[Federal Register Volume 69, Number 51 (Tuesday, March 16, 2004)]
[Notices]
[Pages 12379-12386]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5887]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27812]


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

March 10, 2004.
    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 March 31, 2004, 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 March 31, 2004, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

AGL Resources Inc. (70-10175)

    AGL Resources Inc. (``AGL Resources''), a registered public utility 
holding company, Ten Peachtree Place, Suite 1000, Atlanta, Georgia 
30309, AGL Resources' electric and gas public utility subsidiaries, 
Atlanta Gas Light Company (``AGLC''), Ten Peachtree Place, Suite 1000, 
Atlanta, Georgia 30309; Chattanooga Gas Company (``CGC'') 2207 Olan 
Mills Drive, Chattanooga, Tennessee 37421; Virginia Natural Gas, Inc. 
(``VNG''), 5100 East Virginia Beach Boulevard, Norfolk, Virginia 23502, 
(AGLC, CGC, and VNG collectively ``Utility Subsidiaries''); and AGL 
Resources'' direct and indirect nonutility subsidiaries (``Nonutility 
Subsidiaries'' and collectively with the Utility Subsidiaries, 
``Subsidiaries'') Georgia Natural Gas Company (``GNG''); AGL 
Investments, Inc. (``AGLI''); AGL Services Company (``AGL Services''); 
AGL Capital Corporation (``AGL Capital''); Global Energy Resource 
Insurance Corporation (``GERIC''); Pivotal Energy Services, Inc. 
(``Pivotal Energy Services''); AGL Rome Holdings, Inc.; Pivotal Propane 
of Virginia, Inc.; Southeastern LNG, Inc. (``Southeastern LNG''); AGL 
Capital Trust I; AGL Capital Trust II; AGL Capital Trust III; Trustees 
Investments, Inc.; Customer Care Services, Inc. (``Customer Care 
Services''); AGL Networks, LLC (``AGL Networks''); AGL Energy 
Corporation (``AGL Energy''); and AGL Propane Services, Inc. (``AGL 
Propane''); Ten Peachtree Place, Suite 1000, Atlanta, Georgia 30309, 
SouthStar Energy Services, LLC (``SouthStar''), 817 West Peachtree 
Street, Atlanta, Georgia 30308, Sequent Energy Management, LP; Sequent 
Holdings, LLC; Sequent, LLC; Sequent Energy Marketing, LP, 1200 Smith 
Street Suite 900, Houston, Texas 77002 (collectively, ``Applicants'') 
have filed an application (``Application'') under to sections 6(a), 7, 
9(a), 10, and 12 of the Act and rules 43, 45, 46, and 54 under the Act.

I. Background

    By order dated October 5, 2000 (HCAR No. 27243) (``Merger Order''), 
AGL Resources was authorized to acquire all of the issued and 
outstanding common stock of VNG. AGL Resources registered as a holding 
company under the Act on October 10, 2000. AGL Resources owns directly 
all of the issued and outstanding common stock of three public utility 
companies, AGLC, CGC, and VNG.

II. Description of the Parties

A. AGL Resources

    AGL Resources directly owns AGLC, CGC, VNG, GNG, AGL Services, AGL 
Capital, GERIC, AGLI. AGL Resources' common stock has a five-dollar 
($5.00) par value and is listed and traded on the New York Stock 
Exchange under the symbol ``ATG.'' As of June 30, 2003 AGL Resources 
had 63,731,156 shares of common stock issued and outstanding. As of and 
for the six months ended June 30, 2003, AGL Resources had total assets 
of $3.66 billion, net utility plant assets of $2.07 billion, total 
operating revenues of $539.1 million, operating margin \1\ of $345.1 
million and net income of $70.7 million. As of and for the twelve 
months ended December 31, 2002, AGL Resources had total assets of $3.74 
billion, net utility plant assets of $2.06 billion, total operating 
revenues of $877.2 million, operating margin of $609.0 million and net 
income of $103.0 million.
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    \1\ Applicants state that operating margin represents operating 
revenues less cost of sales.
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Utility Subsidiaries

B. Utility Subsidiaries

1. Atlanta Gas Light Company
    Applicants state that AGLC is a natural gas local distribution 
utility with distribution systems and related facilities serving 237 
cities throughout Georgia, including Atlanta, Athens, Augusta, 
Brunswick, Macon, Rome, Savannah, and Valdosta. AGLC also has 
approximately 6.0 billion cubic feet, or Bcf, of liquefied natural gas 
(``LNG'') storage capacity in three LNG plants to supplement the supply 
of natural gas during peak usage periods. As of and for the six months 
ended June 30, 2003, AGLC had total assets of $2.34 billion, total 
operating revenues of $249.9 million and net income of $40.1 million. 
As of and for the twelve months ended December 31, 2002, AGLC had total 
assets of $2.37 billion, total operating revenues of $538.9 million and 
net income of $80.0 million. AGLC owns all of the outstanding stock of 
AGL Rome Holdings, Inc. AGL Rome Holdings, Inc. owns property 
associated with a former manufactured gas plant in Rome, Georgia.
2. Chattanooga Gas Company
    CGC is a natural gas local distribution utility with distribution 
systems and related facilities serving 12 cities and surrounding areas, 
including the Chattanooga and Cleveland areas of Tennessee. CGC also 
has approximately 1.2 Bcf of LNG storage capacity in its

[[Page 12380]]

LNG plant. As of and for the six months ended June 30, 2003, CGC had 
total assets of $140.8 million, total operating revenues of $51.4 
million and net income of $3.8 million. As of and for the twelve months 
ended December 31, 2002, CGC had total assets of $142.7 million, total 
operating revenues of $75.3 million and net income of $7.0 million.
3. Virginia Natural Gas, Inc.
    VNG is a natural gas local distribution utility with distribution 
systems and related facilities serving eight cities in the Hampton 
Roads region of southeastern Virginia. VNG owns and operates 
approximately 155 miles of a separate high-pressure pipeline that 
provides delivery of gas to customers under firm transportation 
agreements within the state of Virginia. VNG also has approximately 5.0 
million gallons of propane storage capacity in its two propane 
facilities to supplement the supply of natural gas during peak usage 
periods. As of and for the six months ended June 30, 2003, VNG had 
total assets of $648.3 million, total operating revenues of $201.0 
million and net income of $17.7 million. As of and for the twelve 
months ended December 31, 2002, VNG had total assets of $637.5 million, 
total operating revenues of $283.2 million and net income of $19.5 
million.

