-----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, BVlSqbEHketstCmliGvp6Kh25a5g7Swu5xIVG809/XbDhmqMZZ+772lZrUpSis7H LxHZ5txGelP2yoJtWoDYeg== 0000899652-96-000164.txt : 19961016 0000899652-96-000164.hdr.sgml : 19961016 ACCESSION NUMBER: 0000899652-96-000164 CONFORMED SUBMISSION TYPE: U-1 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19961015 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: 070-08933 FILM NUMBER: 96643818 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 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. Cinergy Services, Inc. 139 East Fourth Street Cincinnati, Ohio 45202 (Name of companies filing this statement and addresses of principal executive offices) Cinergy Corp. (Name of top registered holding company parent) William L. Sheafer Treasurer Cinergy Corp. (address above) (Name and address of agent of service) Applicants request that the Commission send copies of all notices, orders and communications in connection herewith to: Jerome A. Vennemann William J. Grealis Associate General Counsel President Cinergy Corp. Cinergy Investments, Inc. (address above). (address above) William T. Baker, Jr. Reid & Priest LLP 40 West 57th Street New York, New York 10019 Item 1. Description of Proposed Transactions A. Requested Authorizations Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("Act"), and Cinergy's wholly-owned nonutility holding company subsidiary, Cinergy Investments, Inc. ("Investments"), request Commission authorization to incorporate and provide guaranties in an aggregate amount at any one time outstanding not to exceed $250 million through December 31, 2001 in respect of a new wholly-owned nonutility subsidiary, expected to be named Cinergy Solutions, Inc. ("Solutions"), which will market a comprehensive array of energy-related products and services exclusively to non-associates, including industrial, commercial, governmental, institutional and residential customers and utility companies. Solutions will offer an integrated package of "value-added" energy-related products and services to enable customers to reduce energy costs, improve energy efficiency and increase productivity. Applicants request authorization for Solutions to conduct its proposed business activities directly through Solutions, indirectly through one or more wholly-owned direct or indirect subsidiaries of Solutions, and indirectly through one or more direct or indirect subsidiaries of Solutions jointly-owned with one or more joint venture non-associates - in each case solely to implement the lines of proposed business activities itemized below. In connection with the formation of Solutions and its contemplated business activities, Cinergy's wholly-owned service company subsidiary, Cinergy Services, Inc. ("Cinergy Services"), requests authorization to provide an expanded range of support services to Cinergy Solutions (including any subsidiaries thereof) as well as any other system nonutility companies, pursuant to an amendment to the existing Cinergy system nonutility service agreement. B. Background In order to retain existing and attract new customers as the U. S. energy markets transform into an increasingly integrated and competitive national market, Cinergy must compete with other players in the industry (traditional vertically integrated utilities and new entrants such as power marketers, energy services companies and owners/operators of independent power production facilities) in terms of both price/quality of the basic energy commodity and value-added energy services and products. For much of 1996 Cinergy's efforts in the latter regard have focused on meeting with or conducting surveys of its existing commercial, industrial and residential retail and wholesale customers to gain a detailed understanding of the types of energy-related services and products those customers have been requesting or would value to advance their business objectives. At the same time, as part of this systematic assessment, Cinergy has been mindful of efforts by competitors to deploy so-called "one-stop retail energy shops." Solutions is the culmination of these extensive preliminary investigations. Solutions will meet the demands of the marketplace for customized, innovative and wide-ranging energy services and products, while affording Cinergy and its investors an important new source of revenues and opportunity for growth and profits. Solutions is a keystone in Cinergy's strategy to compete successfully in the changing energy industry. C. Proposed Business Activities Applicants propose that Solutions engage initially in the business activities described below. Such services/products will be marketed exclusively to non-associates - commercial/industrial customers (including governmental, institutional and utility companies) and residential customers - on a local, regional, nationwide and, as opportunities develop, international basis. The services would be priced based on competitive market rates. Without limitation of the foregoing, if the Commission ultimately adopts proposed Rule 58 (see Rel. No. 35-26313, June 20, 1995), Solutions may also engage in additional types of business activities of an "energy-related company" to the extent encompassed by and subject to the limitations of that potential rule. 1. Energy Management Services As one of its principal business activities, Solutions will offer a complete menu of energy management and efficiency services and related consulting services, often on a turnkey basis. These activities (collectively, "Energy Management Services") may also entail the marketing, installation, operation and maintenance of various products and services designed to implement the solutions recommended in the course of providing these services. Solutions will market Energy Management Services primarily to commercial/industrial customers, but also on a smaller scale to residential customers. Specifically, Energy Management Services will include the following activities: (1) identification (through energy audits or otherwise) of energy and other resource (water, labor, maintenance, materials, etc.) cost reduction or efficiency opportunities; (2) design of facility and process modifications or enhancements to realize such opportunities; (3) management, or direct construction and installation, of energy conservation or efficiency equipment; (4) training of client personnel in the operation of equipment; (5) maintenance of energy systems; (6) design, management or direct construction and installation of new and retrofit heating, ventilating, and air conditioning ("HVAC"), electrical and power systems, motors, pumps, lighting, water and plumbing systems, and related structures, to realize energy and other resource efficiency goals or to otherwise meet a customer's energy-related needs; (7) system commissioning (i.e., monitoring the operation of an installed system to ensure that it meets design specifications); (8) reporting of system results; (9) design of energy conservation programs; (10) implementation of energy conservation programs; (11) provision of conditioned power services (i.e., services designed to prevent, control or mitigate adverse effects of power disturbances on a customer's electrical system to ensure the level of power quality required by the customer, particularly with respect to sensitive electronic equipment); and (12) other similar or related activities. 2. Asset Management Services Another principal business activity of Solutions will involve the provision of comprehensive asset management services ("Asset Management Services"), on a turnkey basis or otherwise, in respect of energy-related systems, facilities and equipment (e.g., electric utility systems and assets, including distribution systems and substations; transmission facilities; electric generation facilities, including standby generation facilities and self-generation facilities; boilers; chillers, i.e., refrigeration and coolant equipment; HVAC; and lighting systems) located on or adjacent to premises of commercial/ industrial customers and used by such customers in connection with their business activities. Likewise, these services would be marketed to other owners of utility assets or systems such as municipalities and electric cooperatives. Additionally, these services would be marketed to developers, owners and operators of non-associate independent power production facilities ("IPPs"), including both qualifying and non-qualifying cogeneration or small power production facilities within the meaning of the Public Utility Regulatory Policies Act of 1978 (such qualifying facilities, "QFs") and exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs") within the meaning of the Act, as well as to developers, owners and operators of non-associate district thermal energy systems, i.e., energy systems consisting of central production plants that distribute steam, hot water and/or chilled water through underground pipes to customer buildings./1/ Specifically, Asset Management Services will include development; engineering; design; construction and construction management; pre-operational start-up testing and commissioning; long-term operations and maintenance, including system overhaul; load control and network control; fuel