-----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, RpF7RBgyt23cmMmtMTbeK69bBh5NmwYC1OAMeGtkWZQwNPtBHkYOlEy5Ol5amG7H VNAdMKsVMmo/AVANjacRUg== 0000899652-95-000019.txt : 19950414 0000899652-95-000019.hdr.sgml : 19950411 ACCESSION NUMBER: 0000899652-95-000019 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19950404 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/A SEC ACT: 1935 Act SEC FILE NUMBER: 070-08587 FILM NUMBER: 95526753 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/A 1 FORM U-1/A As filed with the Securities and Exchange Commission on April 4, 1995 File No. 70-8587 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM U-1 APPLICATION-DECLARATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 _______________________________________________ CINergy Corp., CINergy Services, Inc., The Cincinnati Gas & Electric Co., The Union Light, Heat and Power Co., The West Harrison Gas and Electric Co., Lawrenceburg Gas Co., Miami Power Corp., Tri-State Improvement Co., KO Transmission Co., CINergy Investments, Inc., CG&E Resource Marketing, Inc., Power International, Inc., Beheer- En Belegginsmaatschappij Bruwabel B.V., Power International s.r.o. and Power Development s.r.o. 139 East Fourth Street Cincinnati, Ohio 45202 PSI Energy, Inc., Wholesale Power Services, Inc., PSI Recycling, Inc. and Power Equipment Supply Co. 1000 East Main Street Plainfield, Indiana 46168 (Names 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. 139 East Fourth Street Cincinnati, Ohio 45202 (Name and address of agent 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, Jr. Milbank, Tweed, Hadley & McCloy Reid & Priest One Chase Manhattan Plaza 40 West 57th Street New York, New York 10005 New York, New York 10019 The Application-Declaration of CINergy Corp. ("CINergy") and certain of its subsidiary companies on Form U-1 and Exhibit 6 thereto are hereby amended to respond to certain questions and comments by the Staff of the Securities and Exchange Commission ("Commission") and, as so amended, are hereby restated in their entirety as set forth below. In connection with this Amendment No. 1 to the Application-Declaration, certain exhibits are being filed under cover of Form SE as to which the Staff of the Commission has granted a continuing hardship exemption from electronic filing requirements pursuant to Item 202(a) of Regulation S-T, 17 C.F.R. Section 232.202(a). Item 1. Description of Proposed Transactions. In this Application-Declaration, CINergy Corp. ("CINergy"), a Delaware corporation and a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"), and certain of its subsidiary companies/1/ seek authorization through May 31, 1997 (i) to incur short-term borrowings, (ii) to issue notes and/or commercial paper, (iii) to make capital contributions, and (iv) to establish and utilize a system of money pools to coordinate and provide for the short-term cash requirements of the Applicants, all as provided herein. In addition, CINergy seeks an order of the Commission that U.S. Energy Partners is not a "subsidiary company" of CINergy within the meaning of Section 2(a)(8) of the Act. By order dated January 11, 1995 in File No. 70-8521, Rel. No. 35-26215 (the "January 1995 Order"), the Commission authorized CINergy through January 31, 1997 to incur short-term indebtedness through bank borrowings, to issue notes and commercial paper, and to obtain letters of credit, all in an aggregate amount of up to $375 million. In this Application-Declaration, CINergy requests authorization to use the proceeds of such borrowings and sales of commercial paper (up to a maximum of $375 million at any one time), and any funds available for general corporate purposes (including any funds that may be available for general corporate purposes from the sale of heretofore unissued shares of CINergy Common Stock authorized by the Commission's order dated November 18, 1994 in File No. 70-8477, Rel. No. 35-26159)/2/, to loan funds to the other Applicants when required through the money pools described herein, and to make capital contributions and loans to certain of the Applicants as described in Item 1.B.2. In addition, in connection with bank borrowings by the other Applicants as described in Item 1.A.3.b. and Item 1.B.4., CINergy requests authorization herein (1) through May 31, 1997 to issue guarantees in an aggregate amount that, when added to any then-outstanding CINergy bank borrowings, commercial paper and letters of credit authorized by the January 1995 Order, would not exceed $375 million at any one time and (2) pursuant to the January 1995 Order, to obtain letters of credit (such letters of credit to be part of, and not in addition to, the letters of credit authorized in File No. 70-8521, Release No. 35-26215). Description of the Parties CINergy is a Delaware corporation and a holding company for CG&E, PSI Energy and a number of other companies. CG&E and its subsidiaries ULH&P, Lawrenceburg and West Harrison are primarily engaged in providing electric and/or gas service in the southwestern portion of Ohio and adjacent areas in Kentucky and Indiana. The area served with electricity, gas, or both covers approximately 3,000 square miles, has an estimated population of approximately 1.8 million, and includes the cities of Cincinnati and Middletown in Ohio, Covington and Newport in Kentucky, and Lawrenceburg in Indiana. Miami is an Indiana corporation and a subsidiary of CG&E. Miami owns a 138 kV transmission line running from the Miami Fort Power Station to a point near Madison, Indiana. PSI Energy is engaged in the production, transmission, distribution and sale of electric energy in north central, central, and southern Indiana. It serves a population of approximately 1.9 million in 69 of the 92 counties in Indiana, including the cities of Terre Haute, Kokomo, Columbus, Lafayette, Bloomington and New Albany. CINergy Services is a subsidiary service company for the CINergy system, and provides CG&E, PSI Energy and the other companies of the CINergy system with a variety of administrative, management and support services. Tri-State is a subsidiary of CG&E and is devoted to acquiring and holding property in Ohio, Kentucky and Indiana for substations, electric and gas rights of way, office space and other uses in the utility operations of CG&E and its utility subsidiaries. KO is a subsidiary of CG&E and was formed to acquire an interest in an interstate natural gas pipeline to which CG&E is entitled as a result of a settlement with the Columbia gas system. Subject to approval and jurisdiction of the Federal Energy Regulatory Commission ("FERC"), KO will be engaged in the transportation of natural gas in interstate commerce between Kentucky and Ohio. CINergy Investments is a subsidiary of CINergy and serves as a holding company for certain non-utility businesses of CINergy, including Wholesale Power, Recycling, Equipment, Resource Marketing, PII, and subsidiaries thereof. Wholesale Power was formed to engage in the business of brokering power, emission allowances, electricity futures, and related products and services and to provide consulting services in the wholesale power-related markets. Wholesale Power also has applied to the FERC for a marketing license to provide electric merchant service. In addition, Wholesale Power, through a division, The International Power Exchange, markets and maintains the services of an "electronic bulletin board" for the bulk power market. Recycling recycles paper, metal and other materials from Energy, its largest single supplier, CG&E and other companies. Equipment was formed to sell equipment and parts from a cancelled generating plant, the Marble Hill nuclear project. Equipment now also buys equipment for resale, brokers equipment, and sells equipment on consignment for