[Federal Register Volume 70, Number 85 (Wednesday, May 4, 2005)]
[Notices]
[Pages 23264-23271]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-2148]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27962]


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

April 27, 2005.
    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 May 23, 2005, 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 May 23, 2005, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

E.ON AG, et al. (70-10282)

    E.ON AG (``E.ON''), a registered holding company under the Act, 
located at E.ON-Platz 1, 40479 D[uuml]sseldorf, Germany, and certain of 
its direct and indirect utility and nonutility subsidiary companies 
listed in the Application, including E.ON U.S. Holding GmbH (``E.ON 
U.S. Holding''), a registered holding company and a direct subsidiary 
of E.ON, also located at E.ON-Platz 1, 40479 D[uuml]lsseldorf, Germany, 
and the parent company of E.ON U.S. Investments Corp. (``E.ON U.S. 
Investments''), a registered holding company and parent of LG&E Energy 
LLC (``LG&E Energy''), a registered holding company and parent of 
Louisville Gas and Electric Company (``LG&E'') and Kentucky Utilities 
Company (``KU''), all located at 220 West Main Street, Louisville, 
Kentucky 40202 (collectively, ``Applicants''), have filed an 
application, as amended (``Application'') under sections 6(a), 7, 9(a), 
10, 12(b), 12(c), 12(d) and 13(b) of the Act and rules 20, 26, 42, 43, 
45, 46, 52, 53, 87 and 90.
    Applicants seek authority for certain financing transactions of 
E.ON and its associated companies during the period from the effective 
date of the order granting the Application through May 31, 2008 
(``Authorization Period''). The Commission previously provided 
authorizations for E.ON and certain other entities in the E.ON group 
(``E.ON Group'' or ``Group''), on June 14, 2002, to undertake specific 
financing transactions, which authorizations expire on May 31, 2005 
(``2002 Order'').\1\
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    \1\ See E.ON AG, et al., Holding Co. Act Release No. 27539 (June 
14, 2002).
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I. Background

    E.ON is headquartered in D[uuml]sseldorf, Germany, and most of its 
operations are located in Europe.\2\ Applicants state that, in 2003, 
E.ON reorganized its

[[Page 23265]]

structure to reflect its commitment to an integrated business focusing 
on power and gas.\3\
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    \2\ Applicants state that E.On had approximately 478,000 
shareholders worldwide, as of June 30, 2004, and that E.ON's shares, 
all of which are ordinary shares, are listed on all seven German 
stock exchanges. The shares are also actively traded over-the-
counter in London and E.ON's American Depositary Shares (``ADSs''), 
each of which represents one ordinary share, are listed on the New 
York Stock Exchange.
    Applicants state that, unless otherwise noted, amounts expressed 
in United States dollars (``USD'') are unaudited and have been 
converted from Euros, for convenience, at an exchange rate of USD 
1.2179 = EUR 1.00, the Noon Buying Rate of the Federal Reserve Bank 
of New York on June 30, 2004. For the six months ended June 30, 
2004. E.ON reported consolidated revenues of EUR 25.594 billion (USD 
31.171 billion) calculated in accordance with U.S. generally 
accepted accounting procedures (``US GAAP''). As of June 30, 2004, 
E.ON had total consolidated assets of EUR 113.958 billion (USD 
138.789 billion).
    \3\ Applicants state that E.ON's ``on*top'' project was 
comprehensive strategic review, the principle elements of which were 
an analysis of E.ON's competitive position, the redefinition of its 
corporate strategy and the design of a revised organizational 
structure to reflect E.ON's strategic goals. The on*top project, 
among other things, resulted in the transfer of management of LG&E 
Energy and its utility subsidiaries from Powergen Ltd. 
(``Powergen'') to E.ON. By order dated November 22, 2004, the 
Commission authorized Powergen's deregistration under the Act, as 
well as the deregistration of its direct and indirect parent holding 
companies, E.ON UK Holding GmbH and E.ON UK Holding Company Ltd.
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    E.ON states that, as a result of its decision to focus on power and 
gas, in the last few years, its core energy business has been 
reorganized into five new market units, each of which is focused on a 
market in which E.ON believes it has a strong competitive position: (1) 
Central Europe, led by E.ON Energie AG (``E.ON Energie''); (2) Pan-
European Gas, led by E.ON Ruhrgas AG (``E.ON Ruhrgas''); (3) U.K., led 
by E.ON UK plc (``E.ON UK''); (4) Nordic, led by E.ON Nordic AB (``E.ON 
Nordic''); and (5) U.S. Midwest, led by LG&E Energy. E.ON's non-U.S. 
business segments (E.ON Energie in Central Europe; E.ON Ruhrgas leading 
Pan-European Gas; E.ON UK in the U.K.; and E.ON Nordic in Northern 
Europe) are comprised in part of foreign utility companies, as defined 
in section 33 of the Act (``FUCOs'').