C. Nonutility Subsidiaries

1. Georgia Natural Gas Company
    GNG, a wholly owned subsidiary of AGL Resources, owns a non-
controlling 70% financial interest in SouthStar. SouthStar, a joint 
venture formed in 1998, markets retail natural gas and related services 
to industrial, commercial and residential customers, principally in 
Georgia. SouthStar is the largest marketer in Georgia with a market 
share of 38% and operates under the trade name Georgia Natural Gas. At 
the formation of SouthStar, GNG owned a 50% interest; however, in March 
2003, AGL Resources, through GNG, purchased an additional 20% ownership 
interest in SouthStar. Upon closing, GNG owned a non-controlling 70% 
financial interest in SouthStar and a subsidiary of Piedmont Natural 
Gas Company owned the remaining 30%. Although GNG owns 70% of 
SouthStar, GNG states that it does not have a controlling interest, as 
matters of significance require the unanimous vote of SouthStar's 
governing board. GNG and SouthStar are ``gas-related companies'' under 
rule 58 of the Act.
2. AGL Investments, Inc.
    AGLI is an intermediate holding company for AGL Resources' 
investments in Sequent Energy Management, LP, AGL Networks, AGL Propane 
Services, AGL Energy, and other Nonutility Subsidiaries.
    (i) Sequent, LLC is an intermediate holding company for Sequent 
Energy Management, LP; Sequent Energy Marketing, LP; and Sequent 
Holdings, LLC; collectively referred to as ``Sequent.'' Sequent 
provides asset optimization, gas supply services, and wholesale 
marketing and risk management services for third parties and the 
Utility Subsidiaries. Asset optimization activities focus on capturing 
the value from idle or underutilized natural gas assets, typically by 
participating in transactions that balance the needs of varying markets 
and time horizons. These assets include rights to pipeline capacity, 
underground storage, and natural gas peaking services and facilities. 
Sequent related activities also include the aggregation of gas from 
other marketers and producers and its resale to third parties and the 
Utility Subsidiaries. In addition, Sequent may bundle this commodity 
with transportation and storage service and sell short-term and long-
term gas supply on a delivered basis. The Sequent organization is a 
``gas-related company'' under rule 58 of the Act.
    (ii) AGL Networks is a carrier-neutral provider of last-mile 
infrastructure and dark fiber solutions to a variety of customers in 
Atlanta, Georgia, and Phoenix, Arizona. AGL Networks is an exempt 
telecommunications company under section 34 of the Act.
    (iii) AGL Propane holds a 22.36% membership interest in US Propane 
L.P.; and AGL Energy Corporation holds a membership interest in US 
Propane, LLC, the general partner of US Propane L.P. US Propane L.P. 
owns all of the general partnership interests and approximately 25% of 
the limited partnership interests, in Heritage Propane Partners, L.P. 
(``Heritage''). Heritage, a publicly traded company, is a marketer of 
propane through a nationwide retail distribution network and is the 
fourth largest retail marketer of propane in the United States.
    (iv) AGL Investments is also the sole shareholder of the following 
active companies: Trustees Investments, Inc., which owns a residential 
and retail development in Savannah, Georgia, located on or adjacent to 
manufactured gas plant sites; Customer Care Services; Pivotal Energy 
Services, and Southeastern LNG.
3. AGL Services Company
    AGL Services Company is a service company established in accordance 
with section 13 of the Act. AGL Services Company provides business 
services to AGL Resources and its various Subsidiaries.
4. AGL Capital Corporation
    AGL Capital is a financing subsidiary that provides for the ongoing 
financing needs of AGL Resources through a commercial paper program, 
the issuance of various debt and hybrid securities and other financing 
arrangements.
5. AGL Capital Trust I, AGL Capital Trust II, and AGL Capital Trust III
    AGL Capital Trust I, AGL Capital Trust II and AGL Capital Trust III 
are Delaware statutory business trusts established for the purpose of 
issuing trust preferred securities. AGL Resources owns 100% of AGL 
Capital Trust I common stock and AGL Capital Trust I owns AGL 
Resources' 8.17% junior subordinated deferrable interest debentures. 
AGL Capital owns 100% of AGL Capital Trust II's common stock and AGL 
Capital Trust II owns AGL Capital's 8% junior subordinated deferrable 
interest debentures. AGL Capital Trust III exists for the exclusive 
purposes of issuing and selling its trust preferred securities and 
common securities, using the proceeds from the sale of these securities 
to acquire unsecured debt obligations of AGL Capital, and making 
distributions to the holders of trust securities. As of the date 
hereof, no securities have been issued by AGL Capital Trust III.
6. Global Energy Resource Insurance Corporation
    By order dated April 13, 2001(HCAR No. 27378), the Commission 
authorized GERIC, a captive insurance company, to underwrite certain 
insurance for AGL Resources and its Subsidiaries.