others. Resource Marketing was formed to hold a one-third general partnership interest in Energy Partners, a gas marketing partnership with Public Service Electric & Gas Company. Resource Marketing was formed to compete with traditional regulated local distribution companies by offering "merchant service" (i.e., acquiring natural gas and selling it to customers) and to broker gas to industrial and large commercial customers, with the initial aim of recapturing former customers of CG&E's gas utility business. PII (formerly named Enertech Associates International, Inc.) was formed as a vehicle for CG&E to offer utility management consulting services and to pursue investment opportunities in energy-related areas, including demand-side management services, consulting, energy and fuel brokering, engineering services, and construction and/or operation of generation, co-generation and independent power production facilities. PII and its subsidiaries have a regional and international consulting services practice in Ohio, Kentucky, Indiana and a number of foreign countries, including the Czech Republic and certain countries that were formerly part of the Soviet Union, including Kazakhstan. PII has one direct subsidiary, Bruwabel, and two indirect subsidiaries, Power Development and Power International, which were organized to facilitate operations in the Czech Republic and the tax-efficient treatment of earnings from those operations. Bruwabel is organized under Dutch law, while Power International and Power Development are organized under Czech law. Additional information about the Applicants and their businesses is set forth in the Form U-1 Application-Declaration, as amended, of CINergy in File No. 70-8427, and the exhibits thereto (the "CINergy Merger U-1"). A. CINergy Utility Companies and Certain Non-Utility Companies 1. Borrowing Authority Authorization is requested through May 31, 1997 for CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-State (i) to incur short-term borrowings and to issue notes in connection therewith, and (ii) together with CINergy, to establish and utilize a money pool (the "Utility Money Pool") to coordinate and provide for certain of their short-term cash and working capital requirements. Authorization is also requested through May 31, 1997 for CG&E and PSI Energy to issue commercial paper. Under the authority requested herein (and, in the case of CINergy, the authority granted pursuant to the January 1995 Order), the maximum principal amount of short-term borrowings, notes and/or commercial paper outstanding at any one time for the CINergy system as a whole, and for CINergy, CINergy Services, CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, KO and Tri-State, will not exceed the following amounts: Company Aggregate amount CINergy system $1,000,000,000 CINergy 375,000,000 CINergy Services 100,000,000 PSI Energy 400,000,000 CG&E 400,000,000 ULH&P 35,000,000 West Harrison 200,000 Lawrenceburg 3,000,000 Miami 100,000 KO 2,000,000 Tri-State 40,000,000 The Amended Articles of Incorporation of CG&E limit the issuance of any unsecured indebtedness by CG&E to no more than 20% of the total principal amount of all bonds and other securities representing secured indebtedness issued by CG&E, plus the capital and surplus of CG&E then on its books. This limitation is not expected to interfere with any presently anticipated requirements for unsecured debt during the period covered by this Application. The charters of the other Applicants do not contain limits on outstanding amounts of unsecured debt. 2. Use of Proceeds Proceeds of any short-term borrowings by CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-State and sales of commercial paper by CG&E and PSI Energy may be used by each such company (i) for the interim financing of its construction and capital expenditure programs; (ii) for its working capital needs; (iii) for the repayment, redemption or refinancing of its debt and preferred stock; (iv) to meet unexpected contingencies, payment and timing differences, and cash requirements, to cover inter-company balances, and for other lawful general corporate purposes; (v) to loan to other participants in the Utility Money Pool described in Item 1.A.5 below (except that the proceeds, up to $200 million, of 12- to 24-month borrowings authorized by the Indiana Utility Regulatory Commission by order dated September 9, 1992 in Case No. 39438 (the "PSI Energy Restricted Funds"), shall not be used to make such loans); and (vi) in the case of borrowings by CINergy Services, for other lawful purposes in connection with the performance by CINergy Services of its functions as a subsidiary service company under the Act, including the purposes specified in the CINergy Merger U-1. In addition, proceeds of borrowings, and other available funds, may be used (i) by CG&E to make capital contributions of up to $40 million to Tri-State and up to $2 million to KO for the purpose of settling inter-company open- account balances and indebtedness to CG&E and to provide Tri-State and KO with working capital for their activities in support of CG&E's operations, and (ii) by CG&E and its utility subsidiaries (i.e., ULH&P, West Harrison, Lawrenceburg and Miami) to make loans and open-account advances to one another in connection with services, goods and construction provided to one another, as set forth in Item 3.B of the CINergy Merger U-1, such loans and open account advances not to exceed a maximum of $400 million for CG&E, $35 million for ULH&P, $200,000 for West Harrison, $3 million for Lawrenceburg, and $100,000 for Miami. Applicants' inter-company loan and open-account balances will be set forth in Exhibit 13 hereto. The Applicants' estimated construction and capital expenditures for the years 1995-1996 are as follows: ($ Millions) 1995 1996 Total PSI Energy 164 171 335 CG&E 127 175 302 ULH&P 15 19 34 Total 306 365 671 These estimates are subject to change due to numerous factors, including the rate of load growth, escalation of construction costs, changes in environmental and other regulation, delays from regulatory hearings and the adequacy of rate relief. In addition, the borrowing levels set forth in Item 1.A.1 above include a safety margin required because of the inherent nature of projections and such factors as possible timing differences in the sale of long-term securities which may be used to refund short-term debt, fluctuations in operating expenses, daily fluctuations of short-term cash requirements and resulting borrowing levels, changes in weather which affect income, escalation and timing of construction expenditures and other similar unpredictable events. 