A. LG&E Energy and the U.S. Midwest Market Unit

    E.ON U.S. Holding, the direct subsidiary of E.ON and parent of E.ON 
U.S. Investments Corp. (together, ``Intermediate Companies''), which is 
the direct parent of LG&E Energy, the holding company for LG&E and KU, 
E.ON's United States utility subsidiaries (together, ``Utility 
Subsidiaries''). E.ON U.S. Holding, E.ON U.S. Investments and LG&E 
Energy are registered holding companies. LG&E Energy owns LG&E and KU, 
as noted above.\4\ LG&E is an electricity- and natural gas-utility 
based in Louisville, Kentucky \5\ and KU is an electric-utility based 
in Lexington, Kentucky.\6\ Revenues from the U.S. Midwest market unit 
were USD 1.173 million (EUR 963 million) for the same period, 3.8% of 
E.ON's consolidated revenues.
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    \4\ LG&E Energy is also engaged in nonutility businesses, 
through wholly owned subsidiaries LG&E Capital Corp. (``LCC'') and 
LG&E Energy Marketing Inc. (``LEM''). LCC operates one oil-fired and 
nine coal-fired electricity generation units in western Kentucky 
through its wholly owned subsidiary Western Kentucky Energy Corp. 
and affiliates. In addition, through its subsidiaries, LCC operates 
several other independent power projects in the United States. LCC 
also owns interests in three Argentine gas distribution companies 
and stakes in two power plants in the United States through another 
wholly owned subsidiary, LG&E Power Inc. Applicants state that LG&E 
Energy is in the process of disposing of its stakes in the power 
plants held by LG&E Power Inc.
    \5\ LG&E distributes electricity to approximately 384,000 
customers and supplies natural gas to approximately 312,000 
customers in Louisville and 17 surrounding counties.
    \6\ KU serves approximately 482,000 customers in 77 Kentucky 
counties, approximately 30,000 customers in five counties in 
Virginia, as well as 12 municipalities and fewer than 10 customers 
in Tennessee.
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B. Subsidiaries To-Be-Divested

    The ``to-be-divested'' E.ON subsidiaries (``TBD Subsidiaries'') are 
those subsidiaries that E.ON is required to divest under the 2002 
Order. Viterra AG (``Viterra''), E.ON's wholly owned real estate group, 
is engaged in two businesses: residential real estate and real estate 
development. E.ON currently holds a 42.9% interest in Degussa AG 
(``Degussa''), a specialty chemical company. In the 2002 Order, E.ON 
was required to divest Degussa, Viterra and five passive real estate 
investment vehicles managed by Viterra within five years and E.ON 
states that it continues to expect to meet that requirement.\7\
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    \7\ The 2002 Order also required the divestiture of several 
other E.ON subsidiaries within three years. Since the issuance of 
the 2002 Order, E.ON has divested VEBA Oel AG, Viterra Energy 
Services, Inc., Stinnes AG, Schmalbach Lubeca AG and the other 
companies required to-be-divested within three years, with the 
exception of AV Packaging and Hibernia Gamma 
Beteiligungsgesellschaft mbH. E.ON states that it intends to 
complete the divestiture of AV Packaging and Hibernia Gamma 
Beteiligungsgesellschaft mbH by July 1, 2005, the three year 
anniversary of E.ON's registration under the Act. From January 1, 
2002 to June 30, 2004, the aggregate proceeds received by E.ON from 
the divestiture of various businesses in connection with its 
transformation from a diversified company into an energy and utility 
company were approximately EUR 21.8 billion.
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II. Summary of the Request

    Applicants state that E.ON follows a centralized financing policy 
and that, as a general rule, external financings will be undertaken at 
the E.ON level (or through finance subsidiaries under its 
guarantee).\8\ In certain limited circumstances, future external 
financings may also take place at the subsidiary level. Generally, over 
time, E.ON intends to refinance outstanding external subsidiary debt 
that is not consistent with the group financing policy as it comes due 
with intercompany loans.\9\ E.ON also states, however, that the 
financing of joint ventures or partly-owned companies is generally 
concluded externally.
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    \8\ Applicants state that most of the financing transactions of 
E.ON's market unit have been centralized and netted at the parent, 
or at a direct wholly owned finance subsidiary of the parent, to 
reduce the Group's overall debt and interest expense.
    \9\ Applicants state that E.ON's aim is to maximize its 
financing efficiency and minimize structural subordination issues 
that would arise if significant external debt was held at the 
operating subsidiary level.
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    Applicants request the following financing authorizations and 
authorizations for certain related actions, as described further in 
subsequent sections of this notice, beginning with the effective date 
of an order issued in this matter through May 31, 2008 (the 
Authorization Period).
    1. For E.ON, authority to issue and sell equity and certain debt 
securities, directly or indirectly, in new financing transactions, in 
an aggregate amount of up to USD 75 billion at any one time outstanding 
(and which transactions are also subject to the E.ON External Limit, 
the E.ON Short-term Limit and the E.ON Guarantee Limit (all further 
described below)):
    (a) Equity and unsecured long-term debt securities in an aggregate 
amount of up to USD 50 billion at any one time outstanding (exclusive 
of short-term debt and guarantees) (``E.ON External Limit''), 
including, but not limited to,
    (i) Common stock and ADSs, preferred stock, preferred securities, 
equity-linked securities, options, warrants, purchase contracts, units, 
securities with call and put options and securities convertible into 
any of these securities;
    (ii) Unsecured long-term debt, including, among other things, 
subordinated debt and bank borrowings;
    (b) Unsecured short-term debt in an aggregate amount of up to USD 
30 billion at any one time outstanding (``E.ON Short-term Limit''); and
    (c) Guarantees, and other credit support, in an aggregate amount of 
up to USD 40 billion at any one time outstanding (exclusive of 
guarantees exempt under rules 45(b) and 58(a)(1)) (``E.ON Guarantee 
Limit'').
    2. For E.ON (for itself and on behalf of its subsidiaries) and for 
its subsidiaries, authority to engage in currency and interest rate 
transactions for the purpose of hedging (``Hedging Interests'') and 
certain debt and equity transactions for the purpose of engaging in 
anticipatory hedging (``Anticipatory Hedging Transactions''), subject 
to certain limitations.
    3. For E.ON and its subsidiaries, authority to continue utilizing 
certain profit and loss transfer agreements and the consolidated tax 
filing of E.ON and its German subsidiaries in the manner authorized by 
the 2002 Order.

