-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ax7RmbGtnOXpOvZjKWH3L5ayOGpUSqlmfbPeQb9oxMVcKTGrJ3Ybt40dGxrOxw/b olEBJJDifJXzG+Ui0xWJKw== 0000044545-98-000009.txt : 19980415 0000044545-98-000009.hdr.sgml : 19980415 ACCESSION NUMBER: 0000044545-98-000009 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980414 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GULF POWER CO CENTRAL INDEX KEY: 0000044545 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 590276810 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09171 FILM NUMBER: 98593329 BUSINESS ADDRESS: STREET 1: 500 BAYFRONT PKWY CITY: PENSACOLA STATE: FL ZIP: 32501 BUSINESS PHONE: 9044446111 MAIL ADDRESS: STREET 1: 500 BAYFRONT PARKWAY CITY: PENSACOLA STATE: FL ZIP: 32501 U-1/A 1 AMENDMENT NO. 1 File No. 70-9171 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 1 to FORM U-1 APPLICATION OR DECLARATION under The Public Utility Holding Company Act of 1935 GULF POWER COMPANY MISSISSIPPI POWER COMPANY 500 Bayfront Parkway 2992 West Beach Pensacola, Florida 32501 Gulfport, Mississippi 39501 (Name of company or companies filing this statement and addresses of principal executive offices) THE SOUTHERN COMPANY (Name of top registered holding company parent of each applicant or declarant) Warren E. Tate, Secretary and Treasurer Michael W. Southern, Vice President, Gulf Power Company Secretary, Treasurer and 500 Bayfront Parkway Chief Financial Officer Pensacola, Florida 32501 Mississippi Power Company 2992 West Beach Gulfport, Mississippi 39501 (Names and addresses of agents for service) The Commission is requested to mail signed copies of all orders, notices and communications to: W. L. Westbrook John D. McLanahan, Esq. Financial Vice President Troutman Sanders LLP The Southern Company 600 Peachtree Street, N.E., Suite 5200 270 Peachtree Street, N.W. Atlanta, Georgia 30308 Atlanta, Georgia 30303 Item 3. Applicable Statutory Provisions. Rule 54 Analysis. The proposed transaction is also subject to Rule 54, which provides that, in determining whether to approve an application which does not relate to any "exempt wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), the Commission shall not consider the effect of the capitalization or earnings of any such EWG or FUCO which is a subsidiary of a registered holding company if the requirements of Rule 53(a), (b) and (c) are satisfied. Southern currently meets all of the conditions of Rule 53(a), except for clause (1). At March 31, 1998, Southern's "aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.947 billion, or about 77.70% of Southern's "consolidated retained earnings," also as defined in Rule 53(a)(1), for the four quarters ended December 31, 1997 ($3,793 million). With respect to Rule 53(a)(1), however, the Commission has determined that Southern's financing of investments in EWGs and FUCOs in an amount greater than the amount that would otherwise be allowed by Rule 53(a)(1) would not have either of the adverse effects set forth in Rule 53(c). See The Southern Company, Holding Company Act Release No. 16501, dated April 1, 1996 (the "Rule 53(c) Order"); and Holding Company Act Release No. 26646, dated January 15, 1997 (order denying request for reconsideration and motion to stay). In addition, Southern has complied and will continue to comply with the record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3) on the use of Operating Company personnel to render services to EWGs and FUCOs, and the requirements of Rule 53(a)(4) concerning the submission of copies of certain filings under the Act to retail rate regulatory commissions. Further, none of the circumstances described in Rule 53(b) has occurred. Moreover, even if the effect of the capitalization and earnings of EWGs and FUCOs in which Southern has an ownership interest upon the Southern holding company system were considered, there is no basis for the Commission to withhold or deny approval for the proposal made in this Application-Declaration. The action requested in the instant filing (viz. issuance of Senior Notes by Gulf and Mississippi) would not, by itself, or even considered in conjunction with the effect of the capitalization and earnings of Southern's EWGs and FUCOs, have a material adverse effect on the financial integrity of the Southern system, or an adverse impact on Southern's public-utility subsidiaries, their customers, or the ability of State commissions to protect such public-utility customers. The Rule 53(c) Order was predicated, in part, upon an assessment of Southern's overall financial condition which took into account, among other factors, Southern's consolidated capitalization ratio and the recent growth trend in Southern's retained earnings. As of December 31, 1995, the most recent fiscal year preceding the