III. Overview of the Requests

    Applicants request authorization to engage in the following 
financing transactions during the period from the effective date of the 
order granted in this Application through March 31, 2007 
(``Authorization Period'').
    Applicants state that the proceeds from the sale of securities in 
external financing transactions will be used for general corporate 
purposes, including the financing, in part, of the capital expenditures 
and working capital requirements of AGL Resources and its Subsidiaries, 
for the acquisition, retirement or redemption of securities previously 
issued by AGL Resources or the Subsidiaries, and for authorized

[[Page 12381]]

investments in companies organized in accordance with rule 58 under the 
Act (``Rule 58 Companies''), exempt wholesale generators (``EWGs''), as 
defined in section 32 of the Act, foreign utility companies 
(``FUCOs''), as defined in section 33 of the Act, exempt 
telecommunications companies (``ETCs''), as defined in section 34 of 
the Act, and for other lawful purposes.
    Applicants request authorization for the following transactions 
through the Authorization Period:
    (i) issuances and sales of securities or borrowings during the 
Authorization Period by AGL Resources of up to $5 billion at any time 
outstanding (``AGL Resources External Limit'');
    (ii) issuances by AGL Resources of guarantees and other forms of 
credit support in an aggregate amount of $1 billion at any time 
outstanding (``AGL Resources Guarantee Limit'');
    (iii) issuances by AGLC, CGC, and VNG of guarantees and other forms 
of credit support with respect to the obligations of their respective 
subsidiaries in an amount not to exceed and $300 million, $75 million, 
and $150 million, respectively (``Utility Guarantees'');
    (iv) short-term borrowings by AGLC of $750 million and CGC of $250 
million in short-term debt;
    (v) hedging transactions by AGL Resources and the Utility 
Subsidiaries with respect to their indebtedness;
    (vi) reorganization of the current combined system money pool into 
separate utility and non-utility money pools, and borrowings by the 
Subsidiaries under the new money pools;
    (vii) changes in the terms of any wholly owned Subsidiary's 
authorized capital stock capitalization;
    (viii) payment of dividends out of capital or unearned surplus by 
Nonutility Subsidiaries;
    (ix) acquisition by AGL Resources and the Subsidiaries of the 
equity securities of one or more special purpose subsidiaries 
(``Financing Subsidiaries'') organized solely to facilitate a financing 
transaction and to guarantee the securities issued by Financing 
Subsidiaries;
    (x) restructuring of AGL Resources' nonutility interests from time 
to time, including the establishment of one or more intermediate 
subsidiaries (``Intermediate Subsidiaries'') organized exclusively for 
the purpose of acquiring, financing, and holding the securities of one 
or more existing or future Nonutility Subsidiaries; and
    (xi) issuance of up to 22 million shares of common stock under 
dividend reinvestment and stock-based management incentive and employee 
benefit plans (``Common Stock Plan Limit'').

IV. Financing Authorization

A. Parameters for Financing Transactions

    Applicants state that financings will be subject to the following 
limitations (``Financing Limitations''):
    (i) the cost of money on debt financings and the dividend rate on 
preferred stock or other types of preferred or equity-linked securities 
under the authorizations requested will be consistent with those of 
similar securities of comparable credit quality and maturities issued 
by other companies;
    (ii) the maturity of long-term indebtedness will not exceed fifty 
years and short-term debt will mature within one year;
    (iii) the underwriting fees, commissions or other similar 
remuneration paid in connection with the non-competitive issue, sale or 
distribution of securities will not exceed the greater of (a) 5% of the 
principal or total amount of the securities being issued or (b) 
issuance expenses that are generally paid at the time of the pricing 
for sales of the particular issuance, having the same or reasonably 
similar terms and conditions issued by similar companies of reasonably 
comparable credit quality;
    (iv) AGL Resources will maintain common stock equity \2\ as a 
percentage of total capitalization,\3\ as shown in its most recent 
quarterly consolidated balance sheet, of at least 30% or above. 
Applicants state that each Utility Subsidiary on an individual basis 
will maintain common stock equity of at least 30% of total 
capitalization as shown in its most recent quarterly balance sheet; and
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    \2\ Applicants state that common stock equity (``Common Stock 
Equity'') includes common stock (i.e., amounts received equal to the 
par or stated value of the common stock), additional paid in 
capital, retained earnings and minority interests.
    \3\ Applicants would calculate the Common Stock Equity to total 
capitalization ratio as follows: common stock equity (common stock 
equity + preferred stock + gross debt). Gross debt is the sum of 
long-term debt, short-term debt and current maturities.
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    (v) Applicants further represent that, except for securities issued 
for the purpose of funding money pool (``Money Pool'') operations, no 
guarantees or other securities, other than common stock, may be issued 
in reliance upon the authorization granted by the Commission under this 
Application, unless (a) the security to be issued, if rated, is rated 
investment grade; (b) all outstanding securities of the issuer that are 
rated, are rated investment grade; and (c) all outstanding securities 
of AGL Resources that are rated, are rated 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 (``NRSRO''), 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 (``1934 
Act''). Applicants request that the Commission reserve jurisdiction 
over the issuance of any securities that are rated below investment 
grade. Applicants further request that the Commission reserve 
jurisdiction over the issuance of any guarantee or other securities in 
reliance upon the authorization granted by the Commission under this 
Application at any time that the conditions set forth in clauses (a) 
through (c) above are not satisfied.

B. Financial Condition

    1. Capital Structure: AGL Resources' capital structure as of June 
30, 2003, is shown in the following table:

------------------------------------------------------------------------
                                                          % of total
                                      ($ millions)      capitalization
------------------------------------------------------------------------
Short-term debt...................            $306.4                13.4
Current portion of long-term debt.              77.0                 3.3
Senior and Medium-Term Notes (net              730.8                32.0
 of interest rate swaps of $2.3
 million).........................
Trust Preferred Securities (net of             225.3                 9.9
 interest rate swaps of $6.9
 million).........................
Total debt........................           1,339.5                58.6
Common shareholders' equity (net               945.3                41.4
 of interest rate swaps of $6.9)..
Total capitalization..............          $2,284.8               100.0
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[[Page 12382]]

    2. Current Debt Ratings: The debt ratings of AGL Resources and 
certain of its Subsidiaries are set forth below:

------------------------------------------------------------------------
    Company/Type of facility        Moody's         S&P         Fitch
------------------------------------------------------------------------
AGL Resources/AGL Capital        P-2..........  A-2........  F-2
 Corporation Commercial Paper*.
AGL Resources/AGL Capital        Baa1.........  BBB+.......  A-
 Corporation Senior Notes*.
AGL Resources/AGL Capital Trust  Baa2.........  BBB........  BBB+
 I Trust Preferred Securities*.
AGL Resources/AGL Capital Trust  Baa2.........  BBB........  BBB+
 II Trust Preferred Securities*.
Atlanta Gas Light Company        A3...........  A-.........  A
 Medium-Term Notes**.
------------------------------------------------------------------------
* AGL Resources guarantees payment of these securities subject to the
  terms and conditions of various Guarantee Agreements.
** CGC and VNG currently have no externally held securities and
  therefore are not rated by any NRSRO.