[[Page 23266]]

    4. For E.ON and the E.ON Group (other than the LG&E Group 
(described below)), authority to:
    (a) Finance the TBD Subsidiaries and E.ON's nonutility subsidiaries 
not held within a FUCO group or the LG&E Energy Group (``Retained 
Nonutility Subsidiaries'') through capital contributions, loans, 
guarantees, purchases of equity or debt securities or other methods, 
subject to,
    (i) An aggregate amount of up to USD 1 billion (through July 1, 
2007) (the end of the divestiture period) for TBD Subsidiary 
investments (``TBD Investment Limit'');
    (ii) An aggregate amount of up to USD 15 billion for Retained 
Nonutility Subsidiary investments (``Retained Nonutility Subsidiary 
Investment Limit''); and
    (b) For the Retained Nonutility Subsidiaries, to finance their 
businesses and acquire new businesses (as permitted under the Act, the 
rules or by Commission order) through the issuance of equity, preferred 
stock and debt securities to third parties, subject to the Retained 
Nonutility Subsidiary Investment Limit.
    5. For E.ON through the Intermediate Companies (E.ON U.S. Holding 
and E.ON U.S. Investments) and through the related financing 
subsidiaries, authority to finance the Intermediate Companies and LG&E 
Energy and its subsidiaries (including LG&E and KU) (together, ``LG&E 
Energy Group'') by:
    (a) Issuance and sale of securities to E.ON and associate companies 
(but not companies in the LG&E Energy Group (described below));
    (b) For E.ON North America Inc. (``E.ON NA'') and Fidelia Corp. 
(``Fidelia'') (and any of their subsidiaries), issuance and sale of 
securities to third parties, such as banks, to finance the capital 
needs of the E.ON Group, including the LG&E Energy Group;
    (c) For the Intermediate Companies and their subsidiaries, 
acquisition of securities of other Intermediate Companies and their 
subsidiaries and the LG&E Energy Group;
    (d) For the Intermediate Companies and their subsidiaries, issuance 
of guarantees and other forms of credit support to or for the benefit 
of another Intermediate Company, its subsidiaries and the LG&E Energy 
Group, subject to an aggregate amount of up to USD 2 billion at any one 
time outstanding (exclusive of guarantees exempt under rules 45(b) and 
58(a)(1)); and
    (e) For the LG&E Energy Group, including LG&E and KU, authority,
    (i) For LG&E Energy, to issue and sell short-term debt securities 
in an aggregate amount of up to USD 400 million;
    (ii) For the Utility Subsidiaries, each of LG&E and KU,
    (a) To issue and sell long-term debt securities having a maturity 
of two years or less in an aggregate amount of up to USD 400 million 
and USD 400 million, respectively;
    (b) To issue and sell short-term debt securities in an aggregate 
amount of up to USD 200 million and USD 200 million, respectively;
    (c) To continue to obtain secured intercompany loans from Fidelia 
in an aggregate amount of up to USD 275 million and USD 215 million, 
respectively;
    (d) To guarantee, or provide other credit support, for the 
obligations of their subsidiaries and other companies in which they 
have invested (but not exempt wholesale generators, as defined in 
section 32 of the Act (``EWGs''), exempt telecommunications companies, 
as defined in section 34 of the Act (``ETCs''), or FUCOs), in an amount 
of up to USD 200 million and USD 200 million, respectively;
    (iii) For LG&E Energy and its nonutility subsidiaries, to enter 
into intercompany loans in an aggregate amount of up to USD 1.5 billion 
(excluding amounts exempt under rules 45(b) and 52) at any one time 
outstanding (and LG&E Energy will not borrow from its subsidiaries);
    (iv) For LG&E Energy, to issue guarantees and other credit support 
in an aggregate amount of up to USD 1.5 billion at any one time 
outstanding (excluding amounts exempt under rule 45(b) and separate 
from E.ON's External Limit and E.ON's Guarantee Limit); and
    (v) For the LG&E Energy Group nonutility subsidiaries, to issue 
guarantees and other credit support in an additional aggregate amount 
of up to USD 1.5 billion, at any one time outstanding (exclusive of 
guarantees that may be exempt under rule 45(b) and separate from E.ON's 
External Limit and E.ON's Guarantee Limit).
    6. For Applicants, to continue the existing money pools and 
intercompany financing arrangements.
    7. For Applicants, authority to form financing entities 
(``Financing Entities,'' as defined below) and engage in related 
transactions.
    8. For Applicants, authority for each company in the E.ON Group 
(other than EWGs, FUCOs and ETCs), to acquire, redeem or retire its 
securities (or those of its direct and indirect subsidiaries), either 
outstanding presently or issued and sold in the future, from time to 
time.
    9. For Applicants, to continue authority to change the terms of any 
E.ON Group company's authorized capital stock, issue additional shares, 
or alter of the terms of any existing authorized security.
    10. For Applicants, authority to continue to pay dividends out of 
capital or unearned surplus.
    11. For Applicants, authority to restructure, consolidate or 
otherwise reorganize, E.ON's nonutility holdings, which may include the 
acquisition, directly or indirectly, of securities of one or more 
intermediate subsidiaries (``Development Subsidiaries,'' as defined 
below) organized exclusively for the purpose of acquiring, financing, 
divesting and/or holding the securities of one or more existing or 
future nonutility subsidiaries.\10\
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    \10\ Development Subsidiaries may also engage in development 
activities (``Development Activities'') and administrative 
activities (``Administrative Activities'') relating to the permitted 
businesses of the nonutility subsidiaries.
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    12. For Applicants, authority to continue to invest in EWGs and 
FUCOs up to an aggregate amount of USD 65 billion (``Aggregate EWG/FUCO 
Financing Limitation'').
    13. For Applicants, authority to invest in energy-related companies 
doing business outside the U.S. (``Energy-Related Subsidiaries'') in an 
aggregate amount of up to USD 10 billion (``Energy-Related Subsidiary 
Investment Limit'').