procurement, transportation and storage; fly-ash and other waste disposal; management and supervision; technical, training and administrative support; and any other managerial or technical services required to operate, maintain and manage energy-related assets physically associated with customer premises or to operate, maintain and manage municipality - or cooperative-owned systems, IPPs and district thermal energy systems. Without obtaining the prior approval of the Commission in a separate filing, Solutions will not undertake any Asset Management Service if, as a result thereof, Solutions would become a "public utility company" within the meaning of the Act. 3. Consulting Services Applicants also contemplate that Solutions will market to non-associates, primarily commercial/industrial customers, general technical consulting services with respect to energy-related matters ("Consulting Services"). Specifically, the Consulting Services will include technical and consulting services involving technology assessments, power factor correction and harmonics mitigation analysis, commercialization of electro-technologies, meter reading and repair, rate schedule analysis and design, environmental services, engineering services, billing services including conjunctive billing, summary billing for customers with multiple locations and bill auditing, risk management services, communications systems, information systems/data processing, system planning, strategic planning, finance, feasibility studies, and other similar or related services. 4. Project Development and Ownership Another important aspect of Solutions' business will consist of acquiring, owning and operating "Projects," i.e.: (a) QFs, (b) district thermal energy systems, and (c) potentially other energy-related systems, together in each case with ancillary facilities and equipment, including thermal energy utilization facilities, fuel procurement, transportation and storage facilities, waste disposal equipment, and similar assets or equipment. Applicants request authorization herein for Solutions to conduct preliminary Project development activities ("Project Development"). Such activities will include Project due diligence and design review; market studies; site inspection; preparation of bid proposals (including posting of bid bonds, cash deposits and the like); applications for required permits or regulatory approvals; acquisitions of site options and options on other necessary rights; negotiation and execution of contractual commitments with owners of existing facilities, equipment vendors, construction firms, power purchasers, thermal "host" users, fuel suppliers and other Project contractors; negotiation of financing commitments with lenders and equity co-investors; and such other preliminary development activities as may be required or prudent in preparation for the acquisition, operation or financing of a Project. Solutions will not acquire directly or indirectly interests in any Projecs without obtaining the prior approval of the Commission in a separate filing, unless otherwise exempted under the Act. 5. Consumer Services Solutions would also market a panoply of energy-related services and products ("Consumer Services") exclusively to residential and small commercial customers. Consumer Services will include (1) Service lines repair/extended warranties - repair of underground utility service lines owned by and located on the customer's property and extended service warranties covering the cost of such repairs; (2) Surge protection - meter-based and plug-in equipment to protect customer household appliances and electronic equipment from power surges, including due to lightning; (3) Appliances merchandising/repair/extended warranties - marketing of HVAC and other energy-related household appliances and, in connection therewith or separately, marketing of appliance inspection and repair services and extended service warranties covering the cost of repairing customers' appliances; (4) Utility bill insurance - utility bill payment protection, for a monthly fee for a specified number of months, in the event the customer becomes unemployed, disabled or dies; (5) Gas pilot lighting - - lighting of pilot lights for customers; and (6) other similar or related services. 6. Customer Financing Solutions also would furnish its own or broker non-associate third-party financing to commercial/industrial and residential customers, both to support sales to customers of goods and services included within Energy Management Services, Asset Management Services and Consumer Services and in connection with sales of energy-related equipment where the customer is not otherwise purchasing goods and services promoted by Solutions. For example, as an integral part of its Asset Management Services, Solutions may assist a large industrial customer in upgrading that customer's existing electric substation located on its premises by, among other things, helping the customer obtain necessary financing, either through Solutions directly or through a bank, leasing company or other financial institution arranged by Solutions. Solutions also may provide or broker financing in circumstances where the customer is not otherwise purchasing Solutions products or services - for example, to a residential customer that purchases a heat pump from an HVAC dealer, but purchases no Energy Management Services or Consumer Services. Customer financing will take the form of direct loans, installment purchases, operating or finance lease arrangements (including sublease arrangements) and loan guarantees. Interest on loans and imputed interest on lease payments will be based on prevailing market rates. The obligations will have terms of one to thirty years and will be secured or unsecured. Solutions also may assign obligations acquired from customers to banks, leasing companies or other financial institutions, with or without recourse. 7. Wholly-Owned Subsidiaries; Third-Party Alliances Solutions may undertake certain of the proposed business activities on its own, either directly or through one or more wholly-owned direct or indirect subsidiaries of Solutions, formed as corporations, partnerships, limited liability companies or other legal entities. The decision in particular cases whether to conduct specific business activities directly through Solutions or indirectly through one or more wholly-owned subsidiaries of Solutions will hinge on applicable business, legal, tax, accounting and strategic considerations. In addition, to mitigate risk or access skills and relationships that Solutions may require, Applicants expect that Solutions will pursue proposed business activities in certain instances through alliances with non-associates. Certain of these alliances may be relatively informal, not involving the formation of any new entities. Others may encompass formal joint ventures, possibly involving the formation of one or more wholly- or partly-owned subsidiaries of Solutions. Applicants request authorization for Solutions to form any such wholly-or partly-owned subsidiaries for the exclusive purpose of implementing its proposed business activities as previously described. Applicants do not at this time request authorization for Solutions to acquire securities of any third-party with whom it may ally. D. Incorporation of Solutions; Guaranties by Cinergy and Investments In connection with its formation and initial capitalization under Delaware law, Solutions is expected to issue and sell up to 100 shares of no par value common stock to Investments for nominal cash consideration (not to exceed $1,000). Thereafter, from time to time through December 31, 2001, Cinergy and Investments expect to invest not more than $100 million in Solutions (including any subsidiaries of Solutions), either by acquiring securities of Solutions or making cash capital contributions to Solutions, in exempt transactions pursuant to Rules 52 and 45(b)(4)./2/ As detailed below, Cinergy and Investments request authority through December 31, 2001 to guarantee debt and other obligations of Solutions (including any subsidiaries of Solutions) incurred in the ordinary course of business in a maximum principal amount at any one time outstanding not to exceed $250 million. *Debt financing of Solutions proposed to be guaranteed by Cinergy or Investments (a) will not exceed a term of 15 years, and (b) will bear interest (1) at a floating rate not in excess of 200 basis points over the prime rate, London Interbank Offered Rate or other appropriate index in effect from time to time, or (2) at a fixed rate not in excess of 250 basis points above the yield at the time of issuance of U.S. Treasury obligations of a comparable maturity. Any commitment and other fees on the debt will not exceed 75 basis points per annum on the total amount of debt financing. *Other obligations incurred by Solutions in the ordinary course of business as to which Cinergy and Investments propose to guarantee or otherwise act as indemnitor or surety are expected often to involve Solutions' obligation to perform under contracts with customers to which it is a party. "Guarantees" issued by Cinergy or Investments in these circumstances may take the form of procuring bid bonds and the like or guaranteeing Solutions' performance