[Federal Register Volume 69, Number 227 (Friday, November 26, 2004)]
[Notices]
[Pages 68995-68999]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3336]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27914]


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

November 19, 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 December 13, 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 fact 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 December 13, 2004, 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. (70-10229)

    Xcel Energy Inc. (``Xcel Energy''), a registered public-utility 
holding company under the Act, and Xcel Energy Services, Inc. (``Xcel 
Energy Services''), a wholly owned subsidiary services company, both 
located at 800 Nicollet Mall, Minneapolis, MN 55402, and Public Service 
Company of Colorado (``PSCo''), one of Xcel Energy's wholly owned 
utility companies, 1225 17th Street, Denver, CO 80202 (collectively, 
``Applicants''), have filed an application-declaration, as amended 
(``Application''), with the Commission under sections 9(a)(1), 10 and 
12(d) of the Act and rules 44 and 54.
    Xcel Energy proposes to sell one of its wholly owned public-utility 
company subsidiaries, Cheyenne Light, Fuel & Power Company 
(``Cheyenne''), to Black Hills Corporation (``Black Hills''), a public-
utility holding company exempt from registration under section 3(a)(1) 
of the Act by rule 2.\1\ Cheyenne is an electric- and gas-utility 
company, operating in and around Cheyenne, Wyoming, and serving 
approximately 38,000 electric and 31,000 natural gas customers.\2\ It 
is subject to the jurisdiction of the Wyoming Public Service Commission 
(``Wyoming Commission'') and the Federal Energy Regulatory Commission 
(``FERC'').\3\
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    \1\ Black Hills has stated its intention to register as a 
public-utility holding company under section 5 of the Act upon 
receipt of Commission financing and other related authorizations 
(for which it has filed and which are currently pending). See Black 
Hills Corporation, et al., Holding Co. Act Release No. 27907 
(November 1, 2004).
    \2\ Cheyenne had revenues of approximately $97 million as of 
December 31, 2003, with net income of approximately $2.1 million. 
Cheyenne was incorporated in 1900 under the laws of Wyoming and was 
acquired in October 1923 by PSCo.
    \3\ The Wyoming Commission's jurisdiction extends to Cheyenne's 
facilities, rates, services, accounts and issuance of securities. 
The FERC's jurisdiction extends to Cheyenne's accounting practices, 
transmission and sales of electricity in interstate commerce.
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    Xcel Energy directly owns five utility subsidiaries, serving 
electric or natural gas customers in 11 states: Cheyenne, Northern 
States Power Company, Northern States Power Company, PSCo and 
Southwestern Public Service Co. The proposed buyer of Cheyenne, Black 
Hills, is headquartered in Rapid City, South Dakota. Its sole public-
utility company subsidiary, Black Hills Power, Inc., has customers in 
eleven counties in western South Dakota, eastern Wyoming and 
southwestern Montana. Its nonutility subsidiaries are engaged in other 
energy-related and telecommunications activities.
    Xcel Energy states that its agreement to sell Cheyenne to Black 
Hills was the result of an auction in which Black Hills was the 
successful bidder. On January 13, 2004, Xcel Energy and Black Hills 
entered into a stock purchase agreement in which Xcel Energy agreed to 
sell and transfer to Black Hills, and Black Hills agreed to purchase 
from Xcel Energy, all of the common stock of Cheyenne. The purchase 
price that Black Hills agreed to pay for Cheyenne's stock is the sum of 
(i) $82,000,000 in cash, (ii) minus the principal amount of 
indebtedness and all accrued and unpaid interest owed by Cheyenne on 
Cheyenne's bond issuance (as of the closing date on the sale),\4\ (iii) 
plus or minus any adjustments due under the working capital and the 
capital expenditure adjustments provided for in the agreement.
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    \4\ The bonds were issued under an indenture dated March 1, 
1948, as amended, between Cheyenne and U.S. National Bank of Denver. 
As of March 31, 2004, about $25 million in principal was 
outstanding.
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    Xcel Energy, Xcel Energy Services and PSCo also request authority 
to enter into a transition services agreement with Black Hills under 
which they will provide certain services to Cheyenne, including certain 
(i) operational services, (ii) corporate services, (iii) information 
services, and (iv) other services, for a period not to exceed 6 months 
(9 months for operational services), with a possible extension period 
of 3 months.