3. Bank Borrowings a. Existing bank facilities CINergy's existing formal lines of credit are embodied in a revolving credit agreement dated September 27, 1994 with Barclays Bank PLC, New York branch, and other banks. The banks under such credit agreement have currently committed to lend CINergy up to $100 million at any one time outstanding. At December 31, 1994, $75 million in borrowings were outstanding thereunder. For further information with respect to these borrowings, reference is made to the January 1995 Order. PSI Energy has formal bank facilities with commitments aggregating $230 million, under which $120.5 million in borrowings were outstanding at December 31, 1994. PSI Energy's formal lines of credit are embodied in 13 agreements with 12 banks (Exhibits 1.19-1.31 hereto), subject in each case to annual one-year extensions at the request of PSI Energy and with the consent of the respective banks. The credit lines are unsecured and provide for maturities of one year and one day for any borrowings by PSI Energy thereunder, with interest rate options at or below prime rate. Currently, CG&E has lines of credit with 12 banks with commitments aggregating $82 million (Exhibits 1.1-1.12 hereto). These lines of credit are maintained by compensating balances and/or fees. At year-end 1994, no borrowings were outstanding under any of these lines of credit. As of March 1, 1995, CG&E terminated a $200 million revolving credit facility with a consortium of banks. CG&E has no outstanding borrowings under that facility. ULH&P has formal bank lines of credit with four banks with commitments aggregating $30 million (Exhibits 1.13-1.16 hereto), under which $14.5 million in borrowings were outstanding as of December 31, 1994. Lawrenceburg has a formal line of credit with one bank, with a commitment of $400,000 (Exhibit 1.17 hereto). Lawrenceburg had no borrowings outstanding under this facility at year-end 1994. As of December 31, 1994, CINergy Services, West Harrison, Miami, KO and Tri-State had no committed lines of credit. Certain of the Applicants also have informal arrangements for short- term borrowings with various banks on an "as offered" basis, also known as uncommitted lines of credit. Since interest rates on these borrowings, when and if such borrowings are available, generally are below the prevailing prime rate, it is intended that these informal arrangements will continue to be utilized. b. Additional bank borrowings To provide flexibility to meet their cash needs, authorization is requested through May 31, 1997 for CG&E, PSI Energy, ULH&P and Lawrenceburg to borrow from banks pursuant to the existing formal and informal lines of credit described above (and any increases therein that may be negotiated) and for CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-State to borrow from banks pursuant to new credit facilities (formal or informal) that may be arranged from time to time, and for CINergy to issue guarantees and provide letters of credit in connection with such borrowings. All such borrowings and related CINergy guarantees and letters of credit would be made on or before May 31, 1997 and would be subject to the limitations on aggregate principal amount set forth in Item 1.A.1. In no event will the aggregate amount of such borrowings exceed the Applicants' total borrowing authority under applicable orders of the Commission. Such borrowings may be evidenced by promissory notes, which are expected to be in substantially the form filed herewith as Exhibit 2. Each of such notes (a) would be for the principal amount to be borrowed at the time (if a "transactional" note) or for the principal amount outstanding from time to time (if a "grid" note) from the lending bank and be payable to the order of such bank, (b) would be issued on or before May 31, 1997 and would mature on a date no later than one year (or, in the case of up to $200 million in borrowings by PSI Energy, no later than 24 months) from the date of issuance, (c) would bear interest at a rate no higher than the effective cost of money for unsecured prime commercial bank loans prevailing on the date of such borrowing, and (d) would be subject to prepayment at the option of borrower, or under certain circumstances with the consent of the lending bank, in whole at any time or in part from time to time, without premium or penalty. Amounts outstanding under formal lines of credit typically would become due immediately upon an event of default, including non-payment, default under other agreements governing indebtedness, bankruptcy, or insolvency. Short-term notes may be issued on either a "grid" note basis or a transactional basis, under similar terms and conditions. Ordinarily, short-term grid notes are issued to a lending institution before the first borrowing under such note. The holder of the notes maintains the record of borrowings and repayments without the necessity of issuing additional notes. The actual terms of the notes may vary from the terms described in Item 1.A.1 above to reflect customary terms or particular lending practices and policies of different lending institutions, but otherwise are expected to be substantially similar. Compensation arrangements under lines of credit would be on a compensating balance and/or fee basis. In general, fees range from 5 basis points to 20 basis points (and will not exceed 25 basis points) per annum on the commitment, and balance arrangements require average balances of 5% to 10% (and will not exceed 10%) of the amount of the commitment. For letters of credit obtained by CINergy pursuant to the Commission's order in File No. 70-8521 in support of the bank borrowings described herein, the maximum amount of fees and expenses to be incurred by CINergy would not exceed 1% per year of the face amount of such letters of credit. In the case of guarantees provided by CINergy for the benefit of its subsidiary companies, it is proposed that CINergy have authority to charge an annual fee of up to 2% of the face amount of such guarantee. Subject to the limitations on aggregate outstanding principal amount set forth in Item 1.A.1 above, authorization is also sought for CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri- State to borrow funds managed by the trust departments of banks if such borrowings would result in an estimated cost of money equal to or less than that available from the sale of commercial paper or other bank borrowings. Each such borrowing would be evidenced by notes payable on demand. 4. Commercial Paper The short-term borrowing needs of PSI Energy and CG&E have been met in part with the sale of commercial paper through commercial paper dealers (the "Dealers"). At any given time, PSI Energy and CG&E may be able to issue commercial paper at a lower cost than that applicable to short-term bank borrowings. Accordingly, to provide financing flexibility, CG&E and PSI Energy request authority through May 31, 1997 to issue and sell commercial paper, to one or more Dealers, subject to the limitations on aggregate outstanding principal amount stated in Item 1.A.1 above. There is no affiliation between CG&E or PSI Energy, or any of their subsidiaries, on the one hand, and any Dealer or any of its affiliates, on the other hand. The proceeds from the sale of commercial paper will be added to the seller's treasury funds and will be used for the purposes set forth in Item 1.A.2 above, including, without limitation, for the purpose of loans by the seller through the Utility Money Pool in the manner described in Item 1.A.5 below. The commercial paper which CG&E and PSI Energy propose to issue to Dealers will be in the form of book-entry unsecured promissory notes (in substantially the form filed herewith as Exhibit 3), with varying denominations of no less than $25,000 each. Such notes will be issued and sold by CG&E and PSI Energy directly to Dealers at market rates. No commission or fee will be payable in connection with the issuance and sale of the commercial paper. The purchasing Dealer, however, will reoffer such notes at a rate less than the rate to the issuer and, as principal, will reoffer such notes in such a manner as not to constitute a public offering under the Securities Act of 1933. CG&E and PSI Energy will issue and sell the proposed commercial paper to Dealers at a discount rate not in excess of the maximum discount rate per annum prevailing at the date of issuance for commercial paper of comparable quality of the particular maturity sold by public utility issuers thereof to Dealers. CG&E and PSI Energy also request authorization to sell commercial paper directly to certain financial institutions. Sales of commercial paper directly to such institutions will be undertaken only if the resulting cost of money is equal to or less than that available from Dealer-placed notes. The terms of any such notes would be similar to those of Dealer-placed notes. Maturities: The commercial paper issued by CG&E and PSI Energy will have varying maturities of no more than 270 days from date of issue and will be issued and sold by CG&E and PSI Energy from time to time through May 31, 1997. No such note will have a maturity date more than 270 days after May 31, 1997. Subject to such limitations, sales of commercial paper (and the bank borrowings described in Item 1.A.3) ordinarily will be structured to mature at such time as excess funds are expected to become available for loans through the money pool described in Item 1.A.5 below. Upon the availability of any such excess funds, external borrowings would be retired and loans refinanced to the extent such funds became available. 