[Federal Register Volume 68, Number 196 (Thursday, October 9, 2003)]
[Notices]
[Pages 58367-58368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-25568]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27733]


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

October 3, 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 October 27, 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 October 27, 2003, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Gulf Power Company (70-10154)

    Gulf Power Company (``Gulf''), One Energy Place, Pensacola, Florida 
32520, a wholly owned electric utility subsidiary of The Southern 
Company (``Southern''), 270 Peachtree Street, NW., Atlanta, Georgia 
30303, a registered holding company, has filed an application-
declaration (``Application'') under sections 6(a), 7, 9(a), 10 and 12 
(b) of the Act and rules 45, 52 and 54. Gulf proposes to organize one 
or more subsidiaries for the purpose of effecting various financing 
transactions involving the issuance and sale of an aggregate of 
$150,000,000 of preferred securities, from time to time, through 
December 31, 2006.
    In connection with the issuance of the preferred securities, Gulf 
proposes to organize one or more separate subsidiaries as a business 
trust under the laws of the State of Florida or a statutory trust under 
the laws of the State of Delaware or another comparable trust in any 
jurisdiction, or any other entity or structure, foreign or domestic, 
that is considered advantageous by Gulf (individually a ``Trust'' and 
collectively the ``Trusts'').\1\ Gulf proposes that the Trusts will 
issue and sell from time to time preferred securities, as described in 
this Application (the ``Preferred Securities''), with a specified par 
or stated value or liquidation amount or preference per security. Gulf 
requests the Commission to reserve jurisdiction over the use of a 
foreign entity as a Trust.
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    \1\ Applicants state that the ability to use trusts in financing 
transactions can sometimes offer increased state and/or federal tax 
efficiency. Increased tax efficiency can result if a trust is 
located in a state or country that has tax laws that make the 
proposed financing transaction more tax efficient relative to the 
company's existing taxing jurisdiction. Decreasing tax exposure, 
however, is usually not the primary goal when establishing a trust. 
Use of a trust can provide potentially significant benefits to a 
company, even without a net improvement in its tax position. Trusts 
can increase a company's ability to access new sources of capital by 
enabling it to undertake financing transactions with features and 
terms attractive to a wider investor base. Trusts can be established 
in jurisdictions or on terms favorable to the sponsoring company 
and, at the same time, give targeted investors attractive incentives 
to invest and so provide financing. Many of these investors would 
not be participants in the company's bank group and, typically, 
would not hold company bonds or commercial paper. Consequently, they 
represent potential new sources of capital.
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    Gulf has a total amount of $115,000,000 of Preferred Securities 
issued and outstanding through Trusts, as of June 30, 2003. The 
outstanding Preferred Securities were issued through Trusts rather than 
directly by Gulf as subordinated debt because certain rating agencies 
recognize preferred securities of this kind, issued through trusts, as 
having some equity content, rather than directly issued subordinated 
debt, which has no equity content. Gulf states that transactions of the 
Trusts are reported by Gulf on its financial statements and asserts 
that it is desirable for Gulf to continue to maintain a degree of 
similarity in its financial statements by issuing Preferred Securities 
through the Trusts rather than directly issuing subordinated debt.\2\
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    \2\ Gulf notes that it reclassified $115,000,000 of outstanding 
mandatorily redeemable Preferred Securities as liabilities, 
effective July 1, 2003, pursuant to Financial Accounting Standards 
Board (``FASB'') Statement No. 150 ``Accounting for Certain 
Financial Instruments with the Characteristics of both Liabilities 
and Equity.'' In May 2003, FASB issued Statement 150, which requires 
reclassification of certain financial instruments within its scope, 
including shares that are mandatorily redeemable as liabilities, and 
Statement No. 150 is currently effective. Gulf states that the 
reclassification as a result of implementation of Statement No. 150 
did not have a material effect on its Statements of Income and Cash 
Flows.
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    Gulf currently is authorized to issue Preferred Securities in an 
aggregate amount of up to $30,000,000 through December 31, 2005, 
pursuant to Commission orders dated January 16, 1998 and June 8, 2001 
(HCAR No. 26817 and HCAR No. 27417, respectively). Gulf proposes that 
this Application's authorization of $150,000,000 supersede and replace 
the amounts remaining in these previous authorizations.
    Gulf states that it will acquire all of the common stock of any 
Trust for an amount not less than the minimum required by any 
applicable law and not exceeding 21% of the total equity capitalization 
from time to time of the Trust (i.e., the aggregate of the equity 
accounts of such Trust).\3\ The aggregate of such investment by Gulf 
hereafter is referred to as the ``Equity Contribution.'' Gulf may issue 
and sell to any Trust, at any time or from time to time in one or more 
series, subordinated debentures, promissory notes or other debt 
instruments (individually a ``Note'' and collectively the ``Notes'') 
governed by an indenture or other document. The Trust will apply both 
the Equity Contribution made to it and the proceeds from the sale of 
Preferred Securities by it, from time to time, to purchase Notes. 
Alternatively, Gulf may enter into a loan agreement or agreements with 
any Trust under which the Trust will lend Gulf (individually a ``Loan'' 
and collectively the ``Loans'') both the Equity Contribution to the 
Trust and the proceeds from the sale of the Preferred Securities by the 
Trust, from time to