Black Hills Corporation, et al. (70-10255)

    Black Hills Corporation (``Black Hills''), a South Dakota holding 
company exempt from registration under section 3(a)(1) of the Act by 
rule 2, and its subsidiaries, including Black Hills Power, Inc. 
(``Black Hills Power'' or ``Utility Subsidiary''), its electric public-
utility subsidiary (collectively, ``Subsidiaries''), all located at 625 
Ninth Street, Rapid City, SD 57701 (together, ``Applicants''), have 
filed an application-declaration, as amended (``Application'') with the 
Commission under sections 6, 7, 9, 10, 11, 12(b) and (c) and 13(b) of 
the Act and rules 43, 45, 54 and 88 through 92 of the Act.
    Black Hills seeks to purchase Cheyenne Light, Fuel & Power Company 
(``Cheyenne''), an electric- and gas-utility company subsidiary of Xcel 
Energy Inc. (``Xcel Energy''), a registered holding company, 
(``Acquisition'') and requests certain related authorizations.\5\ 
Cheyenne is a retail utility serving customers located in Wyoming 
exclusively. Cheyenne would be Black Hills' second public-utility 
company subsidiary upon completion of the Acquisition (together with 
Black Hills Power, ``Utility Subsidiaries'').\6\
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    \5\ Xcel Energy has filed an application with the Commission for 
authorization to sell Cheyenne to Black Hills. See SEC File No. 70-
10229 (May 14, 2004). Xcel Energy has also requested authority to 
enter into a transition services agreement with Black Hills, for a 
brief period, to provide Cheyenne with certain continued operational 
and administrative services immediately following the Acquisition to 
assure the transition of Cheyenne.
    \6\ Black Hills intends to register as a holding company under 
section 5 of the Act upon receipt of Commission authorizations (for 
which it has filed and which are currently pending) enabling it and 
its Subsidiaries and businesses to operate and engage in various 
financing and investment activities, intrasystem services and other 
related activities and transactions following its registration 
(``Financing Application''). See Black Hills Corporation, et al., 
Holding Co. Act Release No. 27907 (November 1, 2004). Black Hills 
Power is regulated as a public-utility company by the states of 
South Dakota, Wyoming and Montana (which regulate its retail 
electric rates and charges and most of its securities issuances) 
and, under the Federal Power Act, by the Federal Energy Regulatory 
Commission (``FERC''). Black Hills Energy, directly and indirectly, 
owns the Black Hills' interests in nonutility subsidiaries 
(``Nonutility Subsidiaries'').

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[[Page 68996]]