V. Description of Specific Types of Financing

A. AGL Resources External Financing

    AGL Resources seeks authorization to issue equity and debt 
securities aggregating not more than the AGL Resources External Limit 
at any one time outstanding during the Authorization Period. These 
securities could include, but would not necessarily be limited to, 
common stock, preferred stock, preferred stock equivalent securities, 
options, warrants, purchase contracts, units (consisting of one or more 
purchase contracts, warrants, debt securities, shares of preferred 
stock, shares of common stock or any combination of such securities), 
long- and short-term debt (including commercial paper), convertible 
securities, subordinated debt, bank borrowings and securities with call 
or put options. In addition, AGL Resources also seeks authorization to 
issue shares of common stock or options to purchase shares under stock 
purchase/dividend reinvestment plans and stock-based management 
incentive and employee benefit plans up to the Common Stock Plan Limit. 
Securities issued under the Common Stock Plan Limit would not reduce 
the AGL Resources' capacity to issue securities under the AGL Resources 
External Limit.

B. Common Stock

    AGL Resources seeks authority to issue common stock in an aggregate 
amount outstanding not to exceed the AGL Resources External Limit at 
any time during the Authorization Period. Specifically, AGL Resources 
proposes to issue and sell common stock, options, warrants, purchase 
contracts, units, other stock purchase rights exercisable for common 
stock and securities with some of the characteristics of AGL Resources 
common stock. AGL Resources may perform common stock financings through 
underwriting agreements of a type generally standard in the industry. 
Public distributions may be made by private negotiation with 
underwriters, dealers or agents as discussed below or through 
competitive bidding among underwriters. In addition, sales may be made 
through private placements or other non-public offerings to one or more 
persons. All common stock sales will be at rates or prices and under 
conditions negotiated or based upon, or otherwise determined by, 
competitive capital markets. Underwriters may resell common stock from 
time to time in one or more transactions, including negotiated 
transactions, at a fixed public offering price or at varying prices 
determined at the time of sale. AGL Resources also may grant 
underwriters a ``green shoe'' option permitting common stock to be 
offered solely for the purpose of covering over-allotments.
    AGL Resources also seeks authorization to issue common stock or 
options, warrants or other stock purchase rights exercisable for common 
stock in public or privately negotiated transactions as consideration 
for the equity securities or assets of other companies, provided that 
the acquisition of any equity securities or assets has been authorized 
by the Commission or is exempt under the Act or rules under the Act. 
The ability to offer stock as consideration may make a transaction more 
economical for AGL Resources as well as for the seller of the business. 
For purposes of calculating compliance with the AGL Resources External 
Limit, AGL Resources' common stock would be valued based upon the 
negotiated agreement between the buyer and the seller.

C. Equity Compensation Plans

    AGL Resources proposes, from time to time, during the Authorization 
Period to issue and/or acquire in open market transactions or by some 
other method that complies with applicable law and Commission 
interpretations then in effect, up to 22 million shares of AGL 
Resources common stock under AGL Resources' dividend reinvestment plan, 
certain incentive compensation plans and other employee benefit plans 
currently existing or that may be adopted in the future.

D. Preferred Stock

    AGL Resources may issue preferred stock from time to time during 
the Authorization Period. Preferred stock or other types of preferred 
or equity-linked securities may be issued in one or more series with 
rights, preferences, and priorities as may be designated in the 
instrument creating each series, as determined by AGL Resources' board 
of directors. Dividends or distributions on preferred stock or other 
preferred securities will be made periodically and to the extent funds 
are legally available for that purpose, but may be made subject to 
terms that allow the issuer to defer dividend payments for specified 
periods. Preferred stock or other preferred securities may be 
convertible or exchangeable into shares of AGL Resources' common stock 
or unsecured indebtedness.

E. Long-Term Debt

    AGL Resources proposes to issue long-term debt in accordance with 
the conditions described in Financing Limitations. Any long-term debt 
security would have the maturity, interest rate(s) or methods of 
determining the same, terms of payment of interest, redemption 
provisions, sinking fund terms and other terms and conditions as AGL 
Resources may determine at the time of issuance. Any long-term debt (i) 
may be convertible into any other authorized securities of AGL 
Resources; (ii) will have maturities ranging from one to fifty years; 
(iii) may be subject to optional and/or mandatory redemption, in whole 
or in part, at par or at various premiums above the principal amount; 
(iv) may be entitled to mandatory or optional sinking-fund provisions; 
(v) may provide for reset of the coupon pursuant to a remarketing 
arrangement; (vi) may be subject to tender or the obligation of the 
issuer to repurchase at the election of the holder or upon the 
occurrence of a specified event; (vii) may be called from existing

[[Page 12383]]

investors by a third party; or (viii) may be entitled to the benefit of 
financial or other covenants.