or other similar direct or indirect guarantees of Solutions' contractual or other obligations. Applicants anticipate that these parent company "backstops" will be required to establish Solutions' financial credibility to certain customers as a prerequisite to obtaining the customer's business and/or on the most favorable terms. Cinergy will not seek recovery through higher rates to customers of Cinergy's utility subsidiaries in order to compensate it or Investments for any potential losses they may sustain, or inadequate returns they may realize, resulting from investments in Solutions or guarantees of Solutions' debt or other obligations. E. Employee Arrangements; Expanded Range of Services under Existing Nonutility Service Agreement Initially, Solutions is expected to have limited full-time staff, primarily executive, management, and administrative personnel. Applicants expect that Solutions will make extensive use of outside contractors and consultants in performing its proposed business activities. Applicants propose that Cinergy Services render an expanded range of support services to Solutions (including any subsidiaries thereof) and the other system nonutility companies. Pursuant to the Cinergy system Nonutility Service Agreement ("NUSA") authorized by the Commission in its 1994 order approving the merger that created Cinergy and certain ancillary transactions including the formation of Cinergy Services,/3/ Cinergy Services may provide certain services, primarily administrative and management-type services, to Cinergy's nonutility subsidiaries, priced at cost for the domestic nonutility subsidiaries, as determined pursuant to Rule 90 under the Act, and at fair market value for certain foreign subsidiaries of Cinergy,/4/ and otherwise in accordance with applicable rules and regulations promulgated by the Commission pursuant to Section 13(b) of the Act. Specifically, the services that Cinergy Services may currently render to its nonutility associates/5/ are as follows: (1) information systems, (2) transportation, (3) human resources, (4) facilities, (5) accounting, (6) public affairs, (7) legal, (8) finance, (9) internal audit, (10) investor relations, (11) planning and (12) executive. By contrast, under the Cinergy system Utility Service Agreement ("USA"), also approved in the Commission's 1994 merger order and pursuant to which Cinergy Services renders services at cost to Cinergy's utility subsidiaries,/6/ a much broader range of services are made available. In addition to the same 12 services made available to the client companies under the NUSA, the following additional services may be provided by Cinergy Services to the utility subsidiaries: (1) electric system maintenance, (2) marketing and customer relations, (3) electric transmission and distribution engineering and construction, (4) power engineering and construction, (5) materials management, (6) power planning, (7) rates, (8) rights of way, (9) environmental affairs and (10) fuels./7/ Applicants request Commission authorization for Cinergy Services to provide certain additional services under the NUSA, priced in accordance with the Commission's 1994 merger order and otherwise rendered in conformance with Section 13(b) of the Act and the applicable rules and regulations thereunder. The proposed additional services are in general very similar to those additional services under the USA (enumerated above) that are not currently available under the NUSA. They are intended to accommodate the scope of Solutions' proposed business activities as well as that of the Cinergy system's other nonutility subsidiaries. Specifically, the proposed additional services (collectively, "Additional NUSA Services") are as follows: (1) energy-related facility maintenance, (2) engineering and construction, (3) marketing and customer relations, (4) materials management, (5) fuels, (6) environmental affairs, (7) rates, (8) rights of way and (9) energy-related system operations./8/ Reference is made to Exhibit B for a more detailed description of the Additional NUSA Services. As set forth therein, the Additional NUSA Services would be implemented by means of a restatement of existing Appendix A to the NUSA (which lists and describes the currently available services under the NUSA). Applicants do not otherwise in any respect propose to amend the NUSA. As noted, the Additional NUSA Services are roughly parallel to the additional functions already made available to Cinergy's utility subsidiaries under the USA. Consequently, Applicants do not anticipate a need to add any new employees to Cinergy Services solely to implement the Additional NUSA Services. Applicants hereby represent that the provision of the Additional NUSA Services will not impair Cinergy Services' ability to provide the full range of services that it currently provides to the system utility companies under the USA. All costs associated with Cinergy Services personnel rendering any Additional NUSA Services (including compensation, benefits and overhead) will be fully reimbursed by Solutions and other system nonutility companies that request and receive such services in accordance with Section 13(b) of the Act and the applicable rules and regulations thereunder, including Rules 90 and 91. F. Reporting Obligations Applicants propose that Solutions be subject to the periodic reporting requirements set forth below: *Solutions will file an annual report under Rule 24 of the Act setting forth the following information for the preceding calendar year: (1) a narrative report of business activities undertaken by Solutions, including the formation of any subsidiaries thereof and any joint ventures with third parties; and (2) a description of any services received by Solutions or its subsidiaries from Cinergy Services and the aggregate dollar value thereof. *Solutions will file the following unaudited and other information within 45 days after the end of each calendar quarter for the preceding calendar quarter: (1) a statement of income; (2) a balance sheet; (3) a cash flow statement; and (4) a summary of any Cinergy or Investments' guarantees of Solutions' or its subsidiaries' then-outstanding debt or other obligations, including the aggregate amount thereof. G. Rule 54 Statement Under Rule 54, in determining whether to approve the issue or sale of a security by a registered holding company for purposes other than the acquisition of an EWG or a FUCO other transactions by such registered holding company or its subsidiaries other than with respect to EWGs and FUCOs, the Commission shall not consider the effect of the capitalization or earnings of any subsidiary which is an EWG or a FUCO if the conditions in Rule 53(a), (b) and (c) are satisfied. As set forth below, all applicable conditions of Rule 53(a) are and, upon consummation of the proposed transactions, will be satisfied, and none of the conditions specified in Rule 53(b) exists or, as a result of the proposed transactions, will exist. Rule 53(a)(1): At June 30, 1996, Cinergy had invested, directly or indirectly, an aggregate of approximately $467 million in EWGs and FUCOs (inclusive of indirect investments through Special Purpose Subsidiaries). The average of the consolidated retained earnings of Cinergy reported on Form 10-K or Form 10-Q, as applicable, for the four consecutive quarters ended June 30, 1996 was $966 million. Accordingly, based on Cinergy's "consolidated retained earnings" at June 30, 1996, and taking into account investments as of said date, the current Rule 53 aggregate investment limitation is approximately $16 million (i.e., 50% of "consolidated retained earnings" - $483 million - minus "aggregate investment" at June 30, 1996 - $467 million). Rule 53(a)(2): Cinergy maintains 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, in English, 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): No more than 2% of the employees of Cinergy's operating utility subsidiaries will, at any one time, directly or indirectly, render services to EWGs and FUCOs. Rule 53(a)(4): Cinergy will simultaneously submit a copy of this statement and of any Rule 24 certificate hereunder, as well as a copy of Cinergy's Form U5S and Exhibits H and I thereto, to each public utility commission having jurisdiction over the retail rates of any Cinergy utility subsidiary. 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 thereof is the subject of any pending bankruptcy or similar proceeding. Rule 53(b)(2): Cinergy's average consolidated retained earnings for the four quarters ended June 30, 1996 are $966 million, versus $909 million for the four quarters ended June 30, 1995, a difference of approximately $57 million (representing an increase of 6.3%). Rule 53(b)(3): For the twelve months ended June 30, 1996, Cinergy did not report operating losses attributable to its direct and indirect investments in EWGs and FUCOs aggregating in excess of 5% of consolidated retained earnings. Item 2. Fees, Commissions and Expenses. The fees, commissions and expenses ("Fees") to be incurred, directly or indirectly, by Applicants or any associate companies thereof in connection with the proposed transactions are estimated as follows: U-1 filing fee................$2,000 Fees of Cinergy Services......$15,000 Fees of Reid & Priest.........