-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rv3LZGfR19BuVNWB2CZhY0ESPEkKMb6OxIwLNuDiUL/PIPUuUaFVPzibeLLqCAVs oT+yUJHDI2qkV5dwXzrrAg== 0000899652-95-000010.txt : 19950615 0000899652-95-000010.hdr.sgml : 19950615 ACCESSION NUMBER: 0000899652-95-000010 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19950310 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINERGY CORP CENTRAL INDEX KEY: 0000899652 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 311385023 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1 SEC ACT: 1935 Act SEC FILE NUMBER: 070-08589 FILM NUMBER: 95520047 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5133812000 MAIL ADDRESS: STREET 1: 139 E FOURTH STREET CITY: CINCINATI STATE: OH ZIP: 45202 U-1 1 FORM U-1 As filed with the Securities and Exchange Commission on March 10, 1995 File No. 70-____ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________ FORM U-1 APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 _________________________________ CINergy Corp., CINergy Investments, Inc., and CINergy Services, Inc. 139 East Fourth Street Cincinnati, Ohio 45202 (Name of company filing this statement and address of principal executive offices) CINergy Corp. (Name of top registered holding company) William L. Sheafer Treasurer CINergy Corp. 139 East Fourth Street Cincinnati, Ohio 45202 (Names and addresses of agents for service) The Commission is requested to send copies of all notices, orders and communications in connection with this Application-Declaration to: Cheryl M. Foley Vice President, General Counsel and Corporate Secretary CINergy Corp. 139 East Fourth Street Cincinnati, Ohio 45202 M. Douglas Dunn William T. Baker Milbank, Tweed, Hadley & McCloy Reid & Priest 1 Chase Manhattan Plaza 40 West 57th Street New York, New York 10005 New York, New York 10019 Item 1. Description of Proposed Transaction. CINergy Corp. ("CINergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), and CINergy Investments, Inc. ("CINergy Investments"), a wholly-owned subsidiary of CINergy, hereby request approval and authorization of the Securities and Exchange Commission (the "Commission") (i) to acquire, directly or indirectly, in one or more transactions, the securities of one or more companies (the "New Special Purpose Subsidiaries") organized for the purpose of engaging, directly or indirectly, and exclusively, in the business of acquiring, owning and holding the securities of, and/or providing services to, one or more "foreign utility companies" ("FUCOs") and/or "exempt wholesale generators" ("EWGs"), as defined in Sections 33(a) and 32(a) of the Act, respectively; (ii) to make direct and indirect investments in New Special Purpose Subsidiaries and additional direct and indirect investments in certain existing subsidiary companies of CINergy (the "Existing Special Purpose Subsidiaries")/1/, by the means and subject to the limitations described below; and (iii) to retain (and for the Commission to release jurisdiction over) certain of the Existing Special Purpose Subsidiaries/2/ as to which the Commission reserved jurisdiction in its October 21, 1994 Order in File No. 70-8427 (the "October 21 Order")./3/ Authorization is also requested: (iv) for the Special Purpose Subsidiaries to issue equity and debt securities to persons other than CINergy and CINergy Investments for the purpose of financing investments by such Special Purpose Subsidiaries in EWGs and FUCOs; (v) for the Special Purpose Subsidiaries to provide services to their subsidiaries, and to other Special Purpose Subsidiaries and their subsidiaries; and (vi) to the extent not previously authorized by the Commission, for CINergy Services, Inc. ("CINergy Services"), a Delaware corporation and a subsidiary service company of CINergy, to provide services to the Special Purpose Subsidiaries and their subsidiaries, all in accordance with the terms and conditions set forth herein. CINergy and CINergy Investments propose that the authorizations requested in clauses (i), (ii), and (iv) remain effective until the earlier of May 31, 1998 or the effective date of any rule of general applicability adopted by the Commission that would exempt the acquisition of any securities of any New Special Purpose Subsidiary from the application and approval requirements of Sections 9 and 10 of the Act and the issuance of securities by Special Purpose Subsidiaries from the declaration requirements of Sections 6 and 7 of the Act. It is proposed that no time limitation apply to the authorizations requested in clauses (iii), (v) and (vi). Background CINergy system companies have from time to time invested in or considered potential opportunities to acquire or construct electric generation, transmission and/or distribution facilities outside the United States. CINergy expects to investigate other such opportunities in the future. In most cases, it is expected that such facilities will qualify as facilities that a FUCO or EWG may own or operate./4/ The authorization sought in this Application-Declaration is intended to facilitate investments in such FUCOs and EWGs. A number of legal and business reasons exist for the use of special purpose subsidiaries in connection with such investments. Among other things, the formation and acquisition of special purpose subsidiaries is often necessary or desirable to facilitate the acquisition and ownership of a FUCO or EWG. For example, laws of some foreign countries may require that the bidder in a privatization program be a domestic company in that country. In such cases, it would be necessary for CINergy to form a foreign subsidiary (either as a foreign corporation or as a foreign counterpart thereto) as the entity submitting the bid or other proposal. In addition, the interposition of one or more special purpose subsidiaries may allow CINergy to defer the repatriation of foreign source income, or to take full advantage of favorable tax treaties among foreign countries, or otherwise to secure favorable U.S. income tax treatment that would not otherwise be available. Special purpose subsidiaries are also useful in cases in which CINergy may bid as a part of a consortium, since each member of the consortium will typically want to have at least one consolidated subsidiary in the final ownership structure for tax and accounting purposes. Special purpose subsidiaries also serve to isolate business risks and facilitate subsequent adjustments to or sales of interests among or by the members of the ownership group. 