F. Short-Term Debt

    AGL Resources requests authorization to issue directly, or 
indirectly through Financing Subsidiaries existing or to be formed 
under the authorization requested herein, short-term debt including, 
but not limited to, institutional borrowings, commercial paper and bid 
notes. Issuance of short-term debt will be under terms determined by 
AGL Resources at the time of issuance and in accordance with the 
Financing Limitations. Short-term debt issued by AGL Resources will be 
unsecured. Proceeds of any short-term debt issuance may be used to 
refund short-term debt, to refund maturing long-term debt, and to 
provide financing for general corporate purposes, working capital 
requirements and Subsidiary capital expenditures until long-term 
financing can be obtained.
    Applicants state that AGL Resources maintains committed lines of 
bank credit for $500 million with various banks. Sequent maintains an 
unsecured line of credit in the current amount of $15 million for the 
posting of margin deposits, which is guaranteed by AGL Resources.
    AGL Resources may sell commercial paper, from time to time, in 
established domestic or European commercial paper markets. Commercial 
paper would be sold to dealers at the discount rate or the coupon rate 
per annum prevailing at the date of issuance for commercial paper of 
comparable quality and maturities sold to commercial paper dealers 
generally. It is expected that the dealers acquiring commercial paper 
from AGL Resources will reoffer this paper at a discount to corporate, 
institutional and, with respect to European commercial paper, 
individual investors. Institutional investors are expected to include 
commercial banks, insurance companies, pension funds, investment 
trusts, foundations, colleges and universities and finance companies.
    AGL Resources proposes to engage in other types of short-term 
financing generally available to borrowers with comparable credit 
ratings as it may deem appropriate in light of its needs and market 
conditions at the time of issuance. Applicants state that any 
additional short-term financing would be conducted in accordance with 
the Financing Limitations.
    To the extent credit is extended under either commercial paper or 
short-term debt facilities during the Authorization Period, these 
amounts would be included within the AGL Resources External Limit and 
would be subject to the Financing Limitations.

G. Hedges and Interest Rate Risk Management

    AGL Resources requests authority to enter into, perform, purchase 
and sell financial instruments intended to manage the volatility of 
interest rates, including but not limited to interest rate swaps, caps, 
floors, collars and forward agreements or any other similar agreements 
(``Hedging Instruments''). Hedging Instruments, in addition to the 
foregoing sentence, may also include the issuance of structured notes 
(i.e., a debt instrument in which the principal and/or interest 
payments are indirectly linked to the value of an underlying asset or 
index), or transactions involving the purchase or sale, including short 
sales, of U.S. Treasury or agency (e.g, Federal National Mortgage 
Association) obligations or London Inter-Bank Offer Rate-based swap 
instruments. AGL Resources would employ Hedging Instruments as a means 
of prudently managing the risk associated with any of its outstanding 
debt by, in effect, synthetically (i) converting variable-rate debt to 
fixed-rate debt; (ii) converting fixed rate debt to variable rate debt; 
(iii) limiting the impact of changes in interest rates resulting from 
variable-rate debt; and (iv) providing an option to enter into interest 
rate swap transactions in future periods for planned issuances of debt 
securities. In no case will the notional principal amount of any 
Hedging Instrument exceed that of the underlying debt instrument and 
related interest rate exposure. Thus, AGL Resources will not engage in 
``leveraged'' or ``speculative'' transactions. The underlying interest 
rate indices of such Hedging Instrument will closely correspond to the 
underlying interest rate indices of AGL Resources' debt to which such 
Hedging Instrument relates. Off-exchange Hedging Instruments would be 
entered into only with counterparties whose senior debt ratings are 
investment grade as determined by any one of Standard & Poor's, Moody's 
Investors Service, Inc. or Fitch IBCA, Inc. (``Approved 
Counterparties'').
    In addition, AGL Resources requests authorization to enter into 
Hedging Instruments with respect to anticipated debt offerings 
(``Anticipatory Hedges''), subject to certain limitations and 
restrictions. Anticipatory Hedges would only be entered into with 
Approved Counterparties, and would be used to fix and/or limit the 
interest rate risk associated with any new issuance through (i) a 
forward sale of exchange-traded Hedging Instruments (``Forward Sale''); 
(ii) the purchase of put options on Hedging Instruments (`` Put Options 
Purchase''); (iii) a Put Options Purchase in combination with the sale 
of call options on Hedging Instruments (``Zero Cost Collar''); (iv) 
transactions involving the purchase or sale, including short sales, of 
Hedging Instruments; or (v) some combination of a Forward Sale, Put 
Options Purchase, Zero Cost Collar and/or other derivative or cash 
transactions, including, but not limited to structured notes, caps and 
collars, appropriate for the Anticipatory Hedges.
    Hedging Instruments may be executed on-exchange (``On-Exchange 
Trades'') with brokers through the opening of futures and/or options 
positions traded on the Chicago Board of Trade, the opening of over-
the-counter positions with one or more counterparties (``Off-Exchange 
Trades''), or a combination of On-Exchange Trades and Off-Exchange 
Trades. AGL Resources will determine the optimal structure of each 
Hedging Instrument transaction at the time of execution.

H. Guarantees

    AGL Resources requests authorization to enter into guarantees, 
obtain letters of credit, enter into expense agreements or otherwise 
provide credit support (``Guarantees'') with respect to the obligations 
of its Subsidiaries as may be appropriate or necessary to enable the 
Subsidiaries to carry on in the ordinary course of their respective 
businesses in an aggregate principal amount not to exceed the $1 
billion AGL Resources Guarantee Limit outstanding at any one time. In 
addition, Applicants request authority for AGLC, CGC, and VNG to issue 
Guarantees in an amount not to exceed $300 million, $75 million, and 
$150 million, respectively with respect to the obligations of their 
Subsidiaries.\4\ All debt guaranteed will comply with the Financing 
Parameters. Applicants state that included in this amount are 
Guarantees entered into by AGL Resources that were previously issued in 
favor of its Subsidiaries to the extent that they remain outstanding 
during the Authorization Period. Applicants request that the limit on 
Guarantees be separate from the AGL Resources External Limit. 
Currently, AGL Resources guarantees credit exposures in Sequent's 
energy marketing and risk management business and certain obligations 
with respect to SouthStar.