    Black Hills is an energy company with three principal subsidiaries: 
(i) Black Hills Power, which is engaged in the generation, 
transmission, distribution and sale of electricity to customers in 
South Dakota, Wyoming and Montana and the wholesale sale of power in 
the western United States; (ii) Black Hills Energy, Inc. (``Black Hills 
Energy''), a direct wholly owned subsidiary engaged, through 
subsidiaries, in the development, ownership and operation of exempt 
wholesale generators, as defined in section 32 of the Act, and 
qualifying facilities as defined in the Public Utility Regulatory 
Policies Act of 1978, the production, transportation and marketing of 
natural gas, oil, coal and other energy commodities, power marketing 
and other energy-related activities; and (iii) Black Hills FiberCom, 
LLC, a wholly owned subsidiary of Black Hills Energy, engaged in 
telecommunications activities and which Applicants anticipate will 
become an exempt telecommunications company, as defined in section 34 
of the Act.
    Black Hills states that its common stock issued and outstanding was 
32,458,000 and its total assets were $2,014,667,000 ($486,827,600 in 
total electric utility assets and $1,556,951,840 in other corporate 
assets), as of June 30, 2004. For the six months ended June 30, 2004, 
Black Hills Power had electric utility revenues of $81,414,000. For the 
year ended December 31, 2003, Black Hills Power had electric utility 
revenues of $170,942,000. Black Hills has investment grade ratings from 
two major rating agencies (Baa3 from Moody's and BBB- from Standard & 
Poor's). Black Hills anticipates that, upon the consummation of the 
Acquisition, its ratio of common equity as a percentage of total 
capitalization of Black Hills will be approximately 44%.
    In connection with the request for authorization to make the 
Acquisition, Black Hills also requests certain authorizations to enable 
it, its Subsidiaries and Cheyenne, to operate and engage in certain 
financing and investment activities, intrasystem services and other 
related activities and transactions following the Acquisition, to 
facilitate Cheyenne's operation in the Black Hills system (``Black 
Hills System''). Black Hills proposes that these authorizations, for, 
or related to, Cheyenne, be subject to the limitations contained in any 
Commission order resulting from Black Hills' pending Financing 
Application, with none of these Cheyenne proposals causing any change 
in the limitations proposed in the Financing Application (other than 
the inclusion of Cheyenne as an authorized participant in the relevant 
respects).\7\ Black Hills' requests for Cheyenne financing 
authorizations, for the period beginning with the effective date of an 
order issued in this matter, through December 31, 2007 (``Authorization 
Period''), and for certain related activities are summarized as 
follows:
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    \7\ See supra note 6.
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    1. For Black Hills, directly or indirectly, to retain or refinance 
Cheyenne's existing outstanding long-term utility financing 
arrangements and debt issuances in the total amount of approximately 
$25 million (``Cheyenne's Existing Long-Term Debt'' or ``Cheyenne's 
Existing Financings'');
    2. For Cheyenne (like the other Subsidiaries), to issue and sell 
securities, comprised of: (a) Common stock (``Subsidiary Common 
Stock'') (b) preferred stock and preferred stock equivalent securities 
(``Subsidiary Preferred Securities,'' as defined below), (c) unsecured 
and secured short-term debt (``Subsidiary Short-Term Debt'') and (d) 
unsecured and secured long-term debt (``Subsidiary Long-Term Debt'') 
(subject to the same limitations as the other Subsidiaries, including 
in the limit of up to an aggregate amount of an additional $1 billion 
in securities outstanding at any one time (``Aggregate Additional 
Financing Limit''), as described in the Financing Application);
    3. For Cheyenne (like the other Subsidiaries), to enter into 
transactions to manage interest rate risk, including anticipatory 
hedging transactions (together, ``Interest Rate Hedging Transactions'') 
(subject to the same limitations as the other Subsidiaries described in 
the Financing Application);
    4. For Cheyenne (like the other Subsidiaries), to issue guarantees 
and other credit support (``Guarantees'') (subject to the same 
limitations as the other Subsidiaries, including the limit of up to an 
aggregate amount of $400 million (``Additional Guarantee Limit'') 
described in the Financing Application);
    5. For Cheyenne (like the other Subsidiaries), (a) to form 
financing entities (``Financing Subsidiaries,'' as defined below) and 
(b) to issue and sell securities through Financing Subsidiaries, 
subject to the Aggregate Additional Financing Limit;
    6. For Cheyenne (like the other Utility Subsidiary), to participate 
in the money pool to be established by Black Hills and enter into 
certain intrasystem financing arrangements (subject to the same 
limitations as Black Hills Power, described in the Financing 
Application); and
    7. For Cheyenne (like the other Subsidiaries), to obtain services 
from the service company established by Black Hills, to provide certain 
services among the Subsidiaries and to be excepted, among other things, 
from various at-cost rules applicable to transactions among Black Hills 
System companies (subject to the same limitations as Black Hills Power, 
described in the Financing Application).