[[Page 58368]]

time. Gulf will issue Notes, evidencing such borrowings, to the Trust.
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    \3\ The constituent instruments of each Trust, including its 
Trust Agreement, will provide, among other things, that the Trust's 
activities will be limited to the issuance and sale of Preferred 
Securities, from time to time, and the lending to Gulf of (i) the 
resulting proceeds, (ii) the Equity Contribution to the Trust, and 
(iii) certain other related activities. Consequently, Gulf proposes 
that a Trust's constituent instruments will not include any interest 
or dividend coverage nor will a Trust have capitalization ratio 
restrictions on its ability to issue and sell Preferred Securities. 
Because each issuance will be supported by a Note and Guaranty, 
capitalization ratio restrictions would not be relevant or necessary 
to enable a Trust to maintain an appropriate capital structure. 
Furthermore, each Trust's constituent instruments will state that 
its common stock is not transferable (except to certain permitted 
successors), that its business and affairs will be managed and 
controlled by Gulf (or permitted successor), and that Gulf (or 
permitted successor) will pay all expenses of the Trust.
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    Gulf also proposes to guarantee (individually a ``Guaranty'' and 
collectively the ``Guaranties'') (i) payment of dividends or 
distributions on the Preferred Securities of any Trust if, and to the 
extent, the Trust has funds legally available, (ii) payments to the 
Preferred Securities holders of amounts due upon liquidation of the 
Trust or redemption of the Preferred Securities of such Trust and (iii) 
certain additional amounts that may be payable by the Preferred 
Securities. Gulf's credit would support any Guaranty.
    Gulf states that each Note will have a term of up to fifty (50) 
years. Prior to maturity, Gulf will pay interest only on the Notes at a 
rate equal to the dividend or distribution rate on the related series 
of Preferred Securities, which dividend or distribution rate may be 
either fixed or adjustable, to be determined on a periodic basis by 
auction or remarketing procedures, in accordance with a formula or 
formulae based upon certain reference rates, or by other predetermined 
methods.\4\
    The interest payments will constitute each respective Trust's only 
income and will be used by it to pay dividends or distributions on its 
Preferred Securities and dividends or distributions on its common 
stock. Dividend payments or distributions on the Preferred Securities 
will be made on a monthly or other periodic basis and must be made to 
the extent that the Trust issuing the Preferred Securities has legally 
available funds and cash sufficient for such purposes. However, Gulf 
may have the right to defer payment of interest on any issue of Notes 
for five or more years. Each Trust will have the parallel right to 
defer dividend payments or distributions on the related series of 
Preferred Securities for five or more years, provided that, if 
dividends or distributions on the Preferred Securities of any series 
are not paid for eighteen (18) or more consecutive months, then the 
holders of the Preferred Securities of such series may have the right 
to appoint a trustee, special general partner or other special 
representative to enforce the Trust's rights under the related Note and 
Guaranty. The dividend or distribution rates, payment dates, redemption 
and other similar provisions of each series of Preferred Securities 
will be substantially identical to the interest rates, payment dates, 
redemption and other provisions of the Notes issued.
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    \4\ The Preferred Securities of any series may be redeemable at 
the option of the Trust issuing the series (with the consent or at 
the direction of Gulf) at a price equal to their par or stated value 