[[Page 12384]]

As of December 31, 2003, AGL Resources had issued and had outstanding 
Guarantees on behalf of Subsidiaries in an aggregate amount of 
approximately $228.5 million; however, AGL Resources' issued and 
outstanding Guarantees on behalf of Subsidiaries for the 2003/2004 
winter was in excess of $425 million.
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    \4\ Applicants state that AGL Capital is a financing subsidiary 
that relies on an AGL Resources Guarantee for its credit. Borrowings 
by AGL Capital are considered to be securities issued by AGL 
Resources. AGL Resources' guarantee of AGL Capital's liabilities is 
not included in the AGL Resources Guarantee Limit.
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    Applicants state that Guarantees may take the form of, among 
others, direct guarantees, reimbursement undertakings under letters of 
credit, ``keep well'' undertakings, agreements to indemnify, expense 
reimbursement agreements, and credit support with respect to the 
obligations of the subsidiary companies as may be appropriate to enable 
the system companies to carry on their respective authorized or 
permitted businesses. Any Guarantee that is outstanding at the end of 
the Authorization Period shall remain in force until it expires or 
terminates in accordance with its terms.
    Applicants state that certain Guarantees may be in support of 
obligations that are not capable of exact quantification. In these 
cases, AGL Resources and the Utility Subsidiaries will determine the 
exposure under a Guarantee for purposes of measuring compliance with 
the appropriate Guarantee limit by appropriate means, including 
estimation of exposure based on potential payment amounts. Applicants 
request authority for each Subsidiary to be charged a fee for any 
Guarantee provided on its behalf that is not greater than the cost, if 
any, incurred by the guarantor in obtaining the liquidity necessary to 
perform the Guarantee for the period of time the Guarantee remains 
outstanding.

VI. Utility Subsidiary Short-Term Debt

    The Utility Subsidiaries request authority to enter into, perform, 
purchase and sell Hedging Instruments in the same manner as requested 
by AGL Resources above.
    AGLC and CGC propose to issue up to $750 million and $250 million, 
respectively, of short-term debt consisting of commercial paper, 
secured or unsecured bank loans and borrowings under the utility money 
pool (``Utility Money Pool''), at any one time outstanding during the 
Authorization Period (``Utility Short-Term Debt Limit''). These 
issuances of securities will comply with the Financing Limitations.
    If a Utility Subsidiary elects to issue commercial paper, either 
under rule 52 of the Act or under an applicable Commission order, each 
Utility Subsidiary requests that it be authorized to be made party to 
any AGL Resources' credit facility as back-up to the commercial paper.

VII. Authorization and Operation of the Money Pools

    Applicants request authority for AGL Resources and the Utility 
Subsidiaries to operate a Utility Money Pool, and for the Utility 
Subsidiaries to make unsecured short-term borrowings from the Utility 
Money Pool, to contribute surplus funds to the Utility Money Pool, and 
to lend and extend credit to (and acquire promissory notes from) one 
another through the Utility Money Pool.
    In addition, to the extent not exempt under rule 52(b), Applicants 
request authority for AGL Resources and the Nonutility Subsidiaries to 
operate a nonutility money pool (``Nonutility Money Pool''), and the 
Nonutility Subsidiaries to make unsecured short-term borrowings from 
the Nonutility Money Pool, to contribute surplus funds to the 
Nonutility Money Pool, and to lend and extend credit to (and acquire 
promissory notes from) one another through the Nonutility Money Pool.
    AGL Resources requests authorization to contribute surplus funds 
and to lend and extend credit to (i) the Utility Subsidiaries through 
the Utility Money Pool and (ii) the Nonutility Subsidiaries through the 
Nonutility Money Pool. AGL Resources will not borrow from either the 
Utility Money Pool or the Nonutility Money Pool. AGL Services will 
serve as administrator for both the Utility Money Pool and the 
Nonutility Money Pool. Applicants request that the Commission reserve 
jurisdiction over the participation of any AGL Resources system company 
in either money pool as a borrower until the record in this matter has 
been supplemented with additional information regarding the proposed 
participant.
    Applicants state that Utility Money Pool funds are available from 
the following sources for short-term loans to the participating 
companies from time to time (i) surplus funds in the treasuries of 
participants and (ii) proceeds received by the participants from the 
sale of commercial paper and borrowings from banks (``External 
Funds''). Funds are made available from sources in the order that AGL 
Services, as the administrator under the Utility Money Pool Agreement, 
determines would result in a lower cost of borrowing compared to the 
cost that would be incurred by the borrowing participants individually 
in connection with external short-term borrowings, consistent with the 
individual borrowing needs and financial standing of Utility Money Pool 
participants that invest funds in the Utility Money Pool.
    Each company that is authorized to borrow from the Utility Money 
Pool (``Eligible Borrower'') will borrow pro rata from each Utility 
Money Pool participant that invests surplus funds, in the proportion 
that the total amount invested by the investing participant bears to 
the total amount then invested in the Utility Money Pool. The interest 
rate charged to Eligible Borrowers on borrowings under the Utility 
Money Pool will be equal to AGL Resources' actual cost of external 
short-term borrowings and the interest rate paid on loans to the 
Utility Money Pool would be a weighted average of the interest rate 
earned on loans made by the Utility Money Pool and the return on excess 
funds earned from the investments described below. The interest income 
and investment income earned on loans and investments of surplus funds 
would be allocated among those Utility Money Pool participants that 
have invested funds in accordance with the proportion each 
participant's investment of funds bears to the total amount of funds 
invested in the Utility Money Pool.
    Funds not required by the Utility Money Pool to make loans (with 
the exception of funds required to satisfy the Utility Money Pool's 
liquidity requirements) would ordinarily be invested in one or more 
short-term investments, including (i) obligations issued or guaranteed 
by the U.S. government and/or its agencies and instrumentalities; (ii) 
commercial paper; (iii) certificates of deposit; (iv) bankers' 
acceptances; (v) repurchase agreements; (vi) tax exempt notes; (vii) 
tax exempt bonds; (viii) tax exempt preferred stock; and (ix) other 
investments that are permitted by section 9(c) of the Act and rule 40 
thereunder.
    Each Eligible Borrower receiving a loan through the Utility Money 
Pool would be required to repay the principal amount of the loan, 
together with all interest accrued thereon, on demand and in any event 
within one year after the date of the loan. All loans made through the 
Utility Money Pool may be prepaid by the borrower without premium or 
penalty and without prior notice. Applicants state that the Nonutility 
Money Pool would be operated on the same terms as the Utility Money 
Pool.