$15,000 TOTAL.........................$32,000 Item 3. Applicable Statutory Provisions. Applicants consider that Sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the Act and Rules 45, 52, 54, 90 and 91 thereunder are or may be applicable to the proposed transactions. In addition to the provisions cited, certain of the transactions proposed herein are, or may be, exempted from the Commission's approval requirements under the Act in whole or in part pursuant to certain other existing provisions thereof or rules thereunder (such as Section 9(c)(3) and Rule 40(a)(4)) or proposed rules (such as proposed Rule 58). The filing of this Application-Declaration is not intended in any way to limit the availability of any of these existing or proposed exemptions. Item 4. Regulatory Approval. No state or federal regulatory agency other than the Commission under the Act has jurisdiction over the proposed transactions. Item 5. Procedure. Applicants request that the Commission issue and publish not later than October 31, 1996 the requisite notice under Rule 23 with respect to the filing of this Application-Declaration. Applicants further request that such notice specify a date not later than November 25, 1996 as the date after which the Commission may issue an order granting and permitting to become effective this Application-Declaration. Applicants waive a recommended decision by a hearing officer or other responsible officer of the Commission; consent that the Staff of the Division of Investment Management may assist in the preparation of the Commission's order; and request that there be no waiting period between the issuance of the Commission's order and its effectiveness. Item 6. Exhibits and Financial Statements. (a) Exhibits: A-1 Form of certificate of incorporation of Solutions (to be filed by amendment) A-2 Form of by-laws of Solutions (to be filed by amendment) A-3 Form of common stock certificate of Solutions (to be filed by amendment) B Form of restated Appendix A to NUSA (to be filed by amendment) C Not applicable D Not applicable E Not applicable F Preliminary opinion of counsel (to be filed by amendment) G Form of Federal Register notice (b) Financial Statements: FS-1 Cinergy Consolidated Financial Statements, dated June 30, 1996 FS-2 Cinergy Financial Statements, dated June 30, 1996 FS-3 Investments Consolidated Financial Statements, dated June 30, 1996 FS-4 Cinergy Services Financial Statements, dated June 30, 1996 FS-5 Cinergy Consolidated Financial Data Schedule (included as part of electronic submission only) FS-6 Cinergy Financial Data Schedule (included as part of electronic submission only) FS-7 Investments Financial Data Schedule (included as part of electronic submission only) FS-8 Cinergy Services Financial Data Schedule (included as part of electronic submission only) Item 7. Information as to Environmental Effects. (a) The Commission's action in this matter will not constitute major federal action significantly affecting the quality of the human environment. (b) No other 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 their behalf by the undersigned thereunto duly authorized. Dated: October 15, 1996 CINERGY CORP. By: /s/ William L. Sheafer Treasurer CINERGY INVESTMENTS, INC. By: /s/ William L. Sheafer Treasurer CINERGY SERVICES, INC. By: /s/ William L. Sheafer Treasurer ENDNOTES /1/ In February 1996, Cinergy formed a nonutility subsidiary, Cinergy Cooling Corp., to engage in the district thermal energy business in Cincinnati. Cinergy Cooling Corp. will construct, own and operate a district thermal energy plant and a network of underground distribution pipes in downtown Cincinnati that will provide chilled and possibly heated water to large commercial/governmental buildings in the downtown area for their space cooling/heating needs. As of the fall of 1996, Cinergy Cooling Corp. was in the preliminary stages of its business operations, having begun construction of its district energy system. For more information with respect to Cinergy Cooling Corp. and district thermal energy systems generally, reference is made to Rel. No. 35-26474, February 20, 1996, and to the Application-Declaration as amended and Rule 24 certificates in File No. 70-8767. /2/ Under Rule 52, Solutions' (and its subsidiaries') issuances of additional securities (common and preferred stock and any debt securities) to non-associates, as well as any issuances thereof to and acquisitions by associate companies, for the purpose of financing Solutions' existing business are exempt from prior Commission approval under the Act (provided that, with respect to any debt security issued by Solutions to any associate company, the interest rate and maturity date thereof are designed to parallel the effective cost of capital of the lending associate company). Rule 45(b)(4) exempts from prior Commission approval capital contributions (and non-interest bearing open-account advances) by any associate company to Solutions. Additional investments by Cinergy and Investments in Solutions and any subsidiary thereof would be funded (1) as to Cinergy, through sales of commercial paper and short-term notes to banks and other financial institutions (see File No. 70-8521, Rel. No. 35-26488, March 12, 1996) and/or through internally generated funds; and (2) as to Investments, through capital contributions, loans, and/or open-account advances from Cinergy (pursuant to Rules 45(b)(4) and 52) and/or internally generated funds. /3/ See Rel. No. 35-26146, October 21, 1994. A conformed copy of the NUSA was filed with the Commission on January 10, 1995 as an exhibit to the Rule 24 certificate in File No. 70-8427. /4/ I.e., subsidiaries that do not derive any material part of their income from sources within the United States and are not public-utility companies operating within the United States. See Section 13(b)(1) of the Act and Rule 83 thereunder. /5/ Currently, Cinergy has relatively few active nonutility subsidiaries. In 1995 and in the first nine months of 1996, Cinergy disposed of a number of nonutility subsidiaries in existence at the time of the 1994 merger through asset or stock sales to non-associates. Cinergy's currently active domestic nonutility subsidiaries are (1) TriState Improvement Company, which is engaged in the business of acquiring and holding real property for substations, electric and gas rights of way and other functions connected to the utility business of The Cincinnati Gas & Electric Company ("CG&E") and its utility subsidiaries, The Union Light, Heat and Power Company, Lawrenceburg Gas Company, Miami Power Corporation and The West Harrison Gas and Electric Company; (2) KO Transmission Company, which holds an interest in an interstate natural gas pipeline, acquired in the summer of 1996 pursuant to a settlement agreement between CG&E and the Columbia Gas System; (3) Cinergy Resources, Inc. (formerly CG&E Resource Marketing, Inc.), which is engaged in the gas marketing business; (4) Cinergy Technology, Inc. (formerly PSI Environmental Corp.), which pursues investment opportunities in technology and other energy-related areas and engages in fuel brokering; and (5) Cinergy Cooling Corp. Cinergy has interests in two active foreign subsidiaries, each a FUCO: Midlands Electricity plc and PSI Energy Argentina, Inc. /6/ Cinergy's utility subsidiaries are CG&E and its utility subsidiaries, which among other things provide retail gas and electric service to customers in portions of Ohio, Kentucky and Indiana, and PSI Energy, Inc., which among other things provides retail electric service to portions of Indiana. /7/ In addition, the USA expands the transportation function (which is also in the NUSA) to include utility meter work. /8/ In addition, the existing transportation function would be broadened to include meter work. EX-99.G 2 EXHIBIT G Exhibit G Cinergy Corp. et al. Notice of Proposal to Establish, Finance and Engage in Service Transactions with respect to New Nonutility Energy Services Subsidiary Cinergy Corp. ("Cinergy"), a registered holding company, its wholly-owned nonutility holding company subsidiary, Cinergy Investments, Inc. ("Investments"), and Cinergy's wholly-owned service company subsidiary, Cinergy Services, Inc. ("Cinergy Services"), each of 139 East Fourth Street, Cincinnati, Ohio 45202, have filed an application-declaration under Sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the Act and Rules 40(a)(4), 45, 52, 54, 90 and 91 thereunder. 1. Introduction Cinergy and Investments request authorization to incorporate and provide guaranties in respect of a new wholly-owned nonutility subsidiary, expected to be named Cinergy Solutions, Inc. ("Solutions"), which will market a wide variety of energy-related products and services exclusively to nonassociate commercial/industrial customers (including governmental, institutional and utility companies) and residential customers. Applicants state that Solutions will offer an integrated package of "value-added" energy-related products and services to enable customers to reduce energy costs, improve energy efficiency and increase productivity. Applicants request authorization for Solutions to conduct its proposed business activities directly through Solutions, through wholly-owned subsidiaries of Solutions, and through subsidiaries of Solutions jointly-owned with joint venture nonassociates. Finally, in connection with the formation of Solutions and its contemplated business activities, Cinergy Services requests authorization to provide an expanded range of support services to Cinergy Solutions (including any subsidiary thereof) and other system nonutility companies pursuant to an amendment to the existing Cinergy system nonutility service agreement ("NUSA"). 