1. Existing Special Purpose Subsidiaries PSI Argentina, Costanera and Energy Argentina are all Indiana corporations established in connection with the privatization of electric generation and distribution assets in Argentina. PSI Argentina is a wholly-owned subsidiary of CINergy Investments and in turn has two wholly- owned subsidiaries: Costanera, which was incorporated in Indiana in 1992, and EDEGEL, which is described below./5/ Through PSI Argentina, Costanera, and Energy Argentina, CINergy is a member of two consortia holding interests in, respectively, Central Costanera S.A., an Argentine electric generating company that owns a 1260 megawatt facility, and Distrilec Inversora S.A. ("Distrilec"), which owns 51% of the stock of Edesur S.A., an electric distribution system serving the southern half of Buenos Aires. CINergy holds a 6% interest in Central Costanera S.A., and an 8% interest in Distrilec. In addition, a company named Argelec, S.A., was formed to hold the consortium's 60% equity interest in Central Costanera S.A. CINergy has a 10% interest in Argelec. Argelec does not currently own the consortium's 60% equity interest or any other assets. As noted above, PSI Argentina and Costanera have been determined by the FERC to be EWGs under Section 32(a) of the Act, while Energy Argentina, a wholly-owned subsidiary of PSI Energy, is a FUCO under Section 33(a) of the Act. PSI Resources, Inc., which was merged into CINergy on October 24, 1994, had previously received approvals from the Commission under Section 9(a)(2) of the Act to own and operate the foregoing Argentine investments as well as exemptions under Section 3(b) of the Act. See PSI Resources, et al., Rel. No. 35-25570, 51 SEC Docket 1374 (July 2, 1992); PSI Resources, Inc., et al., Rel. No. 35-25674, 52 SEC Docket 2533 (Nov. 13, 1992). The activities of PSI Argentina, Costanera and Energy Argentina will be limited to those contemplated herein and by the Commission's past orders. T&D, a wholly-owned subsidiary of CINergy Investments, and its wholly-owned subsidiary, Yacyreta, were incorporated in Indiana in 1994 to acquire, own and hold, directly or indirectly, interests in FUCOs. EDEGEL, a subsidiary of PSI Argentina, was incorporated in Delaware in 1994 to acquire, own and hold, directly or indirectly, interests in foreign EWGs. None of T&D, Yacyreta or EDEGEL has made any investments to date in FUCOs or EWGs. CGE ECK, a subsidiary of CINergy Investments, was incorporated in Delaware in 1994 and holds a 3% interest in ECK s.r.o., a Czech limited liability company which operates and owns a generating facility in the Czech Republic. Power Development, Power Operations, PSI International and Sunnyside are all Indiana corporations and direct subsidiaries of CINergy Investments, and were organized to invest in power projects. Power Development and Power Operations were incorporated in 1990 and 1989, respectively, to develop, operate and maintain independent power producer/cogeneration projects. PSI International and PSI Sunnyside were incorporated in 1991 and 1990, respectively, to develop, construct, operate, and own cogenerating or power production facilities. At present, none of the four companies holds any assets or is engaged in any business. All four companies will be used hereafter solely for purposes of engaging, directly or indirectly, and exclusively, in the businesses or acquiring, owning and holding the securities of one or more FUCOs and/or EWGs and such other businesses as the Commission may authorize. Although a number of the Existing Special Purpose Subsidiaries are currently inactive, such Existing Special Purpose Subsidiaries may be used for FUCO and EWG investments in the future. 2. New Special Purpose Subsidiaries. A New Special Purpose Subsidiary may be organized at the time of, and in order to facilitate, the making of bids or proposals to acquire an interest in any EWG or FUCO; after the award of a bid proposal, in order to facilitate closing on the purchase or financing of any such EWG or FUCO; or at any time subsequent to the consummation of an acquisition of an interest in an EWG or FUCO in order, among other things, to effect an adjustment in the respective ownership interests in any EWG or FUCO held by CINergy and unaffiliated co-investors, to facilitate a partial sale of an interest in any such EWG or FUCO, to comply with applicable laws of foreign jurisdictions limiting or otherwise relating to the ownership of domestic companies by foreign nationals; as a part of tax planning in order to limit CINergy's exposure to U.S. and foreign taxes; or for other lawful business purposes. 3. Investment in Special Purpose Subsidiaries. As of December 31, 1994, CINergy's aggregate outstanding investment in FUCOs and EWGs through Existing Special Purpose Subsidiaries, net of amounts written off or received from dispositions of such investments, was approximately $20 million. Under the authority requested herein, the aggregate net investment of CINergy and CINergy Investments outstanding at any one time in New Special Purpose Subsidiaries and Existing Special Purpose Subsidiaries will not exceed $115 million. In addition, (i) any direct or indirect investment by CINergy and CINergy Investments in any Special Purpose Subsidiary would be consummated only if, at the time thereof, and giving effect thereto, CINergy's "aggregate investment," determined in accordance with Rule 53(a)(1)(i), in all FUCOs, EWGs and Special Purpose Subsidiaries, shall not exceed 50% of CINergy's "consolidated retained earnings," as defined in Rule 53(a)(1)(ii), and (ii) CINergy and CINergy Investments will limit their direct and indirect investment in any particular New Special Purpose Subsidiary to an amount which is no greater than the amount reasonably required in connection with making the underlying investment in any EWG or FUCO with respect to which such New Special Purpose Subsidiary was organized or formed, taking into account development expenditures, working capital needs, cash reserves required to be maintained in accordance with financing documents and other relevant factors. CINergy and its subsidiaries will also comply with all other applicable rules under the Act, including, without limitation, such additional rules as may be promulgated pursuant to Sections 32 and 33. Investments by CINergy and CINergy Investments in the Special Purpose Subsidiaries may take the form of any combination of the following: (i) purchases of capital shares, partnership interests, trust certificates, or the equivalent of any of the foregoing under the laws of foreign jurisdictions, if applicable; (ii) cash capital contributions; (iii) open account advances or loans evidenced by promissory notes; and (iv) guaranties, letters of credit or other credit support (collectively, "Guaranties") issued or arranged by CINergy and/or CINergy Investments in respect of the securities or other obligations of the Special Purpose Subsidiaries. The form of the promissory note to be issued to CINergy or CINergy Investments is set forth in Exhibit 1 hereto. Any investment in the capital shares or other equity securities of a Special Purpose Subsidiary that have a stated par value will be in an amount equal to or greater than such par value, and any open account advance made by CINergy or CINergy Investments to a Special Purpose Subsidiary may be non-interest bearing and will be repayable within one year of the date of the advance. Any promissory note issued by a New Special Purpose Subsidiary to CINergy or CINergy Investments, and any promissory note or similar evidence of indebtedness issued by a Special Purpose Subsidiary to a lender other than CINergy or CINergy Investments with respect to which CINergy or CINergy Investments may issue a Guaranty, will mature not later than 30 years after the date of issuance thereof, and will bear interest at a rate (x) in the case of any note issued to CINergy or CINergy Investments, not to exceed the prime rate at a bank to be designated by CINergy, and (y) in the case of any note, bond or other evidence of indebtedness guaranteed by CINergy or CINergy Investments, not to exceed the following: (i) if such note, bond or other indebtedness is denominated