VIII. Changes in Capital Stock of Wholly-Owned Subsidiaries

    Applicants request authority to change the terms of any wholly 
owned subsidiary's authorized capital stock capitalization by an amount 
deemed appropriate by AGL Resources or other intermediate parent 
company. Applicants state that the portion of an

[[Page 12385]]

individual Subsidiary's aggregate financing to be effected through the 
sale of stock to AGL Resources or other immediate parent company during 
the Authorization Period under rule 52 and/or an order issued in this 
file is unknown at this time. The proposed sale of capital securities 
(i.e., common stock or preferred stock) may in some cases exceed the 
then authorized capital stock of a Subsidiary. In addition, the 
Subsidiary may choose to use capital stock with no par value.
    The requested authorization is limited to AGL Resources' wholly 
owned Subsidiaries and will not affect the aggregate limits or other 
conditions contained herein. A Subsidiary would be able to change the 
par value, or change between par value and no-par stock, without 
additional Commission approval. Any such action by a Utility Subsidiary 
would be subject to and would only be taken upon the receipt of any 
necessary approvals by the state commission in the state or states 
where the Utility Subsidiary is incorporated and doing business. In 
addition, each of the Utility Subsidiaries will maintain, during the 
Authorization Period, a common equity capitalization of at least 30%.

IX. Payment of Dividends Out of Capital or Unearned Surplus

    Applicants request authority for the Nonutility Subsidiaries to pay 
dividends from time to time through the Authorization Period, out of 
capital and unearned surplus, to the extent permitted under applicable 
corporate law and state or national law applicable in the jurisdiction 
where each company is organized, and any applicable financing 
covenants.
    AGL Resources anticipates that there will be situations in which a 
Nonutility Subsidiary will have unrestricted cash available for 
distribution in excess of the company's current and retained earnings. 
In these situations, the declaration and payment of a dividend would 
have to be charged, in whole or in part, to capital or unearned 
surplus. The sale of an asset, for example, may provide cash in excess 
of the selling company's retained earnings. In addition, distributions 
out of capital may be necessary in connection with winding down a 
subsidiary. Further, there may be periods during which unrestricted 
cash available for distribution by a Nonutility Subsidiary exceeds 
current and retained earnings due to the difference between accelerated 
depreciation allowed for tax purposes, which may generate significant 
amounts of distributable cash, and depreciation methods required to be 
used in determining book income. Finally, even under circumstances in 
which a Nonutility Subsidiary has sufficient earnings, and therefore 
may declare and pay a dividend to its immediate parent, the immediate 
parent may have negative retained earnings, even after receipt of the 
dividend, due to losses from other operations. In this instance, cash 
would be trapped at a subsidiary level where there is no current need 
for it.

X. Financing Entities

    AGL Resources and the Subsidiaries seek authorization to organize 
new corporations, trusts, partnerships or other entities, or to use 
existing Financing Entities, such as AGL Capital, that will facilitate 
financings by issuing short-term debt, long-term debt, preferred 
securities, equity securities, or other securities to third parties and 
transfer the proceeds of these financings to AGL Resources or their 
respective parent Subsidiaries. To the extent not exempt under rule 52, 
the Financing Entities also request authorization to issue these 
securities to third parties. In connection with this method of 
financing, AGL Resources and the Subsidiaries may (i) issue debentures 
or other evidences of indebtedness to Financing Entities in return for 
the proceeds of the financing; (ii) acquire voting interests or equity 
securities issued by the Financing Entities to establish ownership of 
the Financing Entities (the equity portion of the entity generally 
being created through a capital contribution or the purchase of equity 
securities, ranging from one to three percent of the capitalization of 
the Financing Entities); and (iii) guarantee a Financing Entity's 
obligations in connection with a financing transaction. Any amounts 
issued by Financing Entities to a third party under this authorization 
will be included in the overall external financing limitation 
authorized herein for the immediate parent of the Financing Entity. 
However, the underlying intra-system mirror debt and parent guarantee 
shall not be so included. AGL Resources and the Subsidiaries also 
request authorization to enter into support or expense agreements 
(``Expense Agreement'') with Financing Entities to pay the expenses of 
any such entity. Any affiliate transactions entered into by a Financing 
Entity in connection with an Expense Agreement would be conducted at 
fair market value without regard to cost, and therefore, Applicants 
request an exemption under section 13(b) from the at cost standards of 
rules 90 and 91 for AGL Resources and the Subsidiaries to enter into 
these transactions.

XI. Restructuring and Reorganization

    Applicants propose to restructure AGL Resources' nonutility 
holdings from time to time as may be necessary or appropriate in the 
furtherance of AGL Resources and the Subsidiaries' authorized 
nonutility activities. Restructuring could involve the acquisition of 
one or more new subsidiaries to acquire and hold direct or indirect 
interests in any or all of AGL Resources and the Subsidiaries' existing 
or future authorized nonutility businesses. Restructuring could also 
involve the merger or transfer of existing subsidiaries, or portions of 
existing businesses, among the AGL Resources associates and/or the 
reincorporation of existing subsidiaries in a different state. This 
would enable AGL Resources and the Subsidiaries to consolidate similar 
businesses and to participate effectively in authorized nonutility 
activities, without the need to apply for or receive additional 
Commission approval.
    These direct or indirect subsidiaries might be corporations, 
partnerships, limited liability companies or other entities in which 
AGL Resources, directly or indirectly, might have a 100% interest, a 
majority equity or debt position, or a minority debt or equity 
position. These subsidiaries would engage only in businesses to the 
extent AGL Resources and the Subsidiaries are authorized, whether by 
statute, rule, regulation or order, to engage in those businesses. AGL 
Resources does not seek authorization to acquire an interest in any 
nonassociate company as part of the authority requested in this 
Application and states that the reorganization will not result in the 
entry by AGL Resources and the Subsidiaries into a new, unauthorized 
line of business.