III. Financing Parameters

    Applicants represent that the following general terms will be 
applicable, where appropriate, to the external financing transactions 
requested to be authorized in the Application.

A. Effective Cost of Money

    Applicants state that the effective cost of money on external debt 
securities and preferred stock or other types of preferred securities 
will not exceed the competitive market rates available at the time of 
issuance for securities having the same or reasonably similar terms and 
conditions issued by similar companies of reasonably comparable credit 
quality.

B. Maturity

    Applicants state that the maturity of long-term debt will be 
between one and 50 years after their issuance. Preferred securities and 
equity-linked securities will be redeemed no later than 50 years after 
their issuance, unless converted into common stock. Preferred stock 
issued directly by E.ON may be perpetual in duration. Short-term debt

[[Page 23267]]

will have an original maturity of less than one year.

C. Issuance Expenses

    Applicants state that 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: (i) 
5% of the principal or total amount of the securities being issued; or 
(ii) 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.

D. Common Equity Ratio and Investment Grade Ratings

    E.ON and LG&E Energy, each on a consolidated basis, and LG&E and KU 
will maintain common stock equity as a percentage of total 
capitalization of at least 30%, as reflected in their most recent 
annual or semiannual report, in the case of E.ON, and, with respect to 
LG&E Energy and the Utility Subsidiaries, quarterly financial 
statements prepared in accordance with U.S. GAAP; provided that E.ON in 
any event will be authorized to issue common stock to the extent 
permitted as a consequence of this Application.
    Applicants further represent that, except for 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 granted by the Commission pursuant to the Application 
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 
E.ON that are rated, are rated investment grade. For purposes of this 
provision (``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 
(``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. In addition, Applicants request authorization as follows: (i) 
Notwithstanding that at any time the preferred stock of a Utility 
Subsidiary, if rated, may not be rated investment grade by an NRSRO, 
such Utility Subsidiary may nonetheless participate in the Utility 
Money Pool, borrow funds as secured intercompany loans from Fidelia and 
borrow funds as intercompany loans; and (ii) notwithstanding that at 
any time the securities of a nonutility subsidiary that are rated are 
not rated investment grade, such nonutility subsidiary may nonetheless 
participate in the U.S. Nonutility Money Pool and may borrow funds as 
intercompany loans. Applicants request that the Commission reserve 
jurisdiction over the issuance of any guarantee or other securities in 
reliance upon the authorization granted by the Commission pursuant to 
the Application at any time that the conditions set forth in clauses 
(i) through (iii) above are not satisfied.

E. Use of Proceeds

    Applicants state that the proceeds from the proposed financings 
will be used for general corporate purposes, including: (i) Financing 
investments by and capital expenditures of the E.ON Group; (ii) the 
funding of future investments in companies that are exempt under the 
Act or the rules or permitted by Commission order, including EWGs, 
FUCOs, TBD Subsidiaries, ETCs and Rule 58 Subsidiaries (as defined 
below); (iii) the repayment, redemption, refunding or purchase by any 
E.ON Group company of any of its own securities; (iv) financing or 
refinancing capital requirements of the E.ON Group; and (v) other 
lawful purposes. Applicants represent that no financing proceeds will 
be used to acquire the equity securities of any company unless the 
acquisition has been approved by the Commission or is in accordance 
with an available exemption under the Act or rules, including sections 
32, 33, 34 and rule 58.

IV. The Request

    Applicants request the following authorizations during the 
Authorization Period as described below.

A. E.ON External Financing and Related Transactions

    E.ON requests authorization to increase its capitalization through 
the issuance and sale of securities, including, but not necessarily 
limited to, common stock, preferred stock, preferred securities, 
equity-linked 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-term debt, subordinated debt, 
lease financing, bank borrowings, securities with call or put options, 
and securities convertible into any of these securities, up to an 
aggregate amount of new financing not to exceed USD 50 billion 
outstanding at any one time (exclusive of short-term debt and 
guarantees), the E.ON External Limit, during the Authorization Period; 
provided that securities issued for purposes of refunding or replacing 
other outstanding securities (where E.ON's capitalization is not 
increased as a result) shall not be counted against this 
limitation.\11\ E.ON further proposes that issuances subject to the 
E.ON External Limit (an aggregate limit of USD 50 billion), the E.ON 
Short-term Limit (an aggregate limit of USD 30 billion) and the E.ON 
Guarantee Limit (an aggregate limit of USD 40 billion) would not, in 
the aggregate, exceed USD 75 billion, during the Authorization Period, 
which would be consistent with its current overall financing 
limits.\12\
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    \11\ These financing transactions will be valued at the time of 
issuance.
    \12\ See note 1, above. The Commission's 2002 Order placed an 
overall limit on E.ON's external financing of USD 75 billion. That 
limit applied E.ON's aggregate issuances of equity, long- and short-
term debt securities and guarantees.
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A.1. Common Stock, Preferred Stock, Preferred Securities and Equity-
linked Securities
    E.ON requests authorization to issue and sell common stock, 
options, warrants or other stock purchase rights exercisable for common 
stock.\13\ E.ON also proposes to issue common stock and/or purchase 
shares of its common stock (either currently or under forward 
contracts) in the open market or through negotiated purchases for 
purposes of: (i) Reissuing such shares at a later date pursuant to 
stock-based plans which are maintained for stockholders, employees and 
directors; or (ii) managing its capital structure. E.ON further 
requests authorization to use its common stock and other equity 
instruments to fund employee benefit plans and in connection with 
dividend reinvestment plans currently in existence or that may be 
formed during the Authorization Period.\14\
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    \13\ Public distributions may be pursuant to private negotiation 
with underwriters, dealers or agents, or effected through 
competitive bidding among underwriters. In addition, sales may be 
made through private placements or other non-public offerings to one 
or more persons.
    \14\ E.ON states that it currently maintains a stock-based 
compensation plan that issues stock appreciation rights (``SARs''), 
authorized by the Commission's 2002 Order, and it proposes to issue 
shares of its common stock to satisfy its obligations under its 
stock-based plans, as they may be amended or extended, and similar 
plans or plan funding arrangements adopted in the future without 
additional Commission order.
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    E.ON also requests authorization to issue preferred stock directly 
and/or issue, indirectly, through one or more financing subsidiaries, 
other forms of preferred securities (including, without