Proposed Acquisition

    Black Hills states that it and Xcel Energy entered into a stock 
purchase agreement, dated as of January 13, 2004 (``Acquisition 
Agreement''), in which Black Hills agreed to acquire all the common 
stock of Cheyenne for $82 million, payable in cash at closing, less 
principal and accrued interest on all Cheyenne's indebtedness, with 
appropriate adjustments for working capital and capital expenditures. 
Black Hills expects the purchase price to be approximately equal to 
Cheyenne's book value as of the date of the Acquisition Agreement. 
Black Hills does not expect any new long-term debt to be issued to 
finance Black Hills' cash payment to Xcel Energy, although Black Hills, 
indirectly, will be assuming approximately $25 million of Cheyenne's 
Existing Long-Term Debt.\8\
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    \8\ Black Hills states that the Acquisition Agreement has been 
approved by the Boards of Directors of Black Hills and Xcel Energy 
and no shareholder approval is required. Black Hills also states 
that it will use the purchase method of accounting for the 
Acquisition, in accordance with Statement of Financial Accounting 
Standards (``SFAS'') No. 141 (``Business Combinations'') (i.e., the 
total cost of acquiring Cheyenne will be assigned to the tangible 
and identifiable intangible assets acquired and liabilities assumed 
in the Acquisition based on their fair values on the date of 
Acquisition). Black Hills states that it intends to ``push down'' 
the purchase accounting and establish a new basis of accounting for 
the stand-alone financial statements of Cheyenne.
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    Black Hills states that Cheyenne will be operated as a subsidiary. 
Furthermore, it has not yet determined Cheyenne's leadership and the 
exact composition of the Cheyenne Board of Directors, but it expects 
the Cheyenne official in charge of day-to-day operations at Cheyenne 
will be a Wyoming resident, as will certain

[[Page 68997]]