5. Utility Money Pool To coordinate and provide for their short-term cash and working capital requirements, CINergy, CG&E, PSI Energy, ULH&P, Lawrenceburg, Miami, West Harrison, CINergy Services, KO and Tri-State propose to establish and utilize a money pool (the "Utility Money Pool") and to issue and acquire promissory notes in connection therewith. The proposed terms of the Utility Money Pool are summarized below and will be memorialized in a definitive form of agreement to be filed as Exhibit 5. Under the proposed terms of the Utility Money Pool, short-term funds would be available from the following sources for short-term loans to CG&E, PSI Energy, ULH&P, Lawrenceburg, Miami, West Harrison, CINergy Services, KO and Tri- State from time to time: (1) surplus funds in the treasuries of Utility Money Pool participants other than CINergy, (2) surplus funds in the treasury of CINergy, and (3) proceeds from bank borrowings by Utility Money Pool participants (other than PSI Energy Restricted Funds) or the sale of commercial paper by CINergy, CG&E and PSI Energy for loan to the Utility Money Pool ("External Funds"). Funds would be made available from such sources in such order as CINergy Services, as administrator of the Utility Money Pool, may determine would result in a lower cost of borrowing, consistent with the individual borrowing needs and financial standing of the companies providing funds to the pool. The determination of whether a Utility Money Pool participant at any time has surplus funds to lend to the Utility Money Pool or shall lend funds to the Utility Money Pool would be made by such participant's chief financial officer or treasurer, or by a designee thereof, on the basis of cash flow projections and other relevant factors, in such participant's sole discretion. Funds made available by CINergy for loans through the money pools will be made available first for loans through the Utility Money Pool and thereafter for loans through the Non-Utility Money Pool. Companies that borrow would borrow pro rata from each company that lends, in the proportion that the total amount loaned by each such lending company bears to the total amount then loaned through the Utility Money Pool. On any day when more than one fund source (e.g., surplus treasury funds of CINergy and other Utility Money Pool participants ("Internal Funds") and External Funds), with different rates of interest, is used to fund loans through the Utility Money Pool, each borrower would borrow pro rata from each such fund source in the Utility Money Pool in the same proportion that the amount of funds provided by that fund source bears to the total amount of short-term funds available to the Utility Money Pool. Borrowings from the Utility Money Pool would require authorization by the borrower's chief financial officer or treasurer, or by a designee thereof. No party would be required to effect a borrowing through the Utility Money Pool if it is determined that it could (and had authority to) effect a borrowing at lower cost directly from banks or through the sale of its own commercial paper. No loans through the Utility Money Pool would be made to, and no borrowings through the Utility Money Pool would be made by, CINergy. Certain Costs: The cost of compensating balances and fees paid to banks to maintain credit lines by Utility Money Pool participants lending External Funds to the Utility Money Pool would initially be paid by the participant maintaining such line. A portion of such costs would be retroactively allocated every month to the companies borrowing such External Funds through the Utility Money Pool in proportion to their respective daily outstanding borrowings of such External Funds./3/ Interest Rate on Loans: If only Internal Funds comprise the funds available in the Utility Money Pool, the interest rate applicable to loans of such Internal Funds would be the CD yield equivalent of the 30-day Federal Reserve "AA" Industrial Commercial Paper Composite Rate (or if no such Composite Rate is established for that day, then the applicable rate would be the Composite Rate for the next preceding day for which such Composite Rate was established). If only External Funds comprise the funds available in the Utility Money Pool, the interest rate applicable to loans of such External Funds would be equal to the lending company's cost for such External Funds (or, if more than one Utility Money Pool participant had made available External Funds on such day, the applicable interest rate would be a composite rate equal to the weighted average of the cost incurred by the respective Utility Money Pool participants for such External Funds). In cases where both Internal Funds and External Funds are concurrently borrowed through the Utility Money Pool, the rate applicable to all loans comprised of such "blended" funds would be a composite rate equal to the weighted average of (a) the cost of all Internal Funds contributed by Utility Money Pool participants (as determined pursuant to the second preceding paragraph above) and (b) the cost of all such External Funds (as determined pursuant to the immediately preceding paragraph above). In circumstances where Internal Funds and External Funds are available for loans through the Utility Money Pool, loans may be made exclusively from Internal Funds or External Funds, rather than from a "blend" of such funds, to the extent it is expected that such loans would result in a lower cost of borrowing. Investment of Surplus Funds: Funds not required by the Utility Money Pool to make loans (with the exception of funds required to satisfy the Utility Money Pool's liquidity requirements) would ordinarily be invested in one or more short-term investments, including: (i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities, including obligations under repurchase agreements; (iii) obligations issued or guaranteed by any state or political subdivision thereof, provided that such obligations are rated not less than A by a nationally recognized rating agency; (iv) commercial paper rated not less than A-1 or P-1 or their equivalent by a nationally recognized rating agency; (v) money market funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii) such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder. Allocation of Interest Income and Investment Earnings: The interest income and investment income earned on loans and investments of surplus funds would be allocated among the participants in the Utility Money Pool in accordance with the proportion each participant's contribution of funds bears to the total amount of funds in the Utility Money Pool and the cost of funds provided to the Utility Money Pool by such participant. Repayment. Each Applicant receiving a loan through the Utility Money Pool would be required to repay the principal amount of such loan, together with all interest accrued thereon, on demand and in any event not later than one year after the date of such loan. All loans made through the Utility Money Pool could be prepaid by the borrower without premium or penalty. Form of Loans to Applicants: Loans