure Statement, or the 
confirmation order, and such matters as may be necessary to carry out 
the purposes and effects of the Plan. A holder of a claim that has 
accepted the Plan shall be deemed to have accepted the Plan as altered, 
amended or modified, if the proposed alteration, amendment or 
modification does not materially and adversely change the treatment of 
the claim of such holder. Applicants state that modification of or 
amendments to the Plan will be promptly filed with the Commission by 
amendment to the Application.

III. Obligations of Xcel Under the Plan and the Settlement Agreement

    Applicants also state that under the Settlement Agreement, Xcel and 
NRG

[[Page 47375]]

(on behalf of itself and NRG's subsidiaries) will agree to indemnify 
each other for any actions taken by the indemnifying party through the 
effective date of the Plan where the statutory liability imposed on the 
indemnified party is solely by reason of Xcel's direct or indirect 
ownership of NRG and NRG's subsidiaries. Further, according to 
Applicants, NRG and its direct and indirect subsidiaries will not be 
reconsolidated with Xcel or any of its other affiliates for federal 
income tax purposes at any time after their March 2001 disaffiliation 
or otherwise entitled to the benefits of any tax sharing agreement with 
Xcel. Xcel alone will be entitled to the tax benefits associated with 
the worthless stock deduction Xcel expects to claim with respect to its 
investment in NRG. Xcel and NRG will enter into a tax matters agreement 
(``Tax Matters Agreement'') that addresses liability for any unpaid 
taxes of NRG and Xcel for periods during which NRG and Xcel were part 
of the same consolidated, combined or unitary tax group, entitlement to 
any tax refunds for such periods, the control of contests for such 
periods, cooperation with respect to audits and such other matters as 
would be customary in a tax matters agreement between similarly-
situated corporations.
    Applicants state that Xcel has agreed, to the extent requested by 
NRG, to provide services to NRG under a transitional services agreement 
(``Transitional Services Agreement'') for a specified period after the 
Effective Date. Xcel will receive compensation at cost for any services 
provided. Applicants state that at this time it is not expected that 
NRG will request any services under the Transitional Services 
Agreement.
    Xcel and NRG will enter into an employee matters agreement under 
which various obligations with respect to employees and benefit plans 
will be allocated between Xcel and NRG as of the effective date of the 
Plan. Also, a tax allocation agreement (``Tax Allocation Agreement''), 
dated as of December 29, 2000, provided for all eligible affiliated 
corporations to join with Xcel in the filing of consolidated federal 
income tax returns, and also set forth procedures for allocating tax 
benefits among the parties. NRG and its direct and indirect 
subsidiaries will not be reconsolidated with Xcel or any of its other 
affiliates for federal income tax purposes at any time after their 
March 2001 disaffiliation or otherwise entitled to the benefits of the 
Tax Allocation Agreement. Applicants further state that Xcel's 
obligations under the Settlement Agreement and the Plan, including its 
obligations to make the payments discussed above, will, according to 
Applicants, be contingent upon, among other things, the following:
    (i) Effective date of the Plan occurring on or prior to December 
15, 2003;
    (ii) The receipt of releases in favor of Xcel from holders of at 
least 85 percent of the general unsecured claims held by NRG's 
creditors;
    (iii) Approval of the final Plan by the Bankruptcy Court and 
related documents containing terms satisfactory to Xcel, NRG and 
various groups of NRG's creditors; and
    (iv) The receipt by Xcel of all necessary regulatory approvals.
    Applicants assert that the Plan and related transactions are 
reasonable and in the best interests of the investors in the NRG 
Applicants and of the investors in Xcel.

IV. Post Reorganization Ownership Structure

    Under the Plan, the pre-petition shares of common stock issued by 
NRG and held indirectly by Xcel, through Xcel Wholesale, shall not 
receive any distributions under the Plan, and the Post shares shall be 
canceled and extinguished on the effective date of the Plan. As a 
consequence, Xcel's pre-petition shares in NRG will no longer have any 
claim to voting rights, dividends or any other rights with respect to 
NRG. The entire equity interest in Reorganized NRG will then be held by 
the existing creditors of NRG. NRG will continue to own 100% of the 
equity ownership of NRG PMI.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-20262 Filed 8-7-03; 8:45 am]
BILLING CODE 8010-01-P