XII. Intermediate Subsidiaries

    AGL Resources proposes to acquire, directly or indirectly, the 
securities of one or more entities (``Intermediate Subsidiaries''), 
which would be organized exclusively for the purpose of acquiring, 
holding and/or financing the acquisition of the securities of or other 
interest in one or more EWGs, FUCOs, Rule 58 Companies, ETCs, or other 
non-exempt Nonutility Subsidiaries (as authorized in this proceeding or 
in a separate proceeding), provided that Intermediate Subsidiaries may 
also engage in administrative activities (``Administrative 
Activities'') and development activities (``Development Activities''), 
defined below, relating to these subsidiaries.

[[Page 12386]]

    Administrative Activities include ongoing personnel, accounting, 
engineering, legal, financial, and other support activities necessary 
to manage AGL Resources' investments in Nonutility Subsidiaries. 
Development Activities will be limited to due diligence and design 
review; market studies; preliminary engineering; site inspection; 
preparation of bid proposals, including, in connection therewith, 
posting of bid bonds; application for required permits and/or 
regulatory approvals; acquisition of site options and options on other 
necessary rights; negotiation and execution of contractual commitments 
with owners of existing facilities, equipment vendors, construction 
firms, and other project contractors; negotiation of financing 
commitments with lenders and other third-party investors; and other 
preliminary activities that may be required in connection with the 
purchase, acquisition, financing or construction of facilities, or the 
acquisition of securities of or interests in new businesses.
    Administrative Activities will include ongoing personnel, 
accounting, engineering, legal, financial, and other support activities 
necessary to manage AGL Resources' investments in Nonutility 
Subsidiaries.
    An Intermediate Subsidiary may be organized, among other things, 
(i) to facilitate the making of bids or proposals to develop or acquire 
an interest in any EWG, FUCO, Rule 58 Company, ETC or other Nonutility 
Subsidiary; (ii) after the award of such a bid proposal, to facilitate 
closing on the purchase or financing of an acquired company; (iii) at 
any time subsequent to the consummation of an acquisition of an 
interest in any such company to, among other things, effect an 
adjustment in the respective ownership interests in such business held 
by AGL Resources and non-affiliated investors; (iv) to facilitate the 
sale of ownership interests in one or more acquired non-utility 
companies; (v) to comply with applicable laws of foreign jurisdictions 
limiting or otherwise relating to the ownership of domestic companies 
by foreign nationals; (vi) as a part of tax planning in order to limit 
AGL Resources' exposure to taxes; (vii) to further insulate AGL 
Resources and the Utility Subsidiaries from operational or other 
business risks that may be associated with investments in non-utility 
companies; or (viii) for other lawful business purposes.
    Investments in Intermediate Subsidiaries may take the form of any 
combination of the following (i) purchases of capital shares, 
partnership interests, member interests in limited liability companies, 
trust certificates or other forms of equity interests; (ii) capital 
contributions; (iii) open account advances with or without interest; 
(iv) loans; and (v) guarantees issued, provided or arranged in respect 
of the securities or other obligations of any Intermediate 
Subsidiaries. Funds for any direct or indirect investment in any 
Intermediate Subsidiary will be derived from (i) financings authorized 
in this proceeding; (ii) any appropriate future debt or equity 
securities issuance authorization obtained by AGL Resources from the 
Commission; and (iii) other available cash resources, including 
proceeds of securities sales by Nonutility Subsidiaries under rule 52. 
To the extent that AGL Resources provides funds or Guarantees directly 
or indirectly to an Intermediate Subsidiary that are used for the 
purpose of making an investment in any EWG, FUCO, or Rule 58 Company, 
the amount of the funds or Guarantees will be included in AGL 
Resources' ``aggregate investment'' in these entities, as calculated in 
accordance with rule 53 or rule 58, as applicable.
    AGL Resources requests authorization to consolidate or otherwise 
reorganize all or any part of its direct and indirect ownership 
interests in Nonutility Subsidiaries, and the activities and functions 
related to these investments. To effect any consolidation or other 
reorganization, AGL Resources may wish to merge or contribute the 
equity securities of one Nonutility Subsidiary to another Nonutility 
Subsidiary (including a newly formed Intermediate Subsidiary) or sell 
(or cause a Nonutility Subsidiary to sell) the equity securities or all 
or part of the assets of one Nonutility Subsidiary to another one. To 
the extent that these transactions are not otherwise exempt under the 
Act or rules thereunder, AGL Resources requests authorization to 
consolidate or otherwise reorganize under one or more direct or 
indirect Intermediate Subsidiaries, AGL Resources' ownership interests 
in existing and future Nonutility Subsidiaries. These transactions may 
take the form of a Nonutility Subsidiary selling, contributing, or 
transferring the equity securities of a subsidiary or all or part of a 
subsidiary's assets as a dividend to an Intermediate Subsidiary or to 
another Nonutility Subsidiary, and the acquisition, directly or 
indirectly, of the equity securities or assets of the subsidiary, 
either by purchase or by receipt of a dividend. The purchasing 
Nonutility Subsidiary in any transaction structured as an intrasystem 
sale of equity securities or assets may execute and deliver its 
promissory note evidencing all or a portion of the consideration given. 
Each transaction would be carried out in compliance with all applicable 
laws and accounting requirements.
    AGL Resources requests authorization to make expenditures on 
Development Activities, as defined above, in an aggregate amount of up 
to $600 million. AGL Resources proposes a ``revolving fund'' concept 
for permitted expenditures on Development Activities. Thus, to the 
extent a Nonutility Subsidiary in respect of which expenditures for 
Development Activities were made subsequently becomes an EWG, FUCO, or 
Rule 58 Company, the amount so expended will cease to be considered an 
expenditure for Development Activities, but will instead be considered 
as part of the ``aggregate investment'' in the entity under rule 53 or 
58, as applicable.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-5887 Filed 3-15-04; 8:45 am]
BILLING CODE 8010-01-P