or liquidation amount or preference, plus any accrued and unpaid 
dividends or distributions, (i) at any time after a specified date 
not later than approximately ten (10) years from their date of 
issuance, or (ii) upon the occurrence of certain events, among them 
that (a) the Trust is required to withhold or deduct certain amounts 
in connection with dividend, distribution or other payments or is 
subject to federal income tax with respect to interest received on 
the Notes issued to the Trust, or (b) it is determined that the 
interest payments by Gulf on the related Notes are not deductible 
for income tax purposes, or (c) the Trust becomes subject to 
regulation as an ``investment company'' under the Investment Company 
Act of 1940, as amended. The Preferred Securities of any series may 
also be subject to mandatory redemption upon the occurrence of 
certain events. Gulf also may have the right in certain cases, or in 
its discretion, to exchange the Preferred Securities of any Trust 
for the Notes or other junior subordinated debt issued to the Trust. 
In addition, rather than issuing Preferred Securities of a Trust, 
Gulf may instead issue Notes or other junior subordinated debt 
directly to purchasers.
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    Gulf states that the Notes and related Guaranties will be 
subordinate to all other existing and future unsubordinated 
indebtedness for borrowed money of Gulf and will have no cross-default 
provisions with respect to other indebtedness of Gulf (i.e., a default 
under any other outstanding indebtedness of Gulf would not result in a 
default under any Note or Guaranty). However, Gulf may be prohibited 
from declaring and paying dividends on its outstanding capital stock 
and making payments in respect of pari passu debt unless all payments 
then due under the Notes and Guaranties (without giving effect to the 
deferral rights discussed above) have been made.
    The distribution rate to be borne by the Preferred Securities and 
the interest rate on the Notes will not exceed the greater of (i) 300 
basis points over U.S. Treasury securities having comparable maturities 
or (ii) a gross spread over U.S. Treasury securities that is consistent 
with similar securities issued by other companies having comparable 
maturities and credit quality.
    Gulf will use the proceeds from the sale of the securities in 
connection with its ongoing construction program, to pay scheduled 
maturities and/or refundings of its securities, to repay short-term 
indebtedness to the extent outstanding and for other general corporate 
purposes.
    Gulf represents that it will maintain its common equity as a 
percentage of capitalization (inclusive of short-term debt) at no less 
than thirty (30) percent. Gulf further represents that no guaranties or 
other securities may be issued in reliance upon the requested 
authorization, unless (i) the security to be issued, if rated, is rated 
investment grade; (ii) all outstanding securities of Gulf that are 
rated are rated investment grade; and (iii) all outstanding securities 
of Southern that are rated are rate investment grade. For purposes of 
this provision, a security will be deemed to be 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 
Securities Exchange Act of 1934, as amended. Gulf requests that it, 
nevertheless, be permitted to issue a security that does not satisfy 
these conditions if the requirements of rule 52(a)(i) and rule 
52(a)(iii) are met and the issue and sale of the security have been 
expressly authorized by the Florida Public Service Commission.\5\ Gulf 
also requests the Commission to reserve jurisdiction over any 
guaranties or securities that do not satisfy these conditions.
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    \5\ Gulf is a Maine corporation doing business in the State of 
Florida and does not do business in the State of Maine.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-25568 Filed 10-8-03; 8:45 am]
BILLING CODE 8010-01-P