members of Cheyenne's Board of Directors. Cheyenne's corporate 
headquarters will remain in Cheyenne and Cheyenne will retain local 
Wyoming facilities for customer service, maintenance and fieldwork 
operations.
    Black Hills' current (and, at this time, its only) Utility 
Subsidiary, Black Hills Power, a South Dakota corporation, has its 
principal office in Rapid City, South Dakota, and is engaged in the 
generation, transmission, distribution and sale of electricity to 
approximately 60,000 retail customers in eleven counties throughout a 
9,300 square mile service territory comprising portions of western 
South Dakota, eastern Wyoming and southern Montana.\9\ Black Hills 
Power also sells bundled capacity and energy service to the municipal 
electric system of the City of Gillette, Wyoming, and wholesale 
capacity and energy to other wholesale customers under a market-based 
rate wholesale power sales tariff on file with FERC. It owns generating 
facilities in its South Dakota service area and in Wyoming's Powder 
River Basin, just west of Black Hills Power's service territory. In 
addition, Black Hills Power owns and operates a small transmission 
system of 230 kV and smaller transmission facilities located in 
southwest South Dakota and northeast Wyoming, with a 69 kV distribution 
extension into southeast Montana.\10\ Black Hills Power's transmission 
system totals 2,195 miles of transmission facilities.\11\ It provides 
transmission service over its system under a joint open access 
transmission tariff on file with FERC (``Black Hills Power Joint 
Tariff'').\12\
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    \9\ Black Hills Power's distribution facilities in Montana are 
limited and Black Hills Power served only 34 retail customers in 
Montana in 2003.
    \10\ Black Hills Power also shares an ownership interest with 
Basin Electric in a new 200-MW capacity AC/DC/AC converter tie 
facility located at Rapid City, South Dakota (``Rapid City Tie'') 
that interconnects the Western and Eastern electric grids. Due to 
its system's isolated location, Black Hills Power provides 
transmission service to only a small number of third-party 
customers.
    \11\ The Black Hills Power transmission system is integrated 
with the regional transmission system, with interconnections with 
the Western Area Power Administration (``WAPA'') and PacifiCorp 
transmission systems, and Black Hills Power provides transmission 
service to itself and third-party transmission customers. Black 
Hills Power's transmission system is located within WAPA's Rocky 
Mountain Region (``RMR'') transmission control area. Black Hills 
Power operates its transmission system as a subcontrol area within 
the WAPA RMR control area. Black Hills Power's system is directly 
interconnected with the WAPA system at Stegall West substation, in 
Nebraska, and can also reach WAPA's system through a short 
transmission path over PacifiCorp's transmission system to 
PacifiCorp's Dave Johnston/Casper substation, which is directly 
interconnected with the WAPA system.
    \12\ The Black Hills Power Joint Tariff governs transmission on 
the combined transmission systems of Black Hills Power and 
neighboring transmission systems of Basin Electric Power Cooperative 
and Powder River Energy Corporation. Transmission service over the 
Rapid City Tie is available under the Black Hills Power Joint 
Tariff.
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    Black Hills states that Cheyenne is a small combination retail 
electric and gas operating utility, serving 37,806 electric retail 
customers and 30,709 gas retail customers, in and around the City of 
Cheyenne in southeast Wyoming, as of December 31, 2003. Cheyenne makes 
no wholesale sales of electricity.
    Cheyenne's authorized capitalization consists of 100 shares of 
common stock, par value $0.01 per share, and 1,000,000 shares of 
preferred stock, par value $100 per share. There are 100 shares of 
Cheyenne common stock issued and outstanding, as of December 31, 2003. 
Cheyenne's other outstanding securities consists of $25 million in 
long-term debt, as of December 31, 2003. Cheyenne has no subsidiaries.
    Its property, plant and equipment was valued at approximately 
$82,642,100 ($49,544,478 (net electric utility property, plant and 
equipment), $29,357,486 (net gas utility property, plant and 
equipment), and $3,740,136 (net other corporate assets)), as of 
December 31, 2003. Cheyenne had electric-utility revenues of 
$72,107,894 and gas-utility revenues of $24,926,180, for the year ended 
December 31, 2003. Black Hills states that Cheyenne averaged over $4 