through the Utility Money Pool would ordinarily be made pursuant to open-account advances, repayable upon demand and in any event not later than one year from the date of such advance. Under the authorization requested herein, all loans through the Utility Money Pool would be made on or before May 31, 1997. Each lender would at all times be entitled to receive upon demand one or more promissory notes evidencing any and all loans by such lender. Such notes would be substantially in the form filed as Exhibit 4, would be dated as of the date of the initial borrowing (and in any event not later than May 31, 1997), would mature on demand, or on a date agreed by the parties (but in any case not later than one year after the date of the applicable borrowing), and would be prepayable in whole at any time or in part from time to time, without premium or penalty. Interest would be accrued by each borrower monthly. B. Certain Other Non-Utility Companies 1. Borrowing Authority Authorization is requested through May 31, 1997 for PII, Bruwabel, Power International, Power Development, Recycling, Equipment and Wholesale Power (the "Designated Non-Utility Companies"), Resource Marketing, and CINergy Investments (i) to incur short-term borrowings (any or all of which borrowings may be guaranteed or supported by letters of credit arranged by CINergy) and to issue notes in connection therewith, and (ii) together with CINergy, to establish and utilize a money pool (the "Non-Utility Money Pool"), to be administered by CINergy Services, to coordinate and provide for certain short- term cash and working capital requirements of CINergy Investments, the Designated Non-Utility Companies and Resource Marketing. Under the authority requested herein, the aggregate principal amount of short-term borrowings and notes outstanding at any one time for the Designated Non-Utility Companies, CINergy Investments and Resource Marketing will not exceed the amounts set forth below, plus such additional amounts as may be authorized from time to time by the Commission. Company Aggregate amount CINergy Investments $ 22,000,000 PII 6,750,000 Bruwabel, Power International & Power Development (collectively) 4,000,000 Recycling 4,400,000 Equipment 1,100,000 Wholesale Power 1,200,000 Resource Marketing 2,000,000 Pursuant to the authority requested hereby, borrowings will not exceed those levels permitted from time to time by the borrowing company's charter. At present, the charters of the above companies do not contain limits on outstanding amounts of unsecured debt. 2. Use of Proceeds. Consistent with the Commission's Order dated October 21, 1994 in File No. 70-8427, in which the Commission reserved jurisdiction over the retainability of the non-utility businesses of the CINergy system, borrowings by CINergy Investments, Resource Marketing and the Designated Non-Utility Companies will be used (a) to provide working capital to continue to operate such companies' businesses as described in the CINergy Merger U-1 and to fund commitments existing as of the registration of CINergy as a holding company under the Act on October 25, 1994, (b) to repay and refinance indebtedness, (c) to loan to other participants in the Non-Utility Money Pool described in Item 1.B.3 below, and (d) for the additional purposes of making loans and capital contributions as more fully described below. Because certain of the Designated Non-Utility Companies and Resource Marketing have heretofore been net borrowers from their corporate parents, it has been the practice of such corporate parents to advance funds to such companies in the form of inter-company loans and open-account advances and periodically to forgive such indebtedness, thereby making capital contributions in the amount forgiven. Applicants' inter-company loan and open-account balances as of December 31, 1994, together with cash-flow projections and a summary of projected funding needs for CINergy Investments, Resource Marketing, and the Designated Non-Utility Companies for the period through May 31, 1997, will be included in Exhibit 13 hereto. Because certain of the Designated Non-Utility Companies and Resource Marketing may remain net borrowers during the period covered by this Application-Declaration, authorization is requested for CINergy from time to time through May 31, 1997 to make capital contributions and loans (in the form of open-account advances, repayable on demand, or otherwise through the Non- Utility Money Pool described in Item 1.B.3 below) to CINergy Investments and the Designated Non-Utility Companies, and for CINergy Investments and the Designated Non-Utility Companies to make capital contributions and loans (in the form of open-account advances, repayable on demand, or otherwise through the Non-Utility Money Pool) to their subsidiary companies; provided, that the aggregate amount of all then-outstanding borrowings by, and capital contributions to, a company shall not exceed its aggregate borrowing limit set forth in Item 1.B.1 above. Authority is also requested through May 31, 1997 (i) for CINergy and CINergy Investments from time to time to make capital contributions and loans (in the form of open-account advances, repayable on demand, or otherwise through the Non-Utility Money Pool) to Resource Marketing, and (ii) for Resource Marketing from time to time to make capital contributions and loans (in the form of open-account advances, repayable on demand) to Energy Partners, to provide for working capital needs, repayment or refinancing of debt, unexpected contingencies, payment and timing differences, cash requirements and other general business purposes of Energy Partners./4/ Energy Partners would not participate directly in any money pool hereunder, but would be able to borrow and receive capital contributions from Resource Marketing, subject to the limit set forth in Item 1.B.1 above with respect to Resource Marketing. The maximum dollar amounts of capital contributions and then- outstanding loans that would be made by CINergy to its subsidiary companies under the authority requested herein are as follows: to CINergy Investments, up to $22,000,000; to PII, up to $6,750,000; to Bruwabel, Power International & Power Development, up to $4,000,000 in the aggregate; to Recycling, up to $4,400,000; to Equipment, up to $1,100,000; to Wholesale Power, up to $1,200,000; to Resource Marketing, up to $2,000,000; and to U.S. Energy Partners, up to $2,000,000. The CINergy system's percentage interest in U.S. Energy Partners would not increase as a result of such contributions. 3. Terms of Non-Utility Money Pool To coordinate and provide for short-term cash and working capital requirements of Resource Marketing, CINergy Investments and the Designated Non- Utility Companies, CINergy, CINergy Services, CINergy Investments, Resource Marketing and the Designated Non-Utility Companies propose to establish a Non- Utility Money Pool, with terms similar to those governing the Utility Money Pool. Under the proposed arrangements governing the Non-Utility Money Pool, short-term funds will be available from the following sources for use by the respective participants from time to time: (1) surplus funds in the treasuries of CINergy Investments, Resource Marketing and the Designated Non-Utility Companies, (2) surplus funds in the treasury of CINergy, and (3) proceeds from the sale by CINergy of commercial paper and bank borrowings by CINergy, CINergy Investments, Resource Marketing and the Designated Non-Utility Companies ("External Sources"). Funds will be made available from such sources in such order as CINergy Services, as administrator of the Non-Utility Money Pool, may determine would result in a lower cost of borrowing from the Non-Utility Money Pool, consistent with the borrowing needs and financial