in U.S. dollars, at a fixed rate not to exceed 6.5% (or 650 basis points) over the yield to maturity on an actively traded, non-callable, U.S. Treasury obligation having a maturity approximating the average life of such note, bond or other indebtedness (the "Applicable Treasury Rate"), or at a floating rate not to exceed 6.5% (or 650 basis points) over the then applicable prime rate at a U.S. money center bank to be designated by CINergy (the "Applicable Prime Rate"); and (ii) if such note, bond or other indebtedness is denominated in the currency of a country other than the United States, at a fixed or floating rate which, when adjusted for the prevailing rate of inflation in such country, as reported in official indices published by such country, would be equivalent to a rate on a U.S. dollar-denominated borrowing of the same approximate average life that does not exceed ten percentage points over the Applicable Treasury Rate (interpolated, if necessary) or Applicable Prime Rate, as the case may be. Any promissory note issued to CINergy or CINergy Investments by any Special Purpose Subsidiary, and any open-account advance by CINergy or CINergy Investments to any Special Purpose Subsidiary, may, at the option of CINergy or CINergy Investments, be converted to a capital contribution to such Special Purpose Subsidiary through the forgiveness of the indebtedness evidenced by such note or such open-account advance by CINergy or CINergy Investments. Funds for any direct or indirect investment by CINergy or CINergy Investments in any Special Purpose Subsidiary (including the Guaranty of any securities of any Special Purpose Subsidiary) will be derived from (a) the sale of common stock (within the limitations prescribed in the Commission's order dated November 18, 1994 in File No. 70-8477, Rel. No. 35-26159 (the "November 1994 Order"), and any future authorization obtained from the Commission), (b) bank borrowings, letters of credit and/or commercial paper sales (within the limitations prescribed in the Commission's order dated January 11, 1995 in File No. 70-8521, Rel. No. 35- 26215 (the "January 1995 Order"), and any future authorization obtained from the Commission), and (c) available cash. CINergy hereby requests the Commission's authorization to apply proceeds of bank borrowings and commercial paper sales authorized by the Commission in the January 1995 Order, together with otherwise available cash (including proceeds available for general corporate purposes pursuant to the November 1994 Order), to direct or indirect investments by CINergy in Special Purpose Subsidiaries, FUCOs and EWGs (including the Guaranty of any securities thereof) as described herein. CINergy also requests the Commission's authorization to utilize letters of credit arranged by CINergy pursuant to the January 1995 Order in connection with Guaranties of securities of Special Purpose Subsidiaries, FUCOs and EWGs as described herein. Except as set forth herein and in the other files referred to herein, CINergy is not presently requesting authority herein to issue any additional securities for the purpose of financing investments in any New Special Purpose Subsidiaries. If CINergy ultimately determines that any Special Purpose Subsidiary is no longer useable for EWG or FUCO investment purposes (whether due to termination of a proposed project acquisition, loss of a bid, change in law, or otherwise), CINergy will (to the extent that it is possible to do so at reasonable cost) liquidate, dissolve or sell such Special Purpose Subsidiary within 180 days, unless, within that time, CINergy determines that such Special Purpose Subsidiary could be used to acquire an interest in a different FUCO or EWG or other investment authorized by the Commission. To the extent needed, CINergy requests authority to liquidate, dissolve or sell any Special Purpose Subsidiary under such circumstances. 4. External Financing By Special Purpose Subsidiaries. Approval is also requested for each Special Purpose Subsidiary to issue equity securities and non-recourse debt securities to persons other than CINergy or CINergy Investments (without Guaranty or other payment obligation on the part of CINergy or CINergy Investments), including banks, insurance companies, and other financial institutions, exclusively for the purpose of financing (including any refinancing of) investments in EWGs and FUCOs. Such securities may be issued in one or more transactions from time to time through the earlier to occur of (i) May 31, 1998 and (ii) the effective date of any rule of general applicability adopted by the Commission exempting such transactions from the application requirements under the Act. It is proposed that the aggregate principal amount of non- recourse debt securities issued by each Special Purpose Subsidiary to persons other than CINergy or CINergy Investments will not exceed 90% of total debt and equity of such Special Purpose Subsidiary. Equity securities issued by any New Special Purpose Subsidiary to a person other than CINergy or CINergy Investments may include capital shares, partnership interests, trust certificates, or the equivalent of any of the foregoing under applicable foreign law. Non-recourse debt securities issued to persons other than CINergy or CINergy Investments may include secured and unsecured promissory notes, subordinated notes, bonds, or other evidence of indebtedness. Securities issued by Special Purpose Subsidiaries may be denominated in either U.S. dollars or foreign currencies. The amount and type of such securities, and the terms thereof, including (in the case of any indebtedness) interest rate, maturity, prepayment or redemption privileges, and the terms of any collateral security granted with respect thereto, would be negotiated on a case by case basis, taking into account differences from project to project in optimum debt-equity ratios, projections of earnings and cash flow, depreciable lives, and other similar financial and performance characteristics of each project. Accordingly, CINergy and CINergy Investments propose that they have the flexibility to negotiate the terms and conditions of such securities without further approval by the Commission. Notwithstanding the foregoing, no equity security having a stated par value will be issued or sold by a Special Purpose Subsidiary for a consideration that is less than such par value, and no note, bond or other evidence of indebtedness will be issued or sold by any Special Purpose Subsidiary with a maturity date later than 30 years from the date of issuance thereof, or an interest rate exceeding the following: (i) if such note, bond or other indebtedness is U.S. dollar denominated, a fixed rate exceeding 6.5% over the Applicable Treasury Rate or at a floating rate not to exceed 6.5% over the Applicable Prime Rate; and (ii) if such note, bond or other indebtedness is denominated in the currency of a country other than the United States, a fixed or floating rate which, when reduced for the prevailing rate of inflation in such country, as reported in official indices for such country, would be equivalent to a rate on a U.S. dollar- denominated borrowing of the same approximate average life exceeding 10% over the Applicable Treasury Rate (interpolated, if necessary) or the Applicable Prime Rate, as the case may be. In connection with the issuance