million per year in net operating income over the last ten years.
    Black Hills states that all generating facilities in the Black 
Hills System owned by utilities will be owned or operated, maintained 
and dispatched by Black Hills Power. Some generating resources owned by 
Black Hills Energy also may be scheduled or operated, maintained and 
dispatched by Black Hills Power as part of a coordinated operating 
function for the Black Hills System. Cheyenne does not currently own 
any generating facilities and, as a result, historically, has obtained 
its full electric requirements for its retail loads from off-system 
suppliers. Since 2001, the full requirements service has been provided 
by its Xcel Energy affiliate PSCo. Black Hills supplies power to PSCo; 
consequently, it may, from time to time, indirectly be supplying a 
portion of Cheyenne's requirements.\13\
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    \13\ Specifically, in 2001, Black Hills Wyoming, Inc. (``Black 
Hills Wyoming''), a wholly owned indirect Nonutility Subsidiary that 
owns and operates electric generating facilities in Wyoming, entered 
into two long-term power sales agreements with Cheyenne to supply up 
to 100 MW of electric capacity, associated energy and some ancillary 
services on a unit-contingent basis (``PPAs''). One PPA expires in 
2011, the other expires in 2013. Cheyenne later assigned the PPAs to 
PSCo through 2003 and again from 2004 through 2007, periods when 
PSCo was, or will be, Cheyenne's full requirements supplier. After 
2007, the PPAs automatically will revert back from PSCo to Cheyenne. 
Under the PPAs through 2007, PSCo may from time to time dispatch 
Black Hills Wyoming's generation to serve Cheyenne's load. Black 
Hills Wyoming (formerly known as Black Hills Generation, Inc.) is an 
exempt wholesale generator, as defined in section 32 of the Act. See 
also Black Hills Generation, Inc., 95 FERC ] 62,025 (2001).
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    Black Hills states that Cheyenne is not directly interconnected 
with any of the Xcel Energy operating companies, is not considered part 
of the primary Xcel Energy electric system and is not a party to the 
Xcel Energy system's joint operating agreement.\14\ Cheyenne, along 
with the other Xcel Energy operating companies, offers transmission 
service on a joint basis under Xcel Energy's Open-Access Transmission 
Tariff (``Xcel Energy OATT'').
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    \14\ Black Hills states that Cheyenne is a separate system that 
Xcel Energy was permitted to retain under the Act. Xcel Energy 
operates an electric system, coordinating certain operations under a 
joint operating agreement.
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    Cheyenne owns only limited transmission facilities. They are two 
115 kV transmission line segments that total 25.5 miles in length (and 
are situated wholly within, and operated by, the WAPA Rocky Mountain 
Region control area), and certain limited transmission facilities in 
two WAPA transmission substations and a switching station. Cheyenne 
uses them to interconnect its distribution system with the WAPA 
transmission system.\15\ Although Cheyenne's transmission facilities 
lines operate at transmission voltage (115 kV) and enable Cheyenne's 
interconnection with the WAPA system, effectively, they serve only to 
extend Cheyenne's distribution system.\16\ Cheyenne does not have any 
rate schedules or tariffs on file with FERC. Black Hills states that 
Cheyenne is a ``public utility,'' as defined in section 201(e) of the 
Federal Power Act, solely due to its ownership of this limited set of 
transmission facilities.
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    \15\ Cheyenne has a renewable, firm network integration 
transmission service agreement with WAPA, with three WAPA-defined 
interconnection points where Cheyenne can accept defined amounts of 
power delivered over the WAPA system.
    \16\ Black Hills states that, while transmission over the 
Cheyenne transmission facilities is offered under Xcel Energy's 
OATT, Xcel Energy has never received any request for transmission 
service over the Cheyenne transmission facilities.
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    Cheyenne also provides natural gas distribution service to over 
30,000 retail customers in a 1,200 square mile service area of 
southeastern Wyoming, in and adjacent to Cheyenne, which substantially 
overlaps its electric service area. In 2003, 26% of Cheyenne's 
operating revenues and 36% of operating income came from its gas 
operations.