[[Page 23268]]

limitation, trust preferred securities or monthly income preferred 
securities), equity-linked securities in the form of stock purchase 
units (which combine a security with a fixed obligation (e.g., 
preferred stock or debt) with a stock purchase contract that is 
exercisable (either mandatorily or at the option of the holder or a 
combination of both) within a relatively short period (e.g., three to 
six years after issuance)). Applicants state that these transactions 
will be subject to the E.ON External Limit.
A.2. Long-term Debt
    E.ON also requests authorization to issue unsecured long-term debt 
that may be issued directly through a public or private placement, or 
indirectly, through one or more financing subsidiaries, in the form of 
notes, convertible notes, medium-term notes or debentures under one or 
more indentures or long-term indebtedness under agreements with banks 
or other institutional lenders.\15\ Applicants state that these 
transactions will be subject to the E.ON External Limit.
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    \15\ The maturity dates, interest rates, redemption and sinking 
fund provisions and conversion features, if any, with respect to the 
long-term debt of a particular series, as well as any associated 
placement, underwriting or selling agent fees, commissions and 
discounts, if any, will be established by negotiation or competitive 
bidding at the time of issuance.
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A.3. Short-term Debt
    E.ON requests authority to issue and sell from time to time, 
directly or indirectly through one or more Financing Entities, 
unsecured short-term debt, including commercial paper and bank 
borrowings, in an aggregate principal amount at any time outstanding 
not to exceed USD 30 billion, the E.ON Short-term Limit; provided that 
securities issued for purposes of refunding or replacing other 
outstanding short-term debt securities (where E.ON's capitalization is 
not changed as a result) shall not be counted against this limitation.
    E.ON requests further authorization to issue and sell, from time to 
time, directly or indirectly through one or more Financing Entities, 
unsecured short-term debt, an aggregate amount at any time outstanding 
of up to the E.ON Short-term Limit, in the form of commercial paper, 
notes issued to banks and other institutional lenders, and other forms 
of unsecured short-term indebtedness. Applicants state that short-term 
borrowings under credit lines will have original maturities of less 
than a year from the date of each borrowing. Applicants state that 
these transactions will be subject to the E.ON External Limit.
A.4. Interest Rate, Currency and Certain Equity Risk Management Devices
    E.ON requests authorization to enter into, perform, purchase and 
sell financial instruments intended to manage the volatility of 
interest rates and currency exchange rates, including but not limited 
to swaps, caps, floors, collars and forward agreements or any other 
similar agreements (``Hedging Instruments''). E.ON would employ Hedging 
Instruments as a means of prudently managing the risk associated with 
any of the outstanding debt issued by it or any of its associate 
companies under the authority requested in the Application or an 
applicable exemption by, for example: (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.
    E.ON also proposes to enter into Hedging Instruments with respect 
to anticipated debt or equity offerings (``Anticipatory Hedges''), 
subject to certain limitations and restrictions. Anticipatory Hedges 
would only be entered into on-exchange or off-exchange with Approved 
Counterparties, and would be used to fix and/or limit the interest rate 
or currency exchange rate risk associated with any proposed new 
issuance.\16\
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    \16\ Applicants state that Anticipatory Hedges may include: (i) 
A forward sale of U.S. or European Economic Area (``EEA'') Treasury 
futures contracts, U.S. or EEA Treasury obligations and/or a forward 
swap (each a ``Forward Sale''): (ii) the purchase of put options on 
U.S. or EEA Treasury obligations (``Put Options Purchase''); (iii) a 
Put Options Purchase in combination with the sale of call options on 
U.S. or EEA Treasury obligations (``Zero Cost Collar''); (iv) 
transactions involving the purchase or sale of U.S. or EEA Treasury 
obligations; or (v) some combination of a Forward Sale, Pub 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.
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    E.ON's subsidiaries also propose to enter into Hedging Instruments 
or Anticipatory Hedges to hedge interest rate or currency exposures, 
subject to the limitations described above.
A.5. Guarantees
    E.ON requests authorization to provide guarantees with respect to 
debt securities or other contractual obligations of any subsidiary, as 
may be appropriate in the ordinary course of the subsidiary's business, 
up to an aggregate principal or nominal amount not to exceed USD 40 
billion at any one time outstanding (the E.ON Guarantee Limit), 
exclusive of any guarantees and other forms of credit support that are 
exempt under rules 45(b) and 52(b); provided, however, that the amount 
of guarantees in respect of obligations of any EWGs and FUCOs or 
companies engaged or formed to engage in proposed energy-related 
businesses, and proposed companies exempt under rule 58 under the Act 
(``Rule 58 Subsidiaries'') shall remain subject to the limitations of 
rules 53(a)(1) and 58(a)(1), as applicable.
    E.ON requests authorization for the E.ON Group (other than the LG&E 
Energy Group) to charge each subsidiary (other than an LG&E Energy 
Group company), a fee for the period of time that a guaranty is 
outstanding, the fee to be based upon market rates, which take into 
account credit risk, where it may be necessary to operate its business 
efficiently under applicable regulations.\17\ E.ON represents that the 
amount of guarantees for obligations of any Rule 58 Subsidiaries shall 
remain subject to the limitations of rule 58(a)(1).
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    \17\ Where regulations are not applicable, or for any guarantee 
of an LG&E Energy Group company, E.ON may charge the subsidiary a 
fee for each guarantee that is not greater than the cost, if any, of 
obtaining the liquidity necessary to perform the guarantee (for 
example, bank line commitment fees or letter of credit fees, plus 
other transactional expenses) for the period of time that it remains 
outstanding.
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A.6. Profit and Loss Transfer Agreements
    Applicants request that the Commission continue to authorize the 
profit and loss transfer agreements of E.ON and its German 
subsidiaries.