of any non-recourse debt securities by any Special Purpose Subsidiary, it is anticipated that such Special Purpose Subsidiary may grant a security interest in its assets. Such security interest may take the form of a pledge of the shares or other equity securities of an EWG or FUCO that it owns, including a security interest in any distributions from any such EWG or FUCO, and/or a collateral assignment of its rights under and interests in other property, including rights under contracts. In connection with the issuance of any such non-recourse debt securities, placement, commitment fees, or other similar fees may be paid to lenders, placement agents, or others, on terms and in amounts to be established at arm's length and in conformity with market practice, and authorization therefor is sought hereby. In connection with investments in EWGs and FUCOs, a portion of the capital requirements of any such EWG or FUCO may be obtained through non-recourse financing involving borrowings from banks and other financial institutions. In some cases, however, it may be necessary or desirable to structure an investment in an EWG or FUCO so that the obligations created are not those of the EWG or FUCO, but instead those of its parent companies. For example, in a consortium of non-affiliated companies bidding to purchase the securities or assets of an EWG or FUCO, each of the consortium members would be obligated to fund its respective share of the proposed purchase price. If external sources of funds are needed for this purpose, a consortium participant may choose to engage in non-recourse financing through one or more single-purpose subsidiaries that would then utilize the proceeds of the financing to acquire an ownership interest in the EWG or FUCO./6/ CINergy believes that external financing by Special Purpose Subsidiary involves the same issues that are involved when the financing is carried out by an EWG or FUCO in terms of the potential impact on the financial position of a registered holding company system. Accordingly, where the proceeds of any such financing (including any refinancing) are utilized to make an investment in any EWG or FUCO, and there is no recourse directly or indirectly to CINergy with respect to the securities issued or sold, there is no basis for any adverse findings under Section 6, 7 and 12 of the Act, provided that, at the time of the issuance thereof, CINergy is in compliance with Rule 53. 5. Services Pursuant to the Commission's Order dated October 21, 1994 granting the Application-Declaration of CINergy (as amended) in File No. 70-8427, CINergy Services is authorized to provide administrative, management and support services to utility and non-utility associate companies, including those that are EWGs or FUCOs. Under that order, CINergy Services is authorized to provide services to the domestic non- utility subsidiaries of CINergy at cost, determined in accordance with Rule 90 under the Act, and at fair market value for services rendered to certain foreign non-utility subsidiaries of CINergy, pursuant to Rule 83 under the Act. To the extent (if any) further authorization is required, CINergy Services hereby requests such authorization to provide to the Special Purpose Subsidiaries and their subsidiaries such services as may be necessary or desirable for the development, acquisition, establishment and operation of the Special Purpose Subsidiaries and the investments and properties held, directly or indirectly, by such companies. To provide further operational flexibility, it is also proposed that the Special Purpose Subsidiaries have authority to provide their subsidiaries, and other Special Purpose Subsidiaries and their subsidiaries, with all services necessary or desirable for their operations, including, without limitation, management, administrative, employment, tax, accounting, engineering, consulting, utility performance, and electronic data processing services, and software development and support services in connection therewith. The Special Purpose Subsidiaries will not provide services to any subsidiary company of CINergy other than their subsidiaries and/or other Special Purpose Subsidiaries and their subsidiaries. It is anticipated that such Special Purpose Subsidiaries and their subsidiaries will meet (or, in the case of the Existing Special Purpose Subsidiaries and their subsidiaries, will continue to meet) the requirements of Rule 83(a) under the Act; accordingly, it is proposed that services provided to the Special Purpose Subsidiaries and their subsidiaries be exempt from the standards of Section 13(b) of the Act and the rules and regulations promulgated thereunder. 6. Statement Pursuant to Rule 53 Under Rule 53, in determining whether to approve the issue or sale of a security by a registered holding company for purposes of financing the acquisition of an EWG or the guarantee of a security of an EWG by a registered holding company, the Commission shall not make a finding that such security is not reasonably adapted to the earning power of such company or to the security structure of such company or companies in the same holding company system, or that the circumstances are such as to constitute the making of such guarantee an improper risk for such company, if, as here, the conditions set forth in Rule 53 are met. All applicable conditions set forth in Rule 53(a) are and, assuming consummation of the transactions proposed herein, will be satisfied, and none of the conditions set forth in Rule 53(b) exists or, as a result thereof, will exist. The following discussion assumes the CINergy system's existence for the dates and periods in question. Three CINergy system companies are EWGs or FUCOs: PSI Argentina and Costanera, which are EWGs, and Energy Argentina, which is a FUCO. Rule 53(a)(1): The average of CINergy's pro forma consolidated retained earnings for the four consecutive quarters ended December 31, 1994 was $929 million, and CINergy's aggregate investment in EWGs and FUCOs at December 31, 1994 was approximately $20 million, or approximately 2% of consolidated retained earnings. Rule 53(a)(2): CINergy will maintain books and records enabling it to identify investments in and earnings from each EWG and FUCO in which it directly or indirectly holds an interest. At present, CINergy does not hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore inapplicable. In accordance with Rule 53(a)(2)(ii), the books and records and financial statements of each foreign EWG and FUCO which is a "majority- owned subsidiary company" of CINergy are kept in conformity with and prepared according to U.S. generally accepted accounting principles ("GAAP"). CINergy will provide the Commission access to such books and records and financial statements, or copies thereof, in English, as the Commission may request. In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO in which CINergy directly or indirectly owns 50% or less of the voting securities, CINergy will proceed in good faith, to the extent reasonable under the circumstances, to cause each such entity's books and records to be kept in conformity with, and the financial statements of each such entity to be prepared according to, GAAP. If such books and records are maintained, or such financial statements are prepared, according to a comprehensive body of accounting principles other than