Rule 53(c) Order, Southern's consolidated capitalization consisted of 49.3% equity (including mandatorily redeemable preferred securities) and 50.7% debt (including $1.68 billion of long-term, non-recourse debt and short-term debt related to EWGs and FUCOs). As of year-end 1997, that ratio was 47.5% equity and 52.5% debt (including $4.593 billion of long-term, non-recourse debt and short-term debt related to EWGs and FUCOs). On a pro forma basis, taking into consideration, among other things, the transactions contemplated hereby such ratios are 47.5% and 52.5%, respectively, for equity and debt. The common equity component of Southern's pro forma consolidated capitalization represents 35.1% of total capitalization at December 31, 1997. Thus, since the date of the Rule 53(c) Order, there has been no material change in Southern's consolidated capitalization ratio, which remains within acceptable ranges and limits of rating agencies as evident by the continued "A" corporate credit rating of Southern. Specifically, in January 1997 Standard & Poor's assigned Southern its corporate credit rating of "A" which was consistent with the implied corporate rating previously held by Southern. This implied rating had been in effect since May 1995. Therefore, since the April 1996 issue of the Rule 53(c) Order, the Southern consolidated credit rating has remained at "A" thereby demonstrating Southern's continued strong financial integrity. In addition, the underlying ratings of the affiliated operating companies, which have a strong influence on the Southern corporate rating, are all "A+". As a point of reference, the pro forma percentage of debt in the total capital structure of the Southern domestic operating utility companies is 45.1%, which is at the median total debt ratio of the Standard & Poor's "A" rated vertically integrated utilities.1 Southern's consolidated retained earnings grew on average approximately 8.6% per year from 1992 through 1996. In 1997, consolidated retained earnings increased approximately $78,148,000, or slightly more than 2%. The reduction in the rate of earnings growth in 1997 was primarily due to a $111 million windfall profits tax assessed against South Western Electricity in the United Kingdom. Excluding the impact of such tax, earnings attributable to Southern's investments in EWGs and FUCOs continued to contribute modestly to consolidated retained earnings. Accordingly, since the date of the Rule 53(c) Order, the capitalization and earnings attributable to Southern's investments in EWGs and FUCOs has not had any adverse impact on Southern's financial integrity. Reference is made to Exhibit H filed herewith which reflects capitalization at December 31, 1997 and the Statement of Income for the year ended December 31, 1997 for Southern and subsidiaries consolidated. - -------- 1 Currently, capitalization ratios, including short-term debt, for "A" rated vertically integrated electric utilities have a median total debt to total capital ratio of 45% as noted by Standard & Poor's in May 1997 for companies rated both publicly and confidentially. Prior to issuing this rating standard, the Standard & Poor's total debt to total capital benchmark for an "A" rated vertically integrated investor-owned-utility having an average business position was 47%. Item 6. Exhibits and Financial Statements. (a) Exhibits: F-1 Opinion of Beggs & Lane, counsel for Gulf. F-2 Opinion of Eaton and Cottrell, P.A., counsel for Mississippi. H Capitalization and Income Statement of The Southern Company and Subsidiary Companies after giving effect to the issuance of the Senior Notes. (b) Financial Statements: Balance sheet of each Applicant at December 31, 1997. (Designated in each Applicant's Form 10-K for the year ended December 31, 1997, File Nos. 0-2429 and 0-6849.) Statements of Income of each Applicant for the period ended December 31, 1997. (Designated in each Applicant's Form 10-K for the year ended December 31, 1997, File Nos. 0-2429 and 0-6849.) Since December 31, 1997, there have been no material adverse changes, not in the ordinary course of business, in the financial condition of the Applicants from that set forth in or contemplated by the foregoing financial statements. SIGNATURES Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this amendment to be signed on their behalf by the undersigned thereunto duly authorized. Date: April 14, 1998 GULF POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary MISSISSIPPI POWER COMPANY By /s/Wayne Boston Wayne Boston Assistant Secretary EX-99 2 EXHIBIT F-1 Exhibit F-1 Beggs & Lane Seventh Floor Blount Building 3 West Garden Street Pensacola, Florida 32501 April 14, 1998 Securities and Exchange Commission Washington, D.C. 20549 Re: Statement on Form U-1 of Gulf Power Company (herein called the "Company") File No. 70-9171 Ladies and Gentlemen: We have read the statement on Form U-1, as amended, referred to above, and are furnishing this opinion with respect to the proposed transactions described therein relating to the issuance by the Company of the Senior Notes (as defined therein). We are of the opinion that the Company is validly organized and duly existing as a corporation under the laws of the State of Maine and is duly admitted to do business as a foreign corporation in the States of Florida, Georgia and Mississippi and that, upon the adoption of appropriate resolutions by the board of directors of the Company (or a duly authorized committee thereof), upon the issuance of your order or orders in this matter permitting such statement on Form U-1 to become effective with respect to such proposed transactions, upon compliance with the relevant provisions of the Securities Act of 1933 and the Trust Indenture Act of 1939, and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and your order or orders in respect thereof and with the order or orders of the Florida Public Service Commission with respect thereto: (a) all State laws applicable to the proposed transactions will have been complied with; (b) the Senior Notes will be valid and binding obligations of the Company in accordance with their terms; and (c) the consummation of the proposed transactions will not violate the legal rights of the holders of any securities issued by the Company or any associate company thereof. We hereby give our written consent to the use of this opinion in connection with the above-mentioned statement on Form U-1. Very truly yours, /s/Beggs and Lane BEGGS AND LANE EX-99 3 EXHIBIT F-2 Exhibit F-2 Eaton and Cottrell, P.A. 1310 Twenty Fifth Avenue Gulfport, Mississippi 39501 601-864-8221April 14, 1998 Securities and Exchange Commission Washington, D.C. 20549 Re: Statement on Form U-1 of Mississippi Power Company (herein called the "Company") File No. 70-9171 Ladies and Gentlemen: We have read the statement on Form U-1, as amended, referred to above, and are furnishing this opinion with respect to the proposed transactions described therein relating to the issuance by the Company of the Senior Notes (as defined therein). We are of the opinion that the Company is validly organized and duly existing as a corporation under the laws of the State of Mississippi and is duly admitted to do business under the laws of the State of Alabama and that, upon the adoption of appropriate resolutions by the board of directors of the Company (or a duly authorized committee thereof), upon the issuance of your order or orders in this matter permitting such statement on Form U-1 to become effective with respect to such proposed transactions, upon compliance with the relevant provisions of the Securities Act of 1933 and the Trust Indenture Act of 1939, and in the event that the proposed transactions are consummated in accordance with such statement on Form U-1 and your order or orders in respect thereof: (a) all State laws applicable to the proposed transactions will have been complied with; (b) the Senior Notes will be valid and binding obligations of the Company in accordance with their terms; and (c) the consummation of the proposed transactions will not violate the legal rights of the holders of any securities issued by the Company or any associate company thereof. We hereby give our written consent to the use of this opinion in connection with the above-mentioned statement on Form U-1. Very truly yours, /s/Eaton and Cottrell, P.A. EATON AND COTTRELL, P.A. EX-99 4 EXHIBIT H Exhibit H THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES Capitalization Ratios at December 31, 1997
Consolidated Pro Forma per 10-Q Amounts (A) Equity Debt ---------------- --------------- ---------------- ---------------- Capitalization (in thousands of dollars): Common stock..........................................$3,467,115 $ - $3,467,115 Paid-in capital........................................2,337,714 - 2,337,714 Retained earnings......................................3,842,135 (101,974)(B) 3,740,161 Preferred stock..........................................493,346 200,000 (B) 693,346 Capital & preferred securities.........................1,743,520 935,750 (B) 2,679,270 Long-term debt........................................10,273,606 1,184,070.(B,D) $11,457,676 Preferred due within one year..................................- - - Long-term debt due within one year.......................783,805 - 783,805 Notes payable & commercial paper.......................2,064,249 - 2,064,249 ================ ============ ============ ================ Total (Incl Amts Due in 1 Year)...............$25,005,490 $2,217,846 $12,917,606 $14,305,730 ================ ============ ============ ================ Actual Amounts in Millions of Dollars....................$25,006 $11,884 $13,122 Actual Capitalization Ratios...............................100.0% 47.5% 52.5% Pro Forma Amounts in Millions of Dollars.................$27,224 $12,918 $14,306 Pro Forma Capitalization Ratios............................100.0% 47.5% 52.5%