B. Subsidiary Financing and Related Transactions

B.1. TBD Subsidiaries and Retained Nonutility Subsidiaries
    The E.ON Group (other than the LG&E Energy Group) request 
authorization to finance the TBD Subsidiaries and the Retained 
Nonutility Subsidiaries through capital contributions, loans, 
guarantees, purchase of equity or debt securities or other methods 
throughout the Authorization Period. The Retained Nonutility 
Subsidiaries also propose to finance their respective businesses and 
the acquisition of new businesses (as permitted under the Act or the 
rules or by Commission order), through the issuance of equity, 
preferred stock and debt securities to third parties.
    Applicants propose that, in connection with the financing of the 
TBD Subsidiaries, they be authorized to make investments in an 
aggregate amount of up to USD 1 billion (the TBD

[[Page 23269]]

Investment Limit), through July 1, 2007 (the end of the divestiture 
period). In addition, Applicants propose that financing of, and 
investments in, the Retained Nonutility Subsidiaries, be authorized in 
an aggregate amount of up to USD 15 billion.
B.2. LG&E Energy Group Companies and the Intermediate Companies
    E.ON owns LG&E Energy through the Intermediate Companies, E.ON U.S. 
Holding and E.ON U.S. Investments, which are registered holding 
companies under the Act. E.ON U.S. Holding also owns Fidelia, a 
Financing Entity, and E.ON U.S. Investments owns E.ON NA and its 
subsidiaries, which also function as Financing Entities.
    To finance the LG&E Energy Group and/or the Intermediate Companies 
and their subsidiaries, Applicants request authorization for the 
Intermediate Companies and their subsidiaries to issue and sell 
securities to E.ON and associate companies, but not companies in the 
LG&E Energy Group.
    In addition, authorization is requested for E.ON NA and Fidelia 
(and any of their subsidiaries) to issue securities to third parties, 
such as banks, to finance the capital needs of the E.ON Group, 
including the LG&E Energy Group. Applicants also request authorization 
for the Intermediate Companies and their subsidiaries to acquire 
securities of other Intermediate Companies and their subsidiaries and 
the LG&E Energy Group companies.
    The Intermediate Companies and their subsidiaries also seek 
authorization to issue guarantees, and other forms of credit support, 
to or for the benefit of another Intermediate Company, its subsidiaries 
and the LG&E Energy Group companies. Applicants state that, in no case 
would an Intermediate Company borrow, or receive any extension of 
credit or indemnity from any LG&E Energy Group company or its 
subsidiaries, except that an Intermediate Company may borrow from its 
direct or indirect Financing Entity that is not part of the LG&E Energy 
Group.
    In addition, authority is requested for the Intermediate Companies, 
E.ON NA and Fidelia, and their respective subsidiaries, to guarantee 
the indebtedness or contractual obligations of, and to otherwise 
provide credit support to, their respective associated subsidiary 
companies up to an aggregate amount of external guarantees not exceed 
USD 2 billion outstanding (exclusive of any guarantees and other forms 
of credit support that are exempt under rules 45(b) and 52(b)); 
provided, however, that the amount of guarantees for obligations of any 
Rule 58 Subsidiaries shall remain subject to the limitations of rule 
58(a)(1). Applicants state that, for reasons of economic efficiency, 
the terms and conditions of any financings between an Intermediate 
Company (or E.ON NA and Fidelia) and its direct or indirect parent, or 
between an Intermediate Company and a FUCO subsidiary or their 
associate company subsidiaries, will be on market terms. Applicants 
state that market rate financing assures that intercompany loans will 
not be used to transfer profits from one related entity to another and 
will also allow the lending entity to recover its true costs of 
liquidity, risks associated with credit quality and interest rate and 
currency variability.
B.2.a. LG&E Energy Short-term Debt
    LG&E Energy requests authorization to obtain funds through the 
issuance of external short-term debt securities in an aggregate amount 
of up to USD 400 million, to meet its funding requirements.
B.2.b. Utility Subsidiary Debt, Intercompany Loans and Guarantees
    LG&E and KU request authorization to issue certain long-term and 
short-term debt securities having maturities of two years or less in an 
aggregate amount of up to USD 400 million at any one time outstanding 
for each of LG&E and KU (to the extent their financing is not exempt 
under rule 52(a), or otherwise), as each may deem appropriate in light 
of its needs and market conditions at the time of issuance, subject to 
the applicable Financing Parameters.
    Applicants also request that LG&E and KU be authorized, up to 
amounts of USD 275 million and USD 215 million, respectively, to obtain 
secured intercompany loans from Fidelia, as currently authorized, 
through the Authorization Period.\18\ In addition, authorization is 
requested for Fidelia to provide intercompany loans to LG&E and KU on a 
secured basis.
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    \18\ 18 LG&E and KU request authorization under section 12(d) of 
the Act and rule 43 to secure these intercompany loans with a 
subordinated lien on certain personal property of the respective 
company, including ``utility assets'' within the meaning of the Act, 
as the Commission previously authorized, through May 31, 2005. See 
E.ON, et al., Holding Co. Act Release No. 27711 (Aug. 15, 2003); see 
also SEC File No. 70-9985.
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    Utility Subsidiaries also seek authorization, up to an amount of 
USD 200 million in the case of LG&E and USD 200 million in the case of 
KU, to guarantee, or otherwise provide credit support for, the 
obligations of their subsidiaries and other companies in which they 
have invested (but not EWGs, ETCs or FUCOs), to the extent not exempt 
under rule 45. Applicants represent that any guarantee of an obligation 
of an EWG, FUCO or ETC will be undertaken only if the investment is 
authorized under sections 32, 33 or 34 of the Act, applicable rules, 
and/or Commission order.
    Applicants request that the Utility Subsidiaries be permitted to 
charge each subsidiary a fee for each guarantee provided on the 
subsidiary's behalf that is not greater than the cost, if any, of the 
liquidity necessary to perform the guarantee. Applicants further state 
that guarantees issued by Utility Subsidiaries will not be secured by 
any utility assets.
B.2.c. Certain Other LG&E Energy Group Subsidiary Transactions
    E.ON, E.ON NA and Fidelia (or a special purpose financing 
subsidiary) request authorization to finance all or a portion of the 
capital needs of the LG&E Energy Group companies directly, or 
indirectly through other E.ON Group companies, including the 
Intermediate Companies, at the lowest practical cost. Companies in the 
LG&E Energy Group propose to borrow funds from other E.ON Group 
companies that may have available surplus funds.
    Applicants state that, except for the secured intercompany loans, 
described above, the borrowings will be unsecured and, in all cases, 
the borrowings will only occur if the interest rate on the loan would 
result in an equal or lower cost of borrowing than the LG&E Energy 
Group company could obtain in a loan from E.ON or in the capital 
markets on its own.\19\ Applicants state that borrowings by LG&E Energy 
Group companies would comply, at a minimum, with the Financing 
Parameters.
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    \19\ Applicants state that, consequently, all borrowings by an 
LG&E Energy Group company from an associate company would be at the 
lowest of: (i) E.ON's effective cost of capital; (ii) the lending 
associate's effective cost of capital (if lower than E.ON's 
effective cost of capital); and (iii) the borrowing LG&E Energy 
Group's effective cost of capital determined by reference to the 
effective cost of a direct borrowing by such company from a 
nonassociate for a comparable term loan that could be entered into 
at such time (Best Rate Method).
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    Applicants request authorization for intercompany loans among LG&E 
Energy and its nonutility subsidiaries in an amount of up to USD 1.5 
billion at any one time outstanding during the Authorization Period. 
Applicants state that this intrasystem financing amount would exclude 
financing exempt under rules 45(b) and 52. They further state that LG&E 
Energy will not borrow funds from its subsidiary companies and that the 
terms and conditions of intercompany loans available to any