GAAP, CINergy will, upon request of the Commission, describe and quantify each material variation from GAAP in the accounting principles, practices and methods used to maintain such books and records and each material variation from GAAP in the balance sheet line items and net income reported in such financial statements, as the case may be. In addition, CINergy will proceed in good faith, to the extent reasonable under the circumstances, to cause access by the Commission to such books and records and financial statements, or copies thereof, as the Commission may request, and in any event will make available to the Commission any such books and records that are available to CINergy. Rule 53(a)(3): At any one time, a maximum of approximately 25 CINergy system employees have rendered services to Costanera, PSI Argentina and Energy Argentina. Based on current staffing levels, this represents less than 0.3% of the approximately 8,650 full-time employees of CINergy's domestic operating utility subsidiaries. Such services have heretofore been rendered, in part, by employees of PSI Energy in accordance with the Commission's order in PSI Resources, Inc., et al., Holding Co. Act Rel. No. 35-25674, 52 SEC Docket 2533, 2534-35 (Nov. 13, 1992), and by employees of CG&E in accordance with business practices established prior to the merger of CG&E and PSI Energy into the CINergy system and the registration of CINergy as a holding company under the Act. As noted above, pursuant to the Commission's Order dated October 21, 1994 in File No. 70-8427, CINergy Services is authorized to provide administrative, management and support services to utility and non-utility associate companies, including those that are EWGs or FUCOs. In addition, under the authorizations requested herein, employees of CINergy Services may provide services to New Special Purpose Subsidiaries and their subsidiaries, and Special Purpose Subsidiaries may provide services to their subsidiaries, and to other Special Purpose Subsidiaries and their subsidiaries. Rule 53(a)(4): CINergy is simultaneously submitting a copy of this Application-Declaration, and will submit copies of any Rule 24 certificates required hereunder, as well as a copy of Item 9 of CINergy's Form U5S and Exhibits H and I thereto, to each of the public service commissions having jurisdiction over the retail rates of CINergy's operating utility subsidiaries at the time such documents are filed with the Commission. Rule 53(b): The provisions of Rule 53(a) are not made inapplicable to the authorization herein requested by reason of the provisions of Rule 53(b). Rule 53(b)(1): Neither CINergy nor any subsidiary of CINergy is the subject of any pending bankruptcy or similar proceeding. Rule 53(b)(2): CINergy's total capital invested in utility operations as of December 31, 1994 totaled approximately $5.9 billion, consisting of approximately $2.8 billion in long-term and $208 million in short-term debt of CG&E, PSI Energy and the utility subsidiaries of CG&E, $478 million in preferred stock of CG&E and PSI Energy, and $2.4 billion in common equity of CG&E, PSI Energy and the utility subsidiaries of CG&E. CINergy's aggregate present investment in EWGs and FUCOs (approximately $20 million) represents less than 0.4% of CINergy's total capital invested in utility operations. Together with the $95,000,000 in additional investment authority proposed herein, CINergy's aggregate investment in EWGs and FUCOs ($115,000,000) will represent less than 2% of CINergy's total capital invested in utility operations. Average consolidated retained earnings for the four quarters ended December 31, 1994 equaled $929 million, versus $1,053 million for the four quarters ended December 31, 1993, a difference of approximately $124 million or 12%. Rule 53(b)(3): For the 12 months ended December 31, 1994, CINergy had net income of approximately $175,000 attributable to its direct or indirect investments in EWGs and FUCOs. Rule 53(c). Inasmuch as Rule 53(c) applies only if an applicant is unable to satisfy the requirements of Rules 53(a) and (b), it is inapplicable here. Item 2. Fees, Commissions and Expenses. The estimated fees and expenses to be incurred in connection with this Application-Declaration are as follows: Commission filing fee $ 2,000 Counsel fees 25,000 Other 500 Total $27,500 Item 3. Applicable Statutory Provisions. Sections 6, 7, 9, 10, 11, 12, 13, 32 and 33 and Rules 43, 45, 51, 53 and 83 are or may be applicable to the transactions proposed herein. Sections 32 and 33 are applicable to the acquisition and retention of interests in FUCOs and EWGs. Rule 53 thereunder is applicable to Guaranties of securities of FUCOs and EWGs and would be applicable to sales of securities by CINergy in connection with the acquisition of an EWG. The issuance of securities by the proposed Special Purpose Subsidiaries and the direct or indirect acquisition thereof by CINergy and/or CINergy Investments is or may be subject to Sections 6(a), 7, 9(a) and 10 of the Act and Rules 43, 45 and 51 thereunder. Sections 6(a) and 7 may also be applicable to the liquidation or dissolution of any Special Purpose Subsidiary. Section 11 is applicable to the retention of certain of the Existing Special Purpose Subsidiaries to the extent not authorized by Sections 32 and 33 or by the Commission's orders in PSI Resources, et al., Holding Co. Act Rel. No. 35-25570, 51 SEC Docket 1374 (July 2, 1992), and PSI Resources, Inc., et al., Holding Co. Act Rel. No. 35-25674, 52 SEC Docket 2533 (Nov. 13, 1992). Section 12(b) and Rule 45 thereunder would apply to any direct or indirect cash capital contribution, loan or open account advance by CINergy and/or CINergy Investments to any Special Purpose Subsidiary and to the Guaranty by CINergy and/or CINergy Investments of any security of any Special Purpose Subsidiary. Assuming compliance with the limitations and conditions specified in Item 1, the retention by CINergy and CINergy Investments of the Existing Special Purpose Subsidiaries will satisfy the standards of Section 11, and the acquisition by CINergy and/or CINergy Investments of the securities of any New Special Purpose Subsidiary and the issuance of securities by any New Special Purpose Subsidiary will satisfy the standards of Section 7, 10 and 12(b), as applicable. Such securities will be issued solely for the purpose of financing (including any refinancing of) the acquisition and ownership of interests in FUCOs and EWGs i'n transactions that are permitted under Section 32(g) or Section 33(c), as applicable. In addition, the amounts invested or to be invested by CINergy and/or CINergy Investments in any such Special Purpose Subsidiaries (including Guarantees by CINergy of securities issued by Special Purpose Subsidiaries to third parties) will, when added to amounts invested by CINergy in Special Purpose Subsidiaries, be within the limitations of Rule 53(a). Finally, the issuance and acquisition of such securities will not otherwise be detrimental to the interests of investors or consumers. Pursuant to Rule 83, the provision of services as proposed herein to foreign Special Purpose Subsidiaries and their subsidiaries may be exempted from the standards of Section 13(b) of the Act and the rules and regulations promulgated thereunder. The transactions proposed herein will be carried out in accordance