2. Proposed Business Activities Applicants request authorization for Solutions to engage in the initial business activities summarized below. Such services/products will be marketed to nonassociates on a local, regional, nationwide and, as opportunities develop, international basis. The services would be priced based on competitive market rates. In the first place, Solutions intends to offer a complete menu of energy management and efficiency services and related consulting services, often on a turnkey basis. These activities (collectively, "Energy Management Services") may also entail the marketing, installation, operation and maintenance of various products and services designed to implement the solutions recommended in the course of providing these services. Solutions will market Energy Management Services primarily to commercial/industrial customers, but also on a smaller scale to residential customers. Energy Management Services will include (1) identification (through energy audits or otherwise) of energy and other resource (water, labor, maintenance, materials, etc.) cost reduction or efficiency opportunities; (2) design of facility and process modifications or enhancements to realize such opportunities; (3) management, or direct construction and installation, of energy conservation or efficiency equipment; (4) training of client personnel in the operation of equipment; (5) maintenance of energy systems; (6) design, management or direct construction and installation of new and retrofit heating, ventillating, and air conditioning ("HVAC"), electrical and power systems, motors, pumps, lighting, water and plumbing systems, and related structures, to realize energy and other resource efficiency goals or to otherwise meet a customer's energy-related needs; (7) system commissioning (i.e., monitoring the operation of an installed system to ensure that it meets design specifications); (8) reporting of system results; (9) design of energy conservation programs; (10) implementation of energy conservation programs; (11) provision of conditioned power services (i.e., services designed to prevent, control or mitigate adverse effects of power disturbances on a customer's electrical system to ensure the level of power quality required by the customer, particularly with respect to sensitive electronic equipment); and (12) other similar or related activities. Second, Solutions will market comprehensive asset management services ("Asset Management Services"), on a turnkey basis or otherwise, in respect of energy-related systems, facilities and equipment (e.g., electric utility systems and assets, including distribution systems and substations; transmission facilities; electric generation facilities, including standby generation facilities and self-generation facilities; boilers; chillers, i.e., refrigeration and coolant equipment; HVAC; and lighting systems) located on or adjacent to premises of commercial/ industrial customers and used by such customers in connection with their business activities. Likewise, these services would be marketed to other owners of utility assets or systems such as municipalities and electric cooperatives. Additionally, these services would be marketed to developers, owners and operators of non-associate independent power production facilities ("IPPs"), including both qualifying and non-qualifying cogeneration or small power production facilities within the meaning of the Public Utility Regulatory Policies Act of 1978 (such qualifying facilities, "QFs") and exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs") within the meaning of the Act, as well as to developers, owners and operators of non-associate district thermal energy systems, i.e., energy systems consisting of central production plants that distribute steam, hot water and/or chilled water through underground pipes to customer buildings. In particular, Asset Management Services will include development; engineering; design; construction and construction management; pre-operational start-up testing and commissioning; long-term operations and maintenance, including system overhaul; load control and network control; fuel procurement, transportation and storage; fly-ash and other waste disposal; management and supervision; technical, training and administrative support; and any other managerial or technical services required to operate, maintain and manage energy-related assets physically associated with customer premises or to operate, maintain and manage municipality- or electric cooperative-owned utility systems, IPPs and district thermal energy systems. Without obtaining the prior approval of the Commission in a separate filing, Solutions will not undertake any Asset Management Service if, as a result thereof, Solutions would become a "public utility company" within the meaning of the Act. Third, Solutions proposes to market to nonassociates, primarily commercial/industrial customers, general technical consulting services with respect to energy-related matters ("Consulting Services"). Specifically, the Consulting Services will include technical and consulting services involving technology assessments, power factor correction and harmonics mitigation analysis, commercialization of electro-technologies, meter reading and repair, rate schedule analysis and design, environmental services, engineering services, billing services including conjunctive billing, summary billing for customers with multiple locations and bill auditing, risk management services, communications systems, information systems/data processing, system planning, strategic planning, finance, feasibility studies, and other similar or related services. Fourth, applicants state that Solutions would acquire, own and operate "Projects," i.e.: (a) QFs, (b) district thermal energy systems, and (c) potentially other energy-related systems, together in each case with ancillary facilities and equipment, including thermal energy utilization facilities, fuel procurement, transportation and storage facilities, waste disposal equipment, and similar assets or equipment. Applicants request authorization in the instant proceeding for Solutions to conduct preliminary Project development activities ("Project Development"). Such activities will include Project due diligence and design review; market studies; site inspection; preparation of bid proposals (including posting of bid bonds, cash deposits and the like); applications for required permits or regulatory approvals; acquisitions of site options and options on other necessary rights; negotiation and execution of contractual commitments with owners of existing facilities, equipment vendors, construction firms, power purchasers, thermal "host" users, fuel suppliers and other Project contractors; negotiation of financing commitments with lenders and equity co-investors; and such other preliminary development activities as may be required or prudent in preparation for the acquisition, operation or financing of a Project. Applicants state that Solutions will not acquire, directly or indirectly, interests in any Projects without obtaining the prior approval of the Commission in a separate filing, unless otherwise exempted under the Act. Fifth, Solutions would market energy-related services and products ("Consumer Services") exclusively to residential and small commercial customers: (1) Service lines repair/extended warranties - repair of underground utility service lines owned by and located on the customer's property and extended service warranties covering the cost of such repairs; (2) Surge protection - meter-based and plug-in equipment to protect customer household appliances and electronic equipment from power surges, including due to lightning; (3) Appliances merchandising/repair/extended warranties - marketing of HVAC and other energy-related household appliances and, in connection therewith or separately, marketing of appliance inspection and repair services and extended service warranties covering the cost of repairing customers' appliances; (4) Utility bill insurance - utility bill payment protection, for a monthly fee for a specified number of months, in the event the customer becomes unemployed, disabled or dies; (5) Gas pilot lighting - lighting of pilot lights for customers; and (6) other similar or related services. Sixth, Applicants propose that Solutions furnish its own or broker nonassociate third-party financing to commercial/industrial and residential customers, both to support sales to customers of goods and services included within Energy Management Services, Asset Management Services and Consumer Services and in connection with sales of energy-related equipment where the customer is not otherwise purchasing goods and services promoted by Solutions. Customer financing will take the