standing of the companies providing funds to the pool. The determination of whether a Non- Utility Money Pool participant at any time has surplus funds to lend to the Non- Utility Money Pool or shall lend funds to the Non-Utility Money Pool will be made by an appropriate officer of such participant, or by a designee thereof, on the basis of cash flow projections and other relevant factors, in such participant's sole discretion. Companies that borrow will borrow pro rata from each company that lends, in the proportion that the total amount loaned by each such lending company bears to the total amount then loaned through the Non- Utility Money Pool. On any day when more than one fund source (e.g., surplus treasury funds of CINergy and other Non-Utility Money Pool participants ("Internal Sources") and External Sources), with different rates of interest, is used to fund loans through the Non-Utility Money Pool, each borrower will borrow pro rata from each such fund source in the Non-Utility Money Pool in the same proportion that the amount of funds provided by that fund source bears to the total amount of short-term funds available to the Non-Utility Money Pool. Loans through the Non-Utility Money Pool will be made only from funds provided by CINergy (but only after such funds have been made available for loans through the Utility Money Pool), CINergy Investments, Resource Marketing or other Designated Non-Utility Companies, and no loan will be made to CINergy, CINergy Investments, Resource Marketing, Energy Partners or any Designated Non- Utility Company by the Utility Money Pool or by any public utility company in the CINergy system. In addition, no loans through the Non-Utility Money Pool will be made to, and no borrowings through the Non-Utility Money Pool will be made by, CINergy. Borrowings from the Non-Utility Money Pool will be authorized by an appropriate officer of the borrower or by a designee thereof. No party shall be required to effect a borrowing through the Non-Utility Money Pool if it determines that it can (and is authorized to) effect a borrowing at lower cost directly from a bank. Certain Costs: The cost of compensating balances and fees paid to banks to maintain credit lines by Non-Utility Money Pool participants lending funds from External Sources to the Non-Utility Money Pool would initially be paid by the participant maintaining such line. A portion of such costs would be retroactively allocated every month to the companies borrowing funds from such External Sources through the Non-Utility Money Pool in proportion to their respective daily outstanding borrowings of funds from such External Sources./5/ Interest Rate on Loans: If only funds from Internal Sources comprise the funds available in the Non-Utility Money Pool, the interest rate applicable to loans of such funds from Internal Sources would be the CD yield equivalent of the 30-day Federal Reserve "AA" Industrial Commercial Paper Composite Rate (or if no such Composite Rate were established for that day, then the applicable rate would be the Composite Rate for the next preceding day for which such Composite Rate was established). If only funds from External Sources comprise the funds available in the Utility Money Pool, the interest rate applicable to loans of such funds from External Sources would be equal to the lending company's cost for such funds from External Sources (or, if more than one Non-Utility Money Pool participant had made available funds from External Sources on such day, the applicable interest rate would be a composite rate equal to the weighted average of the cost incurred by the respective Non-Utility Money Pool participants for funds from such External Sources). In cases where both funds from Internal Sources and External Sources are concurrently borrowed through the Non-Utility Money Pool, the rate applicable to all loans comprised of such "blended" funds would be a composite rate equal to the weighted average of (a) the cost of all funds contributed by Non-Utility Money Pool participants from Internal Sources (as determined pursuant to the second preceding paragraph above) and (b) the cost of all funds from External Sources (as determined pursuant to the immediately preceding paragraph above). In circumstances where funds from both Internal Sources and External Sources are available for loans through the Non-Utility Money Pool, loans may be made exclusively with funds from Internal Sources or External Sources, rather than from a "blend" of such funds, to the extent it is expected that such loans would result in a lower cost of borrowing. Investment of Surplus Funds: As in the case of the Utility Money Pool, funds not required by the Non-Utility Money Pool to make loans (with the exception of funds required to satisfy the Non-Utility Money Pool's liquidity requirements) will ordinarily be invested in one or more short-term investments, including: (i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities, including obligations under repurchase agreements; (iii) obligations issued or guaranteed by any state or political subdivision thereof, provided that such obligations are rated not less than A by a nationally recognized rating agency; (iv) commercial paper rated not less than A-1 or P-1 or their equivalent by a nationally recognized rating agency; (v) money market funds; (vi) bank certificates of deposit, (vii) Eurodollar funds, and (viii) such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder. Surplus funds of the Utility Money Pool and the Non-Utility Money Pool may be combined in common short-term investments, but separate records of such funds shall be maintained by CINergy Services as administrator of the pools, and interest thereon shall be separately allocated, on a daily basis, to each money pool in accordance with the proportion that the amount of each money pool's surplus funds bears to the total amount of surplus funds available for investment from both money pools. Allocation of Interest Income and Investment Earnings: The interest income and other investment income earned on loans and investment of surplus funds will be allocated among the participants in the Non-Utility Money Pool in accordance with the proportion each participant's contribution of funds bears to the total amount of funds in the Non-Utility Money Pool and the cost of any funds provided to the Non-Utility Money Pool by such participant from External Sources. Repayment. Each Applicant receiving a loan through the Non-Utility Money Pool will be required to repay the principal amount of such loan, together with all interest accrued thereon, on demand and in any event not later than one year after the date of such loan. All loans made through the Non-Utility Money Pool may be prepaid by the borrower without premium or penalty. Form of Loans to Applicants: As with the Utility Money Pool, loans through the Non-Utility Money Pool will ordinarily be made pursuant to open- account advances, repayable on demand but in any event not more than one year after the date of the advance. Under the authorization requested herein, all loans through the Non-Utility Money Pool will be made on or before May 31, 1997. Each lender will at all times be entitled to receive upon demand one or more promissory notes evidencing any and all loans by such lender. Such notes will be substantially in the form filed as Exhibit 4, will be dated as of the date of the initial borrowing (and in any event not later than May 31, 1997), will mature on demand, or on a date agreed to by the parties to the transaction (but in any case not later than one year after the date of the applicable borrowing), and will be prepayable in whole at any time or in part from time to time, without premium or penalty. Interest will be accrued monthly. The foregoing terms will be reflected in an agreement to be signed by the participants in the Non-Utility Money Pool, the form of which is filed as Exhibit 6.1 hereto. 