[[Page 68998]]

The Related Financing and Other Authorizations

    Black Hills proposes that the same general financing parameters 
that it has proposed in its Financing Application for it and its other 
Subsidiaries be applicable to Cheyenne's External Financings.\17\ These 
parameters are as follows.
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    \17\ See also, Financing Application, supra note 6.
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    Black Hills proposes that the effective cost of capital on any of 
Cheyenne's preferred securities, short-term debt and long-term debt 
will not exceed competitive market rates available at the time of the 
issuance of securities, having the same or reasonably similar terms and 
conditions issued by companies of reasonably comparable credit quality; 
provided that in no event will the effective cost of capital exceed, 
(1) on any series of Subsidiary Preferred Securities or Subsidiary 
Long-Term Debt, 500 basis points over a U.S. Treasury security having a 
remaining term equal to the term of the series; and (2) on Subsidiary 
Short-Term Debt, 300 basis points over the London Interbank Offered 
Rate (``LIBOR'') for maturities of less than one year.
    Black Hills also states that the maturity of any long-term 
indebtedness will not exceed 50 years and that all preferred securities 
will be redeemed no later than 50 years after their issuance.
    In addition, with respect to issuance expenses, Black Hills states 
that the underwriting fees, commissions or other similar remuneration 
paid in connection with the non-competitive issue, sale or distribution 
of a security that is the subject of this Application (not including 
any original issue discount) will not exceed 5% of the principal or 
total amount of the security being issued.
    With respect to the applicable common equity ratio and any 
investment grade ratings by the rating agencies, Black Hills states 
that the consolidated common equity of Black Hills was 47% of total 
consolidated capitalization (common equity, preferred stock and long-
term and short-term debt, including current maturities on long-term 
debt), as of June 30, 2004. Black Hills commits that it and its Utility 
Subsidiaries will each maintain a common equity ratio (as reflected in 
the most recent 10-K or 10-Q (filed with the Commission as required by 
the Securities Exchange Act of 1934, as amended (``34 Act''), and as 
adjusted to reflect subsequent events that affect capitalization) of at 
least 30% of capitalization. Black Hills also represents that, apart 
from securities issued for the purpose of funding money pool 
operations, no guarantees or other securities, other than common stock, 
may be issued in reliance upon the authorization to be granted by the 
Commission in this matter, unless (i) the security to be issued, if 
rated, is rated investment grade; (ii) all outstanding securities of 
the issuer, that are rated, are rated investment grade; and (iii) all 
outstanding securities of Black Hills (the holding company in the Black 
Hills System), that will be registered, that are rated, are rated 
investment grade (``Investment Grade Condition''). For purposes of this 
Investment Grade Condition, 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 
34 Act. The Investment Grade Condition ratings test will not apply to 
any issuance of common stock. Black Hills also requests that the 
Commission reserve jurisdiction over the issuance of any securities 
that are rated below investment grade. Black Hills further requests 
that the Commission reserve jurisdiction over the issuance of any 
guarantee or other securities at any time that the conditions set forth 
in clauses (i) through (iii) above are not satisfied.
    Black Hills also states that proceeds from the sale of securities 
in any Cheyenne external financing transactions will be used for 
general corporate purposes.
    Black Hills requests that Cheyenne be authorized to issue and sell 
securities, comprised of: (a) Subsidiary Common Stock, (b) Subsidiary 
Preferred Securities,\18\ (c) Subsidiary Short-Term Debt and (d) 
Subsidiary Long-Term Debt (and included in the limit of up to an 
additional $1 billion in securities outstanding at any one time, Black 
Hills' Aggregate Additional Financing Limit (as also described in the 
Financing Application). Black Hills also requests that Cheyenne be 
authorized (like the other Subsidiaries) to issue Guarantees (subject 
to the same limitations as the other Subsidiaries described in the 
Financing Application (including the limit of up to an aggregate amount 
of $400 million, Black Hills' Additional Guarantee Limit).
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    \18\ ``Subsidiary Preferred Securities'' is defined to include 
preferred stock or other types of preferred securities of Cheyenne 
(including securities such as trust-preferred securities, monthly 
income preferred securities and equity-linked securities).
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    In addition, Black Hills requests authorization for Cheyenne (like 
the other Subsidiaries) to enter into Interest Rate Hedging 
Transactions of outstanding indebtedness (collectively, ``Interest Rate 
Hedges'') \19\ and for anticipated debt offerings (collectively, 
``Anticipatory Hedges''),\20\ subject to certain limitations and 
restrictions, in order to reduce or manage its interest rate costs. 
Interest Rate Hedging Transactions may be executed on-exchange (``On-
Exchange Trades'') through brokers by the opening of futures and/or 
options positions traded on the Chicago Board of Trade or other futures 
exchange, the opening of over-the-counter positions with one or more 
Approved Counterparties (``Off-Exchange Trades''), or a combination of 
On-Exchange Trades and Off-Exchange Trades. Black Hills states that 
Cheyenne will not engage in speculative transactions. Black Hills 
states that it and Cheyenne will comply with SFAS No. 133 (``Accounting 
for Derivatives Instruments and Hedging Activities''), as adopted and 
implemented by the Financial Accounting Standards Board (``FASB''). 
Interest Rate Hedges and Anticipatory Hedges will qualify for hedge 
accounting treatment under the FASB standards in effect and as

[[Page 68999]]