form of direct loans, installment purchases, operating or finance lease arrangements (including sublease arrangements) and loan guarantees. Interest on loans and imputed interest on lease payments will be based on prevailing market rates. The obligations will have terms of one to thirty years and will be secured or unsecured. Solutions also may assign obligations acquired from customers to banks, leasing companies or other financial institutions, with or without recourse. Applicants request authorization for Solutions to undertake the proposed business activities on its own, either directly or through one or more wholly-owned direct or indirect subsidiaries of Solutions, formed as corporations, partnerships, limited liability companies or other legal entities. Applicants state that the decision in particular cases whether to conduct specific business activities directly through Solutions or indirectly through one or more wholly-owned subsidiaries of Solutions will hinge on applicable business, legal, tax, accounting and strategic considerations. In addition, to mitigate risk or access skills and relationships that Solutions may require, Applicants expect that Solutions will pursue proposed business activities in certain instances through alliances with nonassociates. Certain of these alliances may be relatively informal, not involving the formation of any new entities. Others may encompass formal joint ventures, possibly involving the formation of one or more wholly- or partly-owned subsidiaries of Solutions. Applicants also request authorization for Solutions to form any such joint venture subsidiaries, as in the preceding case solely for the purpose of implementing Solutions' proposed business activities. Applicants state that they do not at this time request authorization for Solutions to acquire securities of any third-party with whom it may ally. 3. Incorporation; Guaranties In connection with its incorporation and initial capitalization under Delaware law, Solutions is expected to issue and sell up to 100 shares of no par value common stock to Investments for nominal cash consideration (not to exceed $1,000). Cinergy and Investments do not expect to invest more than $100 million in Solutions (including any subsidiaries of Solutions) through December 31, 2001, either by acquiring securities of Solutions or making cash capital contributions to Solutions, in exempt transactions pursuant to Rules 52 and 45(b)(4). Cinergy and Investments request authority through December 31, 2001 to guarantee debt and other obligations of Solutions (including any subsidiaries of Solutions) incurred in the ordinary course of business in a maximum principal amount at any one time outstanding not to exceed $250 million. Debt financing of Solutions proposed to be guaranteed by Cinergy or Investments (a) will not exceed a term of 15 years, and (b) will bear interest (1) at a floating rate not in excess of 200 basis points over the prime rate, London Interbank Offered Rate or other appropriate index in effect from time to time, or (2) t at a fixed rate not in excess of 250 basis points above the yield at the time of issuance of U.S. Treasury obligations of a comparable maturity. Any commitment and other fees on the debt will not exceed 75 basis points per annum on the total amount of debt financing. Other obligations incurred by Solutions in the ordinary course of its business as to which Cinergy and Investments propose to guarantee or otherwise act as indemnitor or surety are expected often to involve Solutions' obligation to perform under contracts with customers to which it is a party. "Guarantees" issued by Cinergy or Investments in these circumstances may take the form of procuring bid bonds and the like or guaranteeing Solutions' performance or other similar direct or indirect guarantees of Solutions' contractual or other obligations. Applicants anticipate that these parent company "backstops" will be required to establish Solutions' financial credibility to certain customers as a prerequisite to obtaining the customer's business and/or on the most favorable terms. Cinergy states that it will not seek recovery through higher rates to customers of Cinergy's utility subsidiaries in order to compensate it or Investments for any potential losses they may sustain, or inadequate returns they may realize, resulting from investments in Solutions or guarantees of Solutions' debt or other obligations. 4. Staffing; Service Arrangements Initially, Solutions is expected to have limited full-time staff, primarily executive, management, and administrative personnel. Applicants expect that Solutions will make extensive use of outside contractors and consultants in performing its proposed business activities. Applicants propose that Cinergy Services render an expanded range of support services to Solutions (including any subsidiaries thereof) and the other Cinergy system nonutility companies. Pursuant to the NUSA, which was authorized by the Commission in its 1994 order approving the merger that created Cinergy and certain ancillary transactions including the formation of Cinergy Services,/1/ Cinergy Services may provide certain services, primarily administrative and management-type services, to Cinergy's nonutility subsidiaries, priced at cost for the domestic nonutility subsidiaries, as determined pursuant to Rule 90 under the Act, and at fair market value for certain foreign subsidiaries of Cinergy pursuant to Section 13(b)(1) and Rule 83, and otherwise in accordance with applicable rules and regulations promulgated by the Commission pursuant to Section 13(b) of the Act. Specifically, the services that Cinergy Services may currently render to its nonutility associates/2/ are as follows: (1) information systems, (2) transportation, (3) human resources, (4) facilities, (5) accounting, (6) public affairs, (7) legal, (8) finance, (9) internal audit, (10) investor relations, (11) planning and (12) executive. Under the Cinergy system Utility Service Agreement ("USA"), also approved in the Commission's 1994 merger order and pursuant to which Cinergy Services renders services at cost to Cinergy's utility subsidiaries,/3/ a much broader range of services are made available. In addition to the same 12 services made available to the client companies under the NUSA, the following additional services may be provided by Cinergy Services to the utility subsidiaries: (1) electric system maintenance, (2) marketing and customer relations, (3) electric transmission and distribution engineering and construction, (4) power engineering and construction, (5) materials management, (6) power planning, (7) rates, (8) rights of way, (9) environmental affairs and (10) fuels./4/ Applicants request authorization for Cinergy Services to provide certain additional services under the NUSA, priced in accordance with the Commission's 1994 merger order and otherwise rendered in conformance with Section 13(b) of the Act and the applicable rules and regulations thereunder. Applicants state that the proposed additional services are in general very similar to those additional services under the USA (enumerated above) that are not currently available under the NUSA and that the proposed additional services are intended to accommodate the scope of Solutions' proposed business activities as well as that of the Cinergy system's other nonutility subsidiaries. Specifically, the proposed additional services (collectively, "Additional NUSA Services") are as follows: (1) energy-related facility maintenance, (2) engineering and construction, (3) marketing and customer relations, (4) materials management, (5) fuels, (6) environmental affairs, (7) rates, (8) rights of way and (9) energy-related system operations./5/ Applicants state that the Additional NUSA Services would be implemented by means of a restatement of existing Appendix A to the NUSA (which lists and describes the currently available services under the NUSA). Applicants do not otherwise in any respect propose to amend the NUSA. As noted, applicants state that the Additional NUSA Services are roughly parallel to the additional functions already made available to Cinergy's utility subsidiaries under the USA. Consequently, applicants do not anticipate a need to add any new employees to Cinergy Services solely to implement the Additional NUSA Services. Applicants represent that the provision of the Additional NUSA Services will not impair Cinergy Services' ability to provide the full range of services that it currently provides to the system utility companies under the USA. All costs associated with Cinergy Services personnel rendering any Additional NUSA Services (including compensation, benefits and overhead) will be fully reimbursed by Solutions and other system companies that request and receive such services in accordance with Section 13(b) of the Act and the applicable rules and regulations thereunder, including Rules 90 and 91. For the Commission, by the Division of Investment Management, pursuant to delegated authority. ENDNOTES /1/ Rel. No. 35-26146, October 21, 1994. /2/ Cinergy states that it has relatively few active nonutility subsidiaries. In 1995 and in the first nine months of 1996, Cinergy states that it has disposed of a number of nonutility