Pro Forma Consolidated Statements of Income (Unaudited) (Stated in Thousands of Dollars)
For the Twelve Months Ended Pro Forma December 31, 1997 Amounts (A) As Adjusted OPERATING REVENUES $ 12,610,972 $ - $ 12,610,972 ---------------- ------------ ---------------- OPERATING EXPENSES: Operation-- Fuel 2,280,956 - 2,280,956 Purchased power 3,032,637 - 3,032,637 Other 1,930,064 - 1,930,064 Maintenance 762,945 - 762,945 Depreciation and amortization 1,246,111 - 1,246,111 Amortization of deferred Plant Vogtle costs 120,577 - 120,577 Taxes other than income taxes 572,341 - 572,341 Income taxes 724,881 (55,516)(C) 669,365 ---------------- ------------ ---------------- Total operating expenses 10,670,512 (55,516) 10,614,996 ---------------- ------------ ---------------- OPERATING INCOME 1,940,460 55,516 1,995,976 OTHER INCOME: Allowance for equity funds used during construction 6,461 - 6,461 Interest income 151,693 - 151,693 Other, net 52,960 - 52,960 Income taxes applicable to other income 33,868 - 33,868 Windfall profits tax assessed in United Kingdom (148,062) - (148,062) ---------------- ------------ ---------------- INCOME BEFORE INTEREST CHARGES 2,037,380 55,516 2,092,896 ---------------- ------------ ---------------- INTEREST CHARGES AND OTHER: Interest on long-term debt 679,696 78,874 (C,D) 758,570 Allowance for debt funds used during construction (14,053) - (14,053) Interest on notes payable 111,694 - 111,694 Amortization of debt discount, premium and expense, net 34,233 - 34,233 Other interest charges 63,250 - 63,250 Minority interest in subsidiaries 28,666 - 28,666 Distributions on capital and preferred securities of subsidiary companies 119,577 66,616 (C) 186,193 Preferred dividends of subsidiary companies 42,741 12,000 (C) 54,741 ---------------- ------------ ---------------- Interest charges and other, net 1,065,804 157,490 1,223,294 ---------------- ------------ ---------------- CONSOLIDATED NET INCOME $ 971,576 $ (101,974) $ 869,602 ================ ============ ================
(See Notes on Following Page) NOTES (A) The amounts and types of the securities to be issued will be dependent upon, among other things, market conditions prevailing at the time of issuance. The amounts estimated to be issued are the maximum amounts requested in the subject application, together with remaining authorizations in certain previous applications, and are used solely for the purpose of illustrating the effect upon Southern Company consolidated capitalization and earnings. In addition, no assumptions are made in connection with possible refundings. (B) To give effect to (i) the proposed issuance of $500,000,000 of preferred securities by Alabama Power Company; (ii) the proposed issuance of $310,750,000 of preferred securities by Georgia Power Company; (iii) the proposed issuance of $75,000,000 of preferred securities and $75,000,000 of pollution control obligations by Mississippi Power Company; and (iv) the issuance in January 1998 by Gulf Power Company of $45,000,000 of 7% Trust Preferred Securities and the proposed issuance by Gulf Power Company of $5,000,000 additional preferred securities, $200,000,000 of first mortgage bonds, $200,000,000 of preferred stock and $159,070,000 of pollution control obligations. (C) To give effect to (i) the proposed issuance of $500,000,000 of preferred securities by Alabama Power Company at an assumed rate of 7.125%; (ii) the proposed issuance of $310,750,000 of preferred securities by Georgia Power Company at an assumed rate of 7.125%; (iii) the proposed issuance by Mississippi Power Company of $75,000,000 of preferred securities at an assumed rate of 7.125% and $75,000,000 of pollution control obligations at an assumed rate of 5.50%; and (iv) the issuance in January 1998 by Gulf Power Company of $45,000,000 of 7% Trust Preferred Securities and the proposed issuance by Gulf Power Company of $5,000,000 additional preferred securities at an assumed rate of 7.125%, $200,000,000 of first mortgage bonds at an assumed rate of 6.75%, $200,000,000 of preferred stock at an assumed rate of 6%, $159,070,000 of pollution control obligations at an assumed rate of 5.50%. (D) To give effect to the proposed issuance of $350,000,000 of senior notes by Gulf Power Company and the proposed issuance of $400,000,000 senior notes by Mississippi Power Company, both of which are contemplated in this Form U-1 application. -----END PRIVACY-ENHANCED MESSAGE-----