with the procedures specified in Rule 23. CINergy proposes to comply with the procedures specified in Rule 24 by filing certificates notifying the Commission periodically of each investment made by CINergy, directly or indirectly, in any Special Purpose Subsidiary, indicating the amount and type of such investment and generally identifying the facility with respect to which such subsidiary was organized or formed. Such certificate will also describe in reasonable detail the amount, type, and terms (including interest rate and maturity, and the basis for inflation adjustment in the case of non-recourse indebtedness denominated in any currency other than U.S. dollars) of securities issued by any such subsidiary to third persons. To the extent any other sections of the Act or rules thereunder are or may be applicable to the proposed transactions, CINergy hereby requests appropriate orders thereunder. Item 4. Regulatory Approval. The direct or indirect acquisition by CINergy of Special Purpose Subsidiary securities and the issuance of securities by any such subsidiary are not subject to the jurisdiction of any state commission or any federal commission other than the Commission. Item 5. Procedure. It is requested that the Commission issue and publish no later than March 17, 1995 the requisite notice under Rule 23 with respect to the filing of this Application-Declaration, such notice to specify a date not later than April 11, 1995 as the date after which an order granting and permitting this Application-Declaration to become effective may be entered by the Commission and that the Commission enter not later than April 12, 1995 an appropriate order granting and permitting this Application- Declaration to become effective. No recommended decision by a hearing officer or other responsible officer of the Commission is necessary or required in this matter. The Division of Investment Management of the Commission may assist in the preparation of the Commission's decision in this matter. There should be no 30-day waiting period between the issuance and the effective date of any order issued by the Commission in this matter, and it is respectfully requested that any such order be made effective immediately upon the entry thereof. Item 6. Exhibits and Financial Statements. 1. Form of Promissory Note to be issued by Special Purpose Subsidiaries to CINergy and/or CINergy Investments. 2. Proposed form of notice. 3. Financial statements per books and pro forma (to be filed by amendment). 4. Preliminary opinion of counsel. Item 7. Information as to Environmental Effects. The proposed transactions do not involve any major federal action having a significant effect on the human environment. To the best knowledge of CINergy, CINergy Investments and CINergy Services, no federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions. SIGNATURE Pursuant to the requirements of the Act, the undersigned companies have duly caused this statement to be signed on its behalf by the undersigned thereunto duly authorized. Dated: March 10, 1995 CINergy Corp. By /s/ William L. Sheafer William L. Sheafer Treasurer CINergy Investments, Inc. By /s/ William J. Grealis William J. Grealis President CINergy Services, Inc. By /s/ J. Wayne Leonard J. Wayne Leonard Group Vice President and Chief Financial Officer FOOTNOTES /1/ Costanera Power Corp. ("Costanera"), PSI Argentina, Inc. ("PSI Argentina"), PSI Energy Argentina, Inc. ("Energy Argentina"), E P EDEGEL, Inc. ("EDEGEL"), PSI T&D International, Inc. ("T&D"), PSI Yacyreta, Inc. ("Yacyreta"), CGE ECK, Inc. ("CGE ECK"), PSI Power Resource Development, Inc. ("Power Development"), PSI Power Resource Operations, Inc. ("Power Operations"), PSI International, Inc. ("PSI International"), and PSI Sunnyside, Inc. ("Sunnyside"). The Existing Special Purpose Subsidiaries and the New Special Purpose Subsidiaries are sometimes referred to collectively as the "Special Purpose Subsidiaries". , /2/ Specifically, EDEGEL, T&D, Yacyreta, CGE ECK, Power Development, Power Operations, PSI International and Sunnyside. /3/ Two other Existing Special Purpose Subsidiaries -- Costanera and PSI Argentina -- have been determined by the Federal Energy Regulatory Commission ("FERC") to be EWGs. See Costanera Power Corporation, 61 FERC Par. 61,335 (1992); PSI Argentina, Inc., 68 FERC Par. 61,286 (1994). Another Existing Special Purpose Subsidiary -- Energy Argentina -- is a FUCO and has filed a Notification on Form U-57 with the Commission. Accordingly, under Sections 32 and 33 of the Act, Costanera, PSI Argentina and Energy Argentina are retainable without further action by the Commission. In addition, all three companies -- Costanera, PSI Argentina, and Energy Argentina -- have been exempted from the Act pursuant to Section 3(b) by orders of the Commission. PSI Resources, et al., Rel. No. 35-25570, 51 SEC Docket 1374 (July 2, 1992); PSI Resources, Inc., et al., Rel. No. 35-25674, 52 SEC Docket 2533 (Nov. 13, 1992). /4/ A foreign utility facility may also qualify as an "eligible facility" as defined in Section 32(a)(2) of the Act. In the event that such an investment opportunity is pursued as an EWG rather than as a FUCO, appropriate filings will be made with the FERC. /5/ A third wholly-owned subsidiary of PSI Argentina, Energy Services Inc. of Buenos Aires, was dissolved in January 1995. /6/ Typically, the capital shares or other equity interests in the EWG or FUCO would be pledged to secure the securities issued by the parent. EXHIBIT INDEX Exhibit Transmission Number Exhibit Method 1 Form of Promissory Note to be issued Electronic by Special Purpose Subsidiaries to CINergy and/or CINergy Investments 2 Proposed form of notice Electronic 3 Financial statements per books and By Amendment pro forma (to be filed by amendment) 4 Preliminary opinion of counsel Electronic EX-99.1 2 EXHIBIT 1 EXHIBIT 1 FORM OF NOTE TO BE EXECUTED BY SPECIAL PURPOSE SUBSIDIARY TO CINERGY OR CINERGY INVESTMENTS __________________, 19__ FOR VALUE RECEIVED, the undersigned, [Special Purpose Subsidiary] (the "Borrower"), hereby promises to pay to the order of [CINergy Corp.] [CINergy Investments, Inc.] (the "Lender") at its principal office in Cincinnati, Ohio, on demand but in any event not later than May 31, 1998, the principal sum set forth on the grid on the reverse side hereof as "Principal Amount Outstanding". This note may be prepaid in full at any time, or in part from time to time, without premium or penalty. The Principal Amount Outstanding shall bear interest, calculated daily, at a rate equal to [not to exceed the prime rate of a bank to be designated by CINergy]. Interest will be calculated on the daily Principal Amount Outstanding as indicated on the grid on the reverse side hereof or attached hereto. ______________________________ (Name of Borrower) By:___________________________ Principal Loan Amount Date (Repayment) Outstanding Rate Interest ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ ________ _______________ _______________ ______ ________ EX-99.2 3 EXHIBIT 2 EXHIBIT 2 SECURITIES AND EXCHANGE COMMISSION (Release No. 35- ) Filings Under the Public Utility Holding Company Act of 1935 ("Act") March __, 1995 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 thereunder. 