subsidiaries in existence at the time of the 1994 merger through asset or stock sales to nonassociates. Cinergy's currently active domestic nonutility subsidiaries are (1) TriState Improvement Company, which is engaged in the business of acquiring and holding real property for substations, electric and gas rights of way and other functions connected to the utility business of The Cincinnati Gas & Electric Company ("CG&E") and its utility subsidiaries, The Union Light, Heat and Power Company, Lawrenceburg Gas Company, Miami Power Corporation and The West Harrison Gas and Electric Company; (2) KO Transmission Company, which holds an interest in an interstate natural gas pipeline, acquired in the summer of 1996 pursuant to a settlement agreement between CG&E and the Columbia Gas System; (3) Cinergy Resources, Inc. (formerly CG&E Resource Marketing, Inc.), which is engaged in the gas marketing business; (4) Cinergy Technology, Inc. (formerly PSI Environmental Corp.), which pursues investment opportunities in technology and other energy-related areas and engages in fuel brokering; and (5) Cinergy Cooling Corp., a company engaged in the preliminary stages of a district thermal energy business in downtown Cincinnati (see Rel. No. 35-26474, February 20, 1996). Cinergy has interests in two active foreign subsidiaries, each a FUCO: Midlands Electricity plc and PSI Energy Argentina, Inc. /3/ Cinergy's utility subsidiaries are CG&E and its utility subsidiaries, which among other things provide retail gas and electric service to customers in portions of Ohio, Kentucky and Indiana, and PSI Energy, Inc., which among other things provides retail electric service to portions of Indiana. /4/ In addition, the USA expands the transportation function (which is also int he NUSA) to include utility meter work. /5/ In addition, the existing transportation function in the NUSA would be broadened to include meter work. EX-99.FS.1 3 FINANCIAL STATEMENTS SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U-1 CINERGY CORP. CONSOLIDATED AS OF JUNE 30, 1996 (Unaudited) Pages 1 through 6
CINERGY CORP. PRO FORMA CONSOLIDATED STATEMENT OF INCOME TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands, except per share amounts) OPERATING REVENUES Electric $2,706,643 - $2,706,643 Gas 443,941 - 443,941 3,150,584 - 3,150,584 OPERATING EXPENSES Fuel used in electric production 716,908 - 716,908 Gas purchased 222,350 - 222,350 Purchased and exchanged power 88,748 - 88,748 Other operation 574,820 - 574,820 Maintenance 186,003 - 186,003 Depreciation 278,880 - 278,880 Amortization of phase-in deferrals 13,617 - 13,617 Post-in-service deferred operating expenses - net (2,138) - (2,138) Income taxes 225,214 - 225,214 Taxes other than income taxes 260,393 - 260,393 2,564,795 - 2,564,795 OPERATING INCOME 585,789 - 585,789 OTHER INCOME AND EXPENSES - NET Allowance for equity funds used during construction 927 - 927 Post-in-service carrying costs 1,442 - 1,442 Phase-in deferred return 8,455 - 8,455 Income taxes 9,060 7,350 16,410 Other - net (11,052) - (11,052) 8,832 7,350 16,182 INCOME BEFORE INTEREST AND OTHER CHARGES 594,621 7,350 601,971 INTEREST AND OTHER CHARGES Interest on long-term debt 204,567 - 204,567 Other interest 17,890 21,000 38,890 Allowance for borrowed funds used during construction (6,548) - (6,548) Preferred dividend requirements of subsidiaries 26,985 - 26,985 242,894 21,000 263,894 NET INCOME $351,727 ($13,650) $338,077 AVERAGE COMMON SHARES OUTSTANDING 157,448 157,448 EARNINGS PER COMMON SHARE $2.23 $2.15 DIVIDENDS DECLARED PER COMMON SHARE $1.72
CINERGY CORP. PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 ASSETS Pro Forma Actual Adjustments Pro Forma (in thousands) UTILITY PLANT - ORIGINAL COST In service Electric $8,690,023 - $8,690,023 Gas 693,032 - 693,032 Common 185,749 - 185,749 9,568,804 - 9,568,804 Accumulated depreciation 3,475,410 - 3,475,410 6,093,394 - 6,093,394 Construction work in progress 148,826 - 148,826 Total utility plant 6,242,220 - 6,242,220 CURRENT ASSETS Cash and temporary cash investments 61,326 - 61,326 Restricted deposits 1,675 - 1,675 Accounts receivable less accumulated provision of $12,492 for doubtful accounts 141,125 - 141,125 Materials, supplies and fuel - at average cost Fuel for use in electric production 107,082 - 107,082 Gas stored for current use 24,237 - 24,237 Other materials and supplies 85,477 - 85,477 Property taxes applicable to subsequent year 58,411 - 58,411 Prepayments and other 42,851 - 42,851 522,184 - 522,184 OTHER ASSETS Regulatory Assets Amounts due from customers - income taxes 382,974 382,974 Post-in-service carrying costs and deferred operating expenses 187,967 - 187,967 Phase-in deferred return and depreciation 97,776 - 97,776 Deferred demand-side management costs 128,610 - 128,610 Deferred merger costs 81,093 - 81,093 Unamortized costs of reacquiring debt 73,457 - 73,457 Other 68,561 - 68,561 Investment in Avon Energy 457,567 - 457,567 Other 188,979 350,000 538,979 1,666,984 350,000 2,016,984 $8,431,388 $350,000 $8,781,388
CINERGY CORP. PRO FORMA CONSOLIDATED BALANCE SHEET AT JUNE 30, 1996 CAPITALIZATION AND LIABILITIES Pro Forma Actual Adjustments Pro Forma (dollars in thousands) COMMON STOCK EQUITY Common stock - $.01 par value; Authorized shares - 600,000,000 Outstanding shares - 157,679,129 $1,577 - $1,577 Paid-in capital 1,594,920 - 1,594,920 Retained earnings 981,003 (13,650) 967,353 Cumulative foreign translation adjustment (567) - (567) Total common stock equity 2,576,933 (13,650) 2,563,283 CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES Not subject to mandatory redemption 213,090 - 213,090 Subject to mandatory redemption 160,000 - 160,000 LONG-TERM DEBT 2,523,300 - 2,523,300 Total capitalization 5,473,323 (13,650) 5,459,673 CURRENT LIABILITIES Long-term debt due within one year 50,400 - 50,400 Notes payable 573,500 350,000 923,500 Accounts payable 257,952 - 257,952 Litigation settlement 80,000 - 80,000 Accrued taxes 245,277 (7,350) 237,927 Accrued interest 57,743 21,000 78,743 Other 57,785 - 57,785 1,322,657 363,650 1,686,307 OTHER LIABILITIES Deferred income taxes 1,119,325 - 1,119,325 Unamortized investment tax credits 180,387 - 180,387 Accrued pension and other postretirement benefit costs 211,103 - 211,103 Other 124,593 - 124,593 1,635,408 - 1,635,408 $8,431,388 $350,000 $8,781,388
CINERGY CORP. PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands) BALANCE JULY 1, 1995 $900,094 - $900,094 Net income 351,727 (13,650) 338,077 Dividends on common stock (270,559) - (270,559) Other (259) - (259) BALANCE JUNE 30, 1996 $981,003 ($13,650) $967,353
CINERGY CORP. Pro Forma Consolidated Journal Entries to Give Effect to Cinergy Corp.'s Proposed Investment of $100 Million in a Wholly-Owned Nonutility Subsidiary of Cinergy Investments, Inc., Cinergy Solutions, Inc.* Entry No. 1 Other Assets ** Notes Payable $350,000,000 To record issuance of notes payable by Cinergy Corp. ($100,000,000) and Cinergy Solutions, Inc. ($250,000,000) and to record corresponding consolidated assets of Cinergy Solutions, Inc. Entry No. 2 Interest expense ** Accrued interest $21,000,000 To record interest on notes payable issued to finance/purchase investment in Cinergy Solutions, Inc. ($350,000,000 @ 6.0%) Entry No. 3 Accrued taxes ** Income taxes $7,350,000 To record reduction in income tax expense due to interest on notes payable issued to finance/purchas investment in Cinergy Solutions, Inc. ($21,000,000 @ 35%)
EX-99.FS.2 4 FINANCIAL STATEMENTS SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U-1 CINERGY CORP. AS OF JUNE 30, 1996 (Unaudited) Pages 1 through 5
CINERGY CORP. PRO FORMA STATEMENT OF INCOME TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands, except per share amounts) OTHER INCOME AND EXPENSES - NET Equity in earnings of subsidiaries $355,457 ($9,750) $345,707 Income taxes (credit) 2,004 2,100 $4,104 Other - net (1,870) - ($1,870) 355,591 (7,650) $347,941 INCOME BEFORE INTEREST AND OTHER CHARGES 355,591 (7,650) $347,941 INTEREST 3,864 6,000 $9,864 NET INCOME $351,727 ($13,650) $338,077 AVERAGE COMMON SHARES OUTSTANDING 157,448 157,448 EARNINGS PER COMMON SHARE $2.23 $2.15 DIVIDENDS DECLARED PER COMMON SHARE $1.72
CINERGY CORP. PRO FORMA BALANCE SHEET AT JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (dollars in thousands) ASSETS CURRENT ASSETS Cash and temporary cash investments $8,847 - $8,847 Accounts receivable 47 - 47 Accounts receivable from affiliated companies 7,455 - 7,455 16,349 - 16,349 OTHER ASSETS Investment in subsidiaries 3,045,644 90,250 3,135,894 Other 1,655 - 1,655 3,047,299 90,250 3,137,549 $3,063,648 $90,250 $3,153,898 CAPITALIZATION AND LIABILITIES COMMON STOCK EQUITY Common stock - $.01 par value; Authorized shares - 600,000,000 Outstanding shares - 157,679,129 $1,577 - $1,577 Paid-in capital 1,594,920 - 1,594,920 Retained earnings 981,003 (13,650) 967,353 Cumulative foreign translation adjustment (567) - (567) Total common stock equity 2,576,933 (13,650) 2,563,283 LONG-TERM DEBT - - - Total capitalization 2,576,933 (13,650) 2,563,283 CURRENT LIABILITIES Notes payable 474,000 100,000 574,000 Accounts payable 234 - 234 Accounts payable to affiliated companies 12,741 - 12,741 Accrued taxes (1,046) (2,100) (3,146) Accrued interest 1,043 6,000 7,043 486,972 103,900 590,872 OTHER LIABILITIES Deferred income taxes (258) - (258) Other 1 - 1 (257) - (257) $3,063,648 $90,250 $3,153,898