[[Page 23270]]

borrowing company will be materially no less favorable than the terms 
and conditions of loans available to the borrowing company from third-
party lenders. In addition, all intercompany loans will be payable on 
demand or have a maturity of less than 50 years from the date of 
issuance.
    Applicants also request authorization for LG&E Energy and the LG&E 
Energy Group nonutility subsidiaries to enter into guarantees, extend 
credit, obtain letters of credit, enter into guaranty-type expense 
agreements and otherwise to provide credit support for the obligations, 
from time to time, of the LG&E Energy Group companies during the 
Authorization Period, specifically:
    (a) For LG&E Energy, in an aggregate amount of up to USD 1.5 
billion outstanding at any one time (exclusive of guarantees that may 
be exempt under rule 45(b)); and
    (b) For the LG&E Energy Group nonutility subsidiaries, in an 
additional aggregate amount of up to USD 1.5 billion outstanding at any 
one time (exclusive of guarantees that may be exempt under rule 45(b)).
    Applicants state that these requests are separate from E.ON's 
External Limit and E.ON's Guarantee Limit.

C. Continuation of Money Pools

    Applicants request authorization to continue to operate three money 
pools.\20\ The three money pools are the Utility Money Pool,\21\ the 
U.S. Nonutility Money Pool\22\ and the E.ON Nonutility Money Pool.\23\
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    \20\ See 2002 Order (as modified for the E.ON Nonutility Money 
Pool in E.ON, et al., Holding Co. Act Release No. 27788 (Dec. 29, 
2003)).
    \21\ The Utility Money Pool includes only Utility Subsidiaries, 
as borrowers from and lenders to the pool. E.ON, E.ON NA, Fidelia 
and LG&E Energy may lend to, but not borrow from, the Utility Money 
Pool. LG&E Energy Services Inc. (``LG&E Services'') will continue to 
act as the administrator of the Utility Money Pool.
    \22\ The U.S. Nonutility Money Pool includes the nonutility 
subsidiaries as borrowers from and lenders to the pool. E.ON, E.ON 
NA, Fidelia and LG&E Energy may lend to, but not borrow from, the 
U.S. Nonutility Money Pool. LG&E Services will continue to act as 
the administrator of the U.S. Nonutility Money Pool.
    \23\ The E.ON Nonutility Money Pool may include all E.ON Group 
companies as borrowers from and lenders to the pool, except E.ON, 
the Intermediate Companies, and the LG&E Energy Group. E.ON and the 
Intermediate Companies may lend to, but not borrow from, the E.ON 
Nonutility Money Pool.
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    Applicants state that Utility Subsidiaries' borrowings from the 
Utility Money Pool would be counted against their overall short-term 
borrowing limits stated above. The U.S. Nonutility Money Pool will be 
operated on substantially the same terms and conditions as the Utility 
Money Pool. The E.ON Nonutility Money Pool is administered by E.ON 
Finance GmbH (formerly Hibernia Industriewerte GmbH).\24\
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    \24\ E.ON, et al., Holding Co. Act Release No. 27788 (Dec. 29, 
2003); see also note 20 above.
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D. Acquisition, Redemption or Retirement of Securities

    Applicants request authorization for each company in the E.ON 
Group, other than EWGs, FUCOs and ETCs, to acquire, redeem or retire 
its securities or those of its direct and indirect subsidiaries, which 
securities may be either outstanding presently or issued and sold in 
the future from time to time during the Authorization Period. 
Applicants state that these transactions will be undertaken at either 
the competitive market prices for the securities or at the stated price 
for those securities, as applicable, and that Utility Subsidiaries will 
acquire, retire or redeem securities only in accordance with rule 42.