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) thereto is/are available for public inspection through the Commission's Office 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 April 11, 1995, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549, 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 case of an attorney at law, by certificate) should be filed with the request. Any request for hearing shall 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 said date, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective. CINergy Corp. et al. (File No. 70-____) CINergy Corp. ("CINergy"), a registered holding company under the Act, CINergy Investments, Inc. ("CINergy Investments"), a wholly-owned subsidiary of CINergy, and CINergy Services, Inc., a wholly-owned subsidiary service company of CINergy, have filed an Application- Declaration requesting approval and authorization for certain transactions intended to facilitate investments in foreign utility companies ("FUCOs") and foreign exempt wholesale generators ("EWGs"). Specifically, CINergy and CINergy Investments seek approval and authorization (i) to acquire, in one or more transactions, the securities of one or more New Special Purpose Subsidiaries to be organized for the purpose of engaging, directly or indirectly, and exclusively, in the business of acquiring, owning and holding the securities of, and/or providing services to, one or more FUCOs and/or EWGs; (ii) to make direct and indirect debt and equity investments in New Special Purpose Subsidiaries and additional direct and indirect debt and equity investments in certain Existing Special Purpose Subsidiaries; (iii) to provide guaranties in connection with the activities of the Special Purpose Subsidiaries; and (iv) for the Special Purpose Subsidiaries to engage in external equity and non-recourse debt financing transactions with unaffiliated third parties (without guarantee or other payment obligation on the part of CINergy or CINergy Investments). For the purpose of financing and refinancing investments by such Special Purpose Subsidiaries in EWGs and FUCOs. The terms of such debt and equity securities and guaranties would be determined in light of the circumstances then prevailing and through later negotiations with third parties, within certain parameters as to maximum rates of interest, maturity dates, minimum consideration for par value shares, and other matters set forth in the Application-Declaration. As of December 31, 1994, CINergy's aggregate net outstanding investment in FUCOs and EWGs through Existing Special Purpose Subsidiaries was approximately $20 million. Under the authority requested in the Application-Declaration, the aggregate net investment of CINergy and CINergy Investments outstanding at any one time in New Special Purpose Subsidiaries and Existing Special Purpose Subsidiaries would not exceed $115 million. CINergy and CINergy Investments request that the requested authority remain effective until the earlier of May 31, 1998 or the effective date of any rule of general applicability adopted by the Commission that would exempt the acquisition of Special Purpose Subsidiary securities from the application and approval requirements of Sections 9 and 10 of the Act or the issuance of Special Purpose Subsidiary securities from the declaration requirements of Sections 6 and 7 of the Act. In addition, CINergy and CINergy Investments request approval and authorization to retain certain Existing Special Purpose Subsidiaries as to which the Commission reserved jurisdiction in its October 21, 1994 Order in File No. 70-8427. The Application-Declaration also requests authority for the Special Purpose Subsidiaries to provide services to their subsidiaries, and to other Special Purpose Subsidiaries and their subsidiaries, and supplemental authority for CINergy Services to provide such additional services as may be necessary or desirable for the development, acquisition, establishment and operation of the Special Purpose Subsidiaries and their investments and properties. It is anticipated that the Special Purpose Subsidiaries and their subsidiaries will meet (and, in the case of the Existing Special Purpose Subsidiaries and their subsidiaries, will continue to meet) the requirements of Rule 83(a) under the Act. Accordingly, the Application-Declaration requests that services provided to the Special Purpose Subsidiaries and their subsidiaries be exempt from the standards of Section 13(b) of the Act and the rules and regulations promulgated thereunder. The Application-Declaration states that CINergy system companies have from time to time invested in or considered potential opportunities to acquire or construct electric generation, transmission and/or distribution facilities outside the United States, that CINergy expects to investigate other such opportunities in the future, and that special purpose subsidiaries facilitate FUCO and EWG investments in a number of respects. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jonathan G. Katz, Secretary EX-99.4 4 EXHIBIT 4 EXHIBIT 4 Milbank, Tweed, Hadley & McCloy 1 Chase Manhattan Plaza New York, NY 10005 March 10, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Form U-1 Application-Declaration of CINergy Corp., CINergy Investments, Inc., and CINergy Services, Inc. Dear Sirs: We refer to the Form U-1 Application-Declaration (the "Application-Declaration"), filed by CINergy Corp. ("CINergy"), a Delaware corporation and a registered public utility holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), CINergy Investments, Inc. ("CINergy Investments"), a Delaware corporation and a wholly-owned subsidiary of CINergy, and CINergy Services, Inc. ("CINergy Services"), a Delaware corporation and a wholly-owned subsidiary service company of CINergy. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Application-Declaration. In the Application-Declaration, CINergy and CINergy Investments request approval and authorization, among other things: (i) to acquire, in one or more transactions, the securities of one or more New Special Purpose Subsidiaries to be organized for the purpose of engaging, directly or indirectly, and exclusively, in the business of acquiring, owning and holding the securities of, and/or providing services to, one or more FUCOs and/or EWGs; (ii) to make direct and indirect debt and equity investments in New Special Purpose Subsidiaries and additional direct and indirect debt and equity investments in certain Existing Special Purpose Subsidiaries; (iii) to provide guarantees in connection with the activities of the Special Purpose Subsidiaries; and (iv) for the Special Purpose Subsidiaries to engage in external equity and non-recourse debt financing transactions with unaffiliated third parties, all as described in the Application- Declaration (collectively, the "Transactions"). In addition, authorization is requested for CINergy Services to provide services to the Special Purpose Subsidiaries and their subsidiaries, and for the Special Purpose Subsidiaries to provide services to their subsidiaries, and to other Special Purpose Subsidiaries and their subsidiaries. We have acted as special counsel for CINergy, CINergy Investments and CINergy Services in connection with the Transactions and, as such counsel, we are familiar with certain corporate proceedings taken and to be taken by CINergy, CINergy Investments and CINergy Services in connection with the Transactions as described