CINERGY CORP. PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands) BALANCE JULY 1, 1995 $900,094 - $900,094 Net income 351,727 (13,650) 338,077 Dividends on common stock (270,559) - (270,559) Other (259) - (259) BALANCE JUNE 30, 1996 $981,003 ($13,650) $967,353
CINERGY CORP. Pro Forma Journal Entries to Give Effect to Cinergy Corp.'s Proposed Investment of $100 Million in a Wholly-Owned Nonutility Subsidiary of Cinergy Investments, Inc., Cinergy Solutions, Inc.* Entry No. 1 Investment in subsidiaries ** Notes Payable $100,000,000 To record issuance of notes payable used to finance investment in Cinergy Solutions, Inc. and to record corresponding investment in Cinergy Solutions, Inc. Entry No. 2 Interest expense ** Accrued Interest $6,000,000 To record interest on notes payable issued to purchase investment in Cinergy Solutions, Inc. ($100,000,000 @ 6.0%) Entry No. 3 Accrued taxes ** Income taxes $2,100,000 To record reduction in income tax expense due to interest on notes payable issued to purchase investment in Cinergy Solutions, Inc. ($6,000,000 @ 35%) Entry No. 4 Equity in earnings of subsidiaries ** Investment in subsidiaries $9,750,000 To record the net effect of Cinergy Investment Inc.'s pro forma journal entries involving interest and income tax expense on Cinergy Corporation
EX-99.FS.3 5 FINANCIAL STATEMENTS SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U-1 CINERGY INVESTMENTS, INC. AS OF JUNE 30, 1996 (Unaudited) Pages 1 through 5
CINERGY INVESTMENTS, INC. PRO FORMA STATEMENT OF INCOME TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (dollars in thousands) OTHER INCOME AND EXPENSES - NET Income taxes (credit) $2,132 $5,250 $7,382 Other - net (647) - (647) 1,485 5,250 6,735 INCOME BEFORE INTEREST AND OTHER CHARGES 1,485 5,250 6,735 INTEREST 961 15,000 15,961 NET INCOME $524 ($9,750) ($9,226)
CINERGY INVESTMENTS, INC. PRO FORMA BALANCE SHEET AT JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (dollars in thousands) ASSETS CURRENT ASSETS Cash and temporary cash investments $13,533 - $13,533 Accounts receivable 3,716 - 3,716 Accounts receivable from affiliated companies 21,482 - 21,482 Materials, supplies, and fuel - at average cost Other materials and supplies 233 - 233 Prepayments and other 496 - 496 39,460 - 39,460 OTHER ASSETS Investment in Avon Energy Holdings 457,567 - 457,567 Other (5,504) 350,000 344,496 452,063 350,000 802,063 $491,523 $350,000 $841,523 CAPITALIZATION AND LIABILITIES COMMON STOCK EQUITY Common stock - - - Paid-in capital 457,887 100,000 557,887 Retained earnings 8,495 (9,750) (1,255) Total common stock equity 466,382 90,250 556,632 LONG-TERM DEBT - - - Total capitalization 466,382 90,250 556,632 CURRENT LIABILITIES Notes Payable - 250,000 250,000 Accounts payable 2,234 - 2,234 Accounts payable to affiliated companies 28,730 - 28,730 Accrued taxes (807) (5,250) (6,057) Accrued interest - 15,000 15,000 30,157 259,750 289,907 OTHER LIABILITIES Deferred income taxes (5,562) - (5,562) Other 546 - 546 (5,016) - (5,016) $491,523 $350,000 $841,523
CINERGY INVESTMENTS, INC. PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (dollars in thousands) BALANCE JULY 1, 1995 ($2,412) - ($2,412) Net income 524 (9,750) (9,226) Cumulative foreign currency translation adjust 10,383 - 10,383 BALANCE JUNE 30, 1996 $8,495 ($9,750) ($1,255)
CINERGY INVESTMENTS, INC. Pro Forma Consolidated Journal Entries to Give Effect to Cinergy Corp.'s Proposed Investment of $100 Million in a Wholly-Owned Nonutility Subsidiary of Cinergy Investments, Inc., Cinergy Solutions, Inc.* Entry No. 1 Other Assets ** Paid -In Capital $100,000,000 To record capital contribution by Cinergy Corp. used to finance investment in Cinergy Solutions, Inc and to record corresponding consolidated assets of Cinergy Solutions, Inc. Entry No. 2 Other Assets ** Notes Payable $250,000,000 To record issuance of notes payable by Cinergy Solutions, Inc. and to record corresponding consolidated assets of Cinergy Solutions, Inc. Entry No. 3 Interest expense ** Accrued interest $15,000,000 To record interest on notes payable issued by Cinergy Solutions, Inc. ($250,000,000 @ 6.0%) Entry No. 4 Accrued taxes ** Income taxes $5,250,000 To record reduction in income tax expense due to interest on notes payable issued by Cinergy Solutions, Inc. ($15,000,000 @ 35%)
EX-99.FS.4 6 FINANCIAL STATEMENTS SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U-1 CINERGY SERVICES, INC. AS OF JUNE 30, 1996 (Unaudited) Pages 1 through 6
CINERGY SERVICES, INC. PRO FORMA STATEMENT OF INCOME TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands) OPERATING REVENUES Electric $469,355 - $469,355 Gas - - - 469,355 - 469,355 OPERATING EXPENSES Other operation 458,736 - 458,736 Depreciation 98 - 98 Taxes Federal and state income 624 - 624 State, local and other 10,651 - 10,651 470,109 - 470,109 OPERATING INCOME (754) - (754) OTHER INCOME AND EXPENSES - NET Other - net (18) - (18) (18) - (18) INCOME BEFORE INTEREST AND OTHER CHARGES (772) - (772) INTEREST AND OTHER CHARGES Other interest 219 - 219 219 - 219 NET INCOME ($991) - ($991)
CINERGY SERVICES, INC. PRO FORMA BALANCE SHEET AT JUNE 30, 1996 ASSETS Pro Forma Actual Adjustments Pro Forma (in thousands) UTILITY PLANT - ORIGINAL COST In service Electric - - - Gas - - - Common 1,272 - 1,272 1,272 - 1,272 Accumulated depreciation 94 - 94 1,178 - 1,178 Construction work in progress 709 - 709 Total utility plant 1,887 - 1,887 CURRENT ASSETS Cash and temporary cash investments 593 - 593 Accounts receivable - net 1,329 - 1,329 Accounts receivable from affiliated companies 19,566 - 19,566 21,488 - 21,488 OTHER ASSETS Other 377 - 377 377 - 377 $23,752 - $23,752
CINERGY SERVICES, INC. PRO FORMA BALANCE SHEET AT JUNE 30, 1996 CAPITALIZATION AND LIABILITIES Pro Forma Actual Adjustments Pro Forma (dollars in thousands) COMMON STOCK EQUITY Common stock - - - Paid-in capital - - - Retained earnings (1,044) - (1,044) Total common stock equity (1,044) - (1,044) CURRENT LIABILITIES Notes payable to associated companies 17,333 - 17,333 Accounts payable 6,381 - 6,381 Accrued taxes 1,903 - 1,903 25,617 - 25,617 OTHER LIABILITIES Deferred income taxes (1,278) - (1,278) Other 457 - 457 (821) - (821) $23,752 - $23,752
CINERGY SERVICES, INC. PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS TWELVE MONTHS ENDED JUNE 30, 1996 Pro Forma Actual Adjustments Pro Forma (in thousands) BALANCE JULY 1, 1995 ($53) - ($53) Net income (991) - (991) BALANCE JUNE 30, 1996 ($1,044) - ($1,044)
CINERGY SERVICES, INC. Pro Forma Consolidated Journal Entries to Give Effect to Cinergy Corp.'s Proposed Investment of $100 Million in a Wholly-Owned Nonutility Subsidiary of Cinergy Investments, Inc., Cinergy Solutions, Inc.* EX-27.FS.5 7
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000899652 CINERGY CORP. 0 CINERGY CORP. (CONSOLIDATED) 1,000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 JUL-01-1995 JUL-01-1995 JUN-30-1996 JUN-30-1996 PER-BOOK PRO-FORMA 6,242,220 6,242,220 0 0 522,184 522,184 1,020,438 1,020,438 646,546 996,546 8,431,388 8,781,388 1,577 1,577 1,594,920 1,594,920 980,436 966,786 2,576,933 2,563,283 160,000 160,000 213,090 213,090 2,523,300 2,523,300 573,500 923,500 0 0 0 0 50,400 50,400 0 0 0 0 0 0 2,334,165 2,347,815 8,431,388 8,781,388 3,150,584 3,150,584 225,214 225,214 2,339,581 2,339,581 2,564,795 2,564,795 585,789 585,789 8,832 16,182 594,621 601,971 242,894 263,894 351,727 338,077 26,985 26,985 324,742 311,092 0 0 204,567 204,567 0 0 2.23 2.15 2.23 2.15 EX-27.FS.6 8
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000899652 CINERGY CORP. 1 CINERGY CORP. 1,000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 JUL-01-1995 JUL-01-1995 JUN-30-1996 JUN-30-1996 PER-BOOK PRO-FORMA 0 0 0 0 16,349 16,349 0 0 3,047,299 3,137,549 3,063,648 3,153,898 1,577 1,577 1,594,920 1,594,920 980,436 966,786 2,576,933 2,563,283 0 0 0 0 0 0 474,000 574,000 0 0 0 0 0 0 0 0 0 0 0 0 12,715 16,615 3,063,648 3,153,898 0 0 0 0 0 0 0 0 0 0 355,591 347,941 355,591 347,941 3,864 9,864 351,727 338,077 0 0 351,727 338,077 0 0 0 0 0 0 2 2 2 2 EX-27.FS.7 9
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000899652 CINERGY CORP. 13 CINERGY INVESTMENTS, INC. (CONSOLIDATED) 1,000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 JUL-01-1995 JUL-01-1995 JUN-30-1996 JUN-30-1996 PER-BOOK PRO-FORMA 0 0 0 0 39,460 39,460 0 0 452,063 802,063 491,523 841,523 0 0 457,887 557,887 8,495 (1,255) 466,382 556,632 0 0 0 0 0 0 0 250,000 0 0 0 0 0 0 0 0 0 0 0 0 25,141 34,891 491,523 841,523 0 0 0 0 0 0 0 0 0 0 1,485 6,735 1,485 6,735 961 15,961 524 (9,226) 0 0 524 (9,226) 0 0 0 0 0 0 0 0 0 0 EX-27.FS.8 10
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 0000899652 CINERGY CORP. 2 CINERGY SERVICES, INC. 1,000 12-MOS 12-MOS DEC-31-1995 DEC-31-1995 JUL-01-1995 JUL-01-1995 JUN-30-1996 JUN-30-1996 PER-BOOK PRO-FORMA 1,887 1,887 0 0 21,488 21,488 0 0 377 377 23,752 23,752 0 0 0 0 (1,044) (1,044) (1,044) (1,044) 0 0 0 0 0 0 17,333 17,333 0 0 0 0 0 0 0 0 0 0 0 0 7,463 7,463 23,752 23,752 469,355 469,355 0 0 470,109 470,109 470,109 470,109 (754) (754) (18) (18) (772) (772) 219 219 (991) (991) 0 0 (991) (991) 0 0 0 0 0 0 0 0 0 0 -----END PRIVACY-ENHANCED MESSAGE-----