determined at the date the Interest Rate Hedges or Anticipatory Hedges 
are entered into.
    Black Hills also requests authorization for Cheyenne to acquire, 
directly or indirectly, the common stock or other equity securities of 
one or more entities formed exclusively for the purpose of facilitating 
the issuance of long-term debt and/or preferred securities and for the 
loan or other transfer of the proceeds of those issuances to Cheyenne 
(``Financing Subsidiaries''). Black Hills also requests that Cheyenne 
be permitted to enter into one or more Guarantees for its Financing 
Subsidiary, subject to the Additional Guarantee Limit. Black Hills also 
requests authority for Cheyenne to enter into expense agreements 
(``Expense Agreements'') with any Financing Subsidiary, under which 
Cheyenne would agree to pay all expenses of the Financing Subsidiary. 
Black Hills states that no Financing Subsidiary will acquire or dispose 
of, directly or indirectly, any interest in any ``utility asset,'' as 
that term is defined under the Act.
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    \19\ Interest Rate Hedges will make use of financial instruments 
commonly used in today's capital markets, such as exchange-traded 
interest rate futures contracts and over-the-counter interest rate 
swaps, caps, collars, floors, swaptions, and structured notes (i.e., 
a debt instrument in which the principal and/or interest payments 
are 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 U.S. governmental (e.g., Fannie Mae) 
obligations, or LIBOR-based swap instruments. In addition, Interest 
Rate Hedges (other than exchange-traded interest rate futures or 
options contracts) would only be entered into with counterparties 
whose senior debt ratings, or the senior debt ratings of any credit 
support providers who have guaranteed the obligations of such 
counterparties, as published by Standard & Poor's, are equal to or 
greater than BBB, or an equivalent rating from Moody's or Fitch, 
Inc. (``Approved Counterparties''). Black Hills also states that 
fees, commissions and other amounts payable to an Approved 
Counterparty or exchange or other party (excluding, however, the 
swap or option payments) related to an Interest Rate Hedge will not 
exceed those generally obtainable in competitive markets for parties 
of comparable credit quality.
    \20\ Anticipatory Hedges (other than exchange-traded interest 
rate futures or options contracts) would only be entered into with 
Approved Counterparties and would be used to fix the interest rate 
and/or limit the interest rate risk associated with any new 
issuance. Anticipatory Hedges may be implemented through: (i) A 
forward sale of exchange-traded U.S. Treasury futures contracts, 
U.S. Treasury securities and/or a forward swap (each a ``Forward 
Sale''), (ii) the purchase of put options on U.S. Treasury 
securities (``Put Options Purchase''), (iii) a Put Options Purchase 
in combination with the sale of call options on U.S. Treasury 
securities (``Zero Cost Collar''), (iv) transactions involving the 
purchase or sale, including short sales, of U.S. Treasury 
securities, 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, appropriate structured 
notes, caps and collars.
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    Black Hills also requests authorization for Cheyenne to issue to 
any Financing Subsidiary, from time to time, in one or more series, 
unsecured debentures, unsecured promissory notes, or other unsecured 
debt instruments (``Notes''). Black Hills also asks that a Financing 
Subsidiary be permitted to apply the proceeds of any external financing 
by it, plus the amount of any equity contribution made to it, from time 
to time, to purchase the Notes.\21\
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    \21\ The terms (e.g., interest rate, maturity, amortization, 
prepayment and default provisions, etc.) of Notes would be designed 
to parallel the terms of the securities issued by the Financing 
Subsidiary to which the Notes relate.
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    Black Hills also requests that Cheyenne be permitted to participate 
in any Utility Money Pool established by Black Hills in accordance with 
authorizations resulting from the Financing Application, on the same 
basis as Black Hills Power. Black Hills further requests that Cheyenne 
be permitted (like the other Subsidiaries), to undertake internal 
reorganizations of subsidiaries and businesses, as described in the 
Financing Application.
    In the Financing Application, Black Hills requests authority to 
organize Black Hills Services Company, Inc., a services company for the 
Black Hills System in connection with Black Hills' anticipated holding 
company registration and to engage in various affiliate transactions 
for the provision of goods, services and construction.\22\ Black Hills 
requests that Cheyenne, like Black Hills Power, be permitted to provide 
to other associate companies, services that are incidental to its 
utility businesses, including, but not limited to, infrastructure 
services maintenance, storm outage emergency repairs, supply planning 
services, switchyard activities and services of personnel with 
specialized expertise related to the operation of the utility, to the 
extent any of these services might exceed those allowable under 
applicable rules, as well as provide certain other services and engage 
in certain affiliate transactions to the same extent that Black Hills 
Power may be permitted to act by the Commission in connection with the 
Financing Application.
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    \22\ See supra note 6.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
 [FR Doc. E4-3336 Filed 11-24-04; 8:45 am]
BILLING CODE 8010-01-P