in the Application-Declaration. We have examined originals, or copies certified to our satisfaction, of such corporate records of CINergy, CINergy Investments, CINergy Services and the Existing Special Purpose Subsidiaries, certificates of public officials, certificates of officers and representatives of CINergy, CINergy Investments, CINergy Services and the Existing Special Purpose Subsidiaries and other documents as we have deemed it necessary to require as a basis for the opinions hereinafter expressed. In such examination we have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity with the originals of all documents submitted to us as copies. As to various questions of fact material to such opinions we have, when relevant facts were not independently established, relied upon certificates by officers of CINergy, CINergy Investments, CINergy Services and the Existing Special Purpose Subsidiaries and other appropriate persons and statements contained in the Application-Declaration. The opinions expressed below in respect of the Transactions described in the Application-Declaration are subject to the following assumptions or conditions: a. The Transactions shall have been duly authorized and approved to the extent required by applicable state and foreign law by the Boards of Directors and shareholders of CINergy, CINergy Investments, CINergy Services and the Special Purpose Subsidiaries. b. All required approvals, authorizations, consents, certifi- cates, and orders of, and all filings and registrations with, all applicable federal, state and foreign commissions and regulatory authorities with respect to the Transactions (including the approval and authorization of the Commission under the Act) shall have been obtained or made, as the case may be, and remain in effect; the Commission shall have duly entered an appropriate order or orders granting and permitting the Application-Declaration to become effective with respect to the Transactions as described in the Application- Declaration; and the Transactions shall have been accomplished in accordance with all such approvals, authorizations, consents, certifi- cates, orders, filings and registrations. In addition, the Transactions shall comply with any and all applicable rules or regulations hereafter adopted by the Commission regarding the scope or interpretation of Section 33 of the Act. c. For each New Special Purpose Subsidiary, all required organizational documents, in proper form, shall have been duly and validly adopted and shall have been filed with (and the filing thereof accepted by) the Secretary of State or other appropriate official of such New Special Purpose Subsidiary's jurisdiction of organization, and all other corporate and other formalities as are required by the laws of such jurisdiction for the valid organization and due existence of such New Special Purpose Subsidiary shall have been taken. As to each company referred to in opining paragraph 2 below, no action or proceeding for the dissolution or liquidation of such company or threatening the existence of such company shall have been taken or commenced. d. The notes proposed to be issued by the Special Purpose Subsidiaries to CINergy and CINergy Investments shall be substantially in the form set forth in Exhibit 1 to the Application-Declaration and shall have been properly completed and executed and, where required, countersigned, and the rate of interest on such notes shall not exceed the interest rate permitted by applicable law. e. Borrowings by any Special Purpose Subsidiary will not exceed those levels permitted from time to time by the borrowing Special Purpose Subsidiary's articles or certificate of incorporation or other governing documents, debt instruments and agreements to which the borrowing Special Purpose Subsidiary is a party or by which its property is bound, and applicable laws and orders of governmental and regulatory authorities with jurisdiction over such Special Purpose Subsidiary. f. The purchase or subscription price or other consideration to be paid or given for the shares of stock issued by any Special Purpose Subsidiary shall have been paid and shall be not less than the par value of such shares or such other amount as may be required by applicable law, resolutions and governing corporate documents in order for such shares to be fully paid and non-assessable; certificates representing such shares (or the equivalent thereof under applicable foreign law) shall have been duly executed, countersigned and registered by the applicable transfer agent and registrar (if any); and all other acts and formalities required by the laws of such Special Purpose Subsidiary's jurisdiction of organization for such shares to be validly issued shall have been taken. g. No act or event other than as described herein shall have occurred subsequent to the date hereof which would change the opinions expressed above. h. The consummation of the Transactions shall be conducted under our supervision, and all legal matters incident thereto shall be satisfactory to us, including the receipt in satisfactory form of such opinions of other counsel, qualified to practice in jurisdictions pertaining to such transactions in which we are not admitted to practice, as we may deem appropriate. Based on the foregoing, and having regard to legal considerations which we deem relevant, we are of the opinion that, in the event that the proposed Transactions are consummated in accordance with the Application- Declaration, and subject to the assumptions and conditions set forth above: 1. All state laws applicable to the proposed Transactions will have been complied with. 2. CINergy, CINergy Investments, and CINergy Services will be validly organized and duly existing under the laws of the State of Delaware; each Existing Special Purpose Subsidiary will be validly organized and duly existing under the laws of its jurisdiction of organization; and each New Special Purpose Subsidiary will be validly organized and duly existing under the laws of its jurisdiction of organization. 3. The shares of stock issued by the Special Purpose Subsidiaries will be validly issued, fully paid and non-assessable, and the holders thereof will be entitled to the rights and privileges appertaining thereto set forth in the charter or other organizational documents of the issuing Special Purpose Subsidiary; and the debt securities issued by the Special Purpose Subsidiaries will be valid and binding obligations of the issuing Special Purpose Subsidiary, enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 4. Each of CINergy and CINergy Investments will legally acquire any securities issued to it by the Special Purpose Subsidiaries in connection with the Transactions. 5. The consummation of the proposed Transactions will not violate the legal rights of the holders of any securities issued by CINergy, CINergy Investments or CINergy Services or any associate company thereof. We hereby consent to the use of this opinion as an exhibit to the Application-Declaration. The opinions set forth herein are issued and expressed as of the date hereof. We do not assume or undertake any responsibility to advise you of changes in either fact or law which may come to our attention after the date hereof. Very truly yours, Milbank, Tweed, Hadley & McCloy MDD/RBW -----END PRIVACY-ENHANCED MESSAGE-----