E. Financing Entities

    Applicants also request authorization for the E.ON Group companies, 
except the EWGs, FUCOs and ETCs, to organize new or use existing 
corporations, trusts, partnerships or other entities (``Financing 
Entities''), to finance the business of the respective parent company 
or its subsidiaries. Applicants state that a Financing Entity would be 
used to finance the authorized or permitted businesses of its direct or 
indirect parent company (``Founding Parent''), including the businesses 
of the LG&E Energy Group, but in no event would a Financing Entity 
engage in prohibited upstream loans involving companies in the LG&E 
Energy Group.\25\
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    \25\ Applicants state that Financing Entities would be intended 
to issue any securities that the Founding Parent would be authorized 
to issue, as authorized by the Commission by order, rule or under 
the Act.
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    In addition, Applicants request authorization to issue securities 
to a Financing Entity to evidence the transfer of financing proceeds by 
a Financing Entity to a company receiving financing. Applicants also 
request authorization to enter into support or expense agreements on 
market price terms with Financing Entities to pay the expenses of any 
of these entities.

F. Changes in Capital Stock of Subsidiaries

    Applicants request authority to change the terms of any 
subsidiary's authorized capital stock capitalization or other equity 
interests by an amount deemed appropriate by E.ON or any intermediate 
parent company; provided that the consents of all other shareholders, 
if required by applicable corporate law or the subsidiary's governing 
documents, have been obtained for the proposed change.

G. Payment of Dividends Out of Capital or Unearned Surplus

    Applicants request authorization that each of the TBD Subsidiaries, 
the Retained Nonutility Subsidiaries, the Intermediate Companies, and 
the LG&E Energy Group companies (excluding Utility Subsidiaries), be 
permitted to continue to pay dividends with respect to its capital 
stock, from time to time, out of capital and unearned surplus (to the 
extent permitted under the corporate law and state or national law 
applicable in the jurisdiction where each company is organized and the 
terms of any credit agreements and indentures that restrict the amount 
and timing of distributions to shareholders), through the Authorization 
Period. Applicants state that, in addition, none of the companies will 
declare or pay any dividend out of capital or unearned surplus unless 
it: (i) Has received excess cash as a result of the sale of some or all 
of its assets; (ii) has engaged in a restructuring or reorganization; 
and/or (iii) is returning capital to an associate company.

H. Nonutility Reorganizations

    Applicants also request continued authority to restructure, 
consolidate or otherwise reorganize E.ON's nonutility holdings, 
including those in the LG&E Energy Group, from time to time, as may be 
necessary or appropriate in furtherance of the E.ON Group's authorized 
nonutility activities, and to maintain and support investment in the 
E.ON TBD Subsidiaries pending divestiture.
    E.ON requests authorization to acquire, directly or indirectly, the 
securities of one or more intermediate subsidiaries (``Development 
Subsidiaries'') organized exclusively for the purpose of acquiring, 
financing, divesting and/or holding the securities of one or more 
existing or future nonutility subsidiaries. Applicants request 
authorization for the Development Subsidiaries to provide management, 
administrative, project development and operating services to direct or 
indirect subsidiaries at cost, in accordance with section 13 of the Act 
and the rules, including rules 90 and 91, to the extent transactions 
are not exempt, or authorized or permitted by Commission rule or order.

[[Page 23271]]

I. EWG and FUCO Subsidiaries and Reinvestment of Proceeds From the 
Divestiture of Nonutility Businesses

    E.ON requests the Commission authorize continued investment in an 
aggregate amount of up to USD 65 billion in EWGs and FUCOs, the 
Aggregate EWG/FUCO Financing Limitation.\26\ Applicants state that they 
also seek authority to issue and sell up to USD 35 billion of 
securities to finance EWG and FUCO investments pending the receipt of 
divestiture proceeds (``Bridge Loans''), for the flexibility of E.ON, 
so that attractive investment opportunities may be pursued, because the 
timing of the receipt of divestiture proceeds will not always coincide 
with the opportunity to invest in additional EWG or FUCO assets.\27\ 
Applicants state that any issuance of Bridge Loans would count against 
the E.ON External Limit or the E.ON Short-term Limit, depending on the 
maturity of the Bridge Loans.
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    \26\ See the 2002 Order, note 1 above. Applicants propose that 
the investments consist of: (i) an initial combined E.ON, Powergen 
and LG&E Energy aggregate investment in EWGs and FUCOs of USD 4.886 
billion, as of December 31, 2001; (ii) the proposed reinvestment of 
the sale proceeds of the TBD Subsidiary divestitures in an amount up 
to USD 35 billion; and (iii) an additional amount of EWG/FUCO 
proposed investment of up to USD 25 billion.
    \27\ Applicants state that, upon the receipt of the divestiture 
proceeds, the Bridge Loans or debt securities with an equivalent 
principal amount would be retired, redeemed or otherwise paid down.
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J. Energy-Related Subsidiaries

    E.ON also seeks authorization to acquire and to invest up to USD 10 
billion, the Energy-Related Subsidiary Investment Limit, of the 
divestiture proceeds during the Authorization Period in certain 
permitted nonutility businesses located primarily outside of the U.S.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-2148 Filed 5-3-05; 8:45 am]
BILLING CODE 8010-01-P