4. Bank Borrowings PII has a $1,000,000 bank line of credit, which is embodied in an agreement to be filed as Exhibit 1.18 hereto. As of December 31, 1994, PII had no borrowings outstanding under the line of credit. PII proposes to maintain such line of credit to provide financing flexibility and an independent source of funds, outside the money pool system. To provide additional flexibility, it is proposed that CINergy Investments, Resource Marketing, and the Designated Non-Utility Companies also have authority to borrow under bank facilities, and for CINergy to provide guaranties and obtain letters of credit in connection therewith. Borrowings under such facilities would be evidenced by promissory notes with terms substantially similar to those described in Item 1.A.3.b above (but could bear interest at a rate of up to prime plus 2%) and would be subject to compensation arrangements similar to those described therein. Fees associated with guarantees and letters of credit issued or obtained by CINergy would be as described above in Section A.3.b. of this Item 1. 5. Continued Reservation of Jurisdiction CINergy requests that the Commission continue to reserve jurisdiction over the retention of certain non-utility businesses of the Applicants herein, in accordance with the Commission's October 21, 1994 Order in File No. 70-8427. C. Administration of Money Pools Operation of the Utility and Non-Utility Money Pools, including record keeping and coordination of loans, will be handled by CINergy Services under the authority of the appropriate officers of the Applicants. CINergy Services will administer the Utility and Non-Utility Money Pools on an "at cost" basis and will maintain separate records for each money pool. D. Reporting CINergy Services, on behalf of the Applicants, will file periodic reports with the Commission pursuant to Rule 24 under the Act setting forth (i) each Applicant's maximum principal amount of short-term borrowings outstanding, (ii) the average rate for each money pool over the period, and (iii) the maximum amount outstanding during the period for each source of outside borrowings. E. Statement Pursuant to Rule 54 Applicants do not intend at present to use the borrowings proposed herein to finance the acquisition of an exempt wholesale generator ("EWG") or a foreign utility company ("FUCO"). If the Applicants' intention changes, an amended Application-Declaration will be filed requesting authorization for such use. Under Rule 54, in determining whether to approve the issuance or sale of a security by a registered holding company for purposes other than the acquisition of an EWG or FUCO or other transactions by such registered holding company or its subsidiaries other than with respect to EWGs or FUCOs, the Commission shall not consider the effect of the capitalization or earnings of any subsidiary which is an EWG or FUCO upon the registered holding company system, if the conditions set forth in Rule 53(a), (b) and (c) are satisfied. As set forth below, all applicable conditions set forth in Rule 53(a) are and, assuming the 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, Inc. ("PSI Argentina") and its subsidiary, Costanera Power Corp. ("Costanera"), were determined to be EWGs by the Federal Energy Regulatory Commission ("FERC") in Costanera Power Corp., 61 FERC Paragraph 61,335 (1992), and PSI Argentina, Inc., 68 FERC Paragraph 61,286 (1994). PSI Energy Argentina ("Energy Argentina") is a FUCO and has filed a Notification of FUCO status on Form U-57. In addition to these investments, CINergy owns a number of other companies formed to hold investments in FUCOs and/or EWGs (CGE ECK, Inc., PSI T&D International, Inc., PSI Yacyreta, Inc., and E P EDEGEL, Inc.), and is seeking authorization to retain certain other companies (including PSI Power Resource Development, Inc., PSI Power Resource Operations, Inc., PSI International, Inc., and PSI Sunnyside, Inc.) and to form additional companies to facilitate FUCO and EWG investments. Because none of these other companies presently owns any EWG or FUCO, they are not included in the calculations below. 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 PSI Argentina, Costanera 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 formation of the CINergy system and the registration of CINergy as a holding company under the Act. Pursuant to the Commission's October 21, 1994 Order granting the CINergy Merger U-1, CINergy Services is authorized to provide services to utility and non-utility associate companies, including those that are EWGs or FUCOs. 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 authorizations 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 million in additional investment authority CINergy currently expects to request in a separate application, CINergy's aggregate investment authority for EWGs and FUCOs ($115,000,000) would 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. An estimate of the fees and expenses to be paid or incurred by the Applicants in connection with the proposed transactions is set forth below: Amount Holding Company Act filing fee. . . . . . $ 2,000* Rating agency fees for commercial paper (annual). . . . . . . . . . . . . . ** Counsel fees. . . . . . . . . . . . . . . 50,000 Miscellaneous and incidental expenses including travel, telephone and postage . . . . . . . . . . . . . . . . . 3,000 Total . . . . . . . . . . . . . . . . . . $ ** _______________ *Actual amount. **To be added by amendment. Fees with respect to bank borrowings are set forth in Item 1. In addition to the foregoing fees, CINergy Services will provide certain services in connection with the application, consisting primarily of treasury and legal services. Item 3. Applicable Statutory Provisions. Sections 6, 7, 9(a), 10, 12(b), 12(f) and 13 of the Act and Rules 40, 43, 45, 53, 54 and 80-95 thereunder are or may be applicable to one or more of the proposed transactions. To the extent any other sections of the Act and the Commission's rules thereunder may be applicable to the proposed transactions, the Applicants hereby request appropriate orders thereunder. Item 4. Regulatory Approval. Ohio: Pursuant to Ohio Code Section 4905.401, approval of the Public Utilities Commission of Ohio ("PUCO") is not required for "[t]he issue, renewal, or assumption of liability on . . . notes, or other evidences of indebtedness [payable at periods of not more than twelve months] which have been, or are the subject of an order of the [Commission] under the [Act]." Accordingly, PUCO approval is not statutorily required for the CG&E borrowings or commercial paper issuances proposed herein. Notwithstanding the foregoing, CG&E has committed to the PUCO in the context of this filing that it will not incur short-term debt in the future without PUCO authorization. With respect to CG&E's existing borrowing arrangements, all requisite approvals of the PUCO have been obtained. By order of the PUCO dated June 9, 1994 in Case No. 94-811-GE-AIS (Exhibit 7 hereto), CG&E is authorized to incur short-term indebtedness and issue promissory notes and/or commercial paper in an aggregate amount of up to $200,000,000 through June 30, 1995. Because the current $200 million short-term authorization expires on June 30, 1995, CG&E plans to file an application with the PUCO in the near future, pursuant to the commitment noted above, to extend that authorization and to increase its maximum authorized short-term borrowing limit to $400 million. Indiana: Under Indiana Code Section 8-1-2-78, an Indiana public utility may not, without the approval of the Indiana Utility Regulatory Commission ("IURC"), issue bonds, notes or other evidences of indebtedness payable at periods of "more than twelve (12) months after the date thereof." By order of the IURC dated September 9, 1992 in Case No. 39438 (Exhibit 8 hereto), PSI Energy is authorized to effect borrowings of not less than 12 months nor more than 24 months in an aggregate amount of up to $200,000,000 at any one time outstanding. The IURC order has no stated expiration date. The IURC order and applicable provisions of the Indiana Code do not allow the use of such borrowings by PSI Energy for purposes of making loans to the Utility Money Pool. Under the Indiana Code, IURC authorization is not required for borrowings of 12 months or less and is therefore not required for the other borrowings by PSI Energy (including the issuance of commercial paper by PSI Energy) proposed herein, or any of the borrowings by West Harrison, Lawrenceburg and Miami proposed herein. The Indiana Code does not limit the use of such 12-month-or- less borrowings or preclude the use of the proceeds of such borrowings for purposes of making loans through the Utility Money Pool, and IURC authorization is not required for PSI Energy to lend the proceeds of such 12-month-or-less borrowings through the Utility Money Pool as proposed herein. The $200 million in 12- to 24-month borrowings authorized by the IURC are included within the $400 million in PSI Energy short-term borrowing authority proposed in this Application-Declaration, but, as noted, the proceeds of such 12- to 24-month bank borrowings may not be used to make money pool loans, and PSI Energy does not intend to seek authorization to invest the proceeds of such borrowings in the Utility Money Pool. KPSC: Pursuant to an Order issued on October 25, 1994 in FERC Docket No. ES94-43-000 (Exhibit 9 hereto), ULH&P presently has all necessary authority from the FERC to issue up to $35,000,000 of unsecured promissory notes through December 31, 1996. No additional authorization from the Kentucky Public Service Commission ("KPSC") is required under Kentucky law for the ULH&P borrowings proposed herein. Additional approvals: Pursuant to the terms of certain settlement agreements, commitments and orders relating to the mergers that resulted in the formation of the CINergy system, CINergy is required to submit certain proposed inter-affiliate agreements subject to the Commission's jurisdiction (including the proposed Utility Money Pool Agreement) to the IURC and the PUCO for their review (over a period of up to 60 days) before filing such agreements with the Commission. During such review period, the applicable state commission may (among other things) reject, disapprove or find unreasonable the proposed inter- affiliate agreement, as more fully described in Item 3.B of the CINergy Merger U-1. Except as described above, no state or federal regulatory authority, other than the Commission under the Act, has jurisdiction over any of the proposed transactions, and no other state or federal authorizations are required for the transactions described herein. 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 thirty-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. Exhibit 1.1 - Letter agreement between CG&E and Star Bank and Grid Note ($5,000,000) (filed herewith). Exhibit 1.2 - Letter agreement between CG&E and The Fifth Third Bank and Promissory Note ($15,000,000) (filed herewith). Exhibit 1.3 - Letter agreement between CG&E and PNC Bank, Ohio, N.A., and Amended and Restated Grid Note ($10,000,000) (filed herewith). Exhibit 1.4 - Letter agreement between CG&E and The Provident Bank ($5,000,000) (filed herewith). Exhibit 1.5 - Letter agreement between CG&E and The First National Bank of Southwestern Ohio ($1,000,000) (filed herewith). Exhibit 1.6 - Letter agreement between CG&E and National City Bank, Kentucky, and Master Promissory Note in favor of First National Bank of Louisville ($5,000,000) (filed herewith). Exhibit 1.7 - Letter agreement between CG&E and NBD Bank, N.A. ($5,000,000) (filed herewith). Exhibit 1.8 - Letter agreement between CG&E and Society National Bank and Master Promissory Note ($6,000,000) (filed herewith). Exhibit 1.9 - Letter agreement between CG&E and The Bank of New York ($10,000,000) (filed herewith). Exhibit 1.10 - Letter agreement between CG&E and Citibank ($10,000,000) (filed herewith). Exhibit 1.11 - Letter agreement between CG&E and The Toronto-Dominion Bank and Note in favor of TD (Texas), Inc. ($5,000,000) (filed herewith). Exhibit 1.12 - Letter agreement between CG&E and Union Bank of Switzerland, Chicago Branch, and Promissory Note ($5,000,000) (filed herewith). Exhibit 1.13 - Letter agreement between ULH&P and Star Bank and Grid Note ($7,500,000) (filed herewith). Exhibit 1.14 - Letter agreement between ULH&P and The Fifth Third Bank and Promissory Note ($7,500,000) (filed herewith). Exhibit 1.15 - Letter agreement between ULH&P and Central Trust Company and Amended and Restated Grid Note in favor of PNC Bank, Ohio, National Association ($7,500,000) (filed herewith). Exhibit 1.16 - Letter agreement between ULH&P and National City Bank, Kentucky, and Master Promissory Note in favor of First National Bank of Louisville ($7,500,000) (filed herewith). Exhibit 1.17 - Letter agreement between The Lawrenceburg Gas Company and Star Bank N.A., Indiana ($400,000) (filed herewith). Exhibit 1.18 - Revolving Note between Enertech Associates International Inc. and The Fifth Third Bank ($1,000,000) (filed herewith). Exhibit 1.19 - Letter agreement between PSI Energy and Bank One, Indianapolis, N.A. and Master Note ($5,000,000) (filed herewith). Exhibit 1.20 - Committed Line of Credit Agreement between PSI Energy and Barclays Bank PLC and Grid Note of same date ($15,000,000) (filed herewith). Exhibit 1.21 - Letter agreement between PSI Energy and Canadian Imperial Bank of Commerce and Master Note ($30,000,000) (filed herewith). Exhibit 1.22 - Letter agreement between PSI Energy and The Chase Manhattan Bank, N.A., Promissory Note, and amendment letters ($30,000,000) (filed herewith). Exhibit 1.23 - Letter agreement between PSI Energy and Citibank, N.A. and Master Note ($15,000,000) (filed herewith). Exhibit 1.24 - Amended and Restated Revolving Note by PSI Energy in favor of The Fifth Third Bank ($15,000,000) (filed herewith). Exhibit 1.25 - Letter agreement dated between PSI Energy and The First National Bank of Chicago and Master Note ($15,000,000) (filed herewith). Exhibit 1.26 - Letter agreement between PSI Energy and Bank of Montreal and Unsecured Note ($27,000,000) (filed herewith). Exhibit 1.27 - Letter agreement between PSI Energy and NBD Bank, N.A., and Renewal Master Note ($5,000,000) (filed herewith). Exhibit 1.28 - Letter agreement between PSI Energy and National City Bank, Indiana, and Commercial Time Note ($3,000,000) (filed herewith). Exhibit 1.29 - Letter agreement between PSI Energy and The Mitsubishi Bank, Ltd., Chicago Branch, and Master Note ($40,000,000) (filed herewith). Exhibit 1.30 - Revolving Credit Agreement between PSI Energy and Swiss Bank Corporation, New York Branch, Promissory Note, and Amendment No. 2 ($15,000,000) (filed herewith). Exhibit 1.31 - Letter Agreement between PSI Energy and The Chase Manhattan Bank, N.A., and Master Note ($15,000,000) (filed herewith). Exhibit 2 - Form of note to evidence borrowings from banks. Exhibit 3 - Form of commercial paper note. Exhibit 4 - Form of note to be executed by borrowing Applicants to lending Applicants. Exhibit 5 - Form of Utility Money Pool Agreement (to be filed by amendment). Exhibit 6.1 - Revised Form of Non-Utility Money Pool Agreement. Exhibit 7 - PUCO Order dated June 9, 1994 (Case No. 94-811-GE-AIS) (filed herewith). Exhibit 8 - IURC Order dated September 9, 1992 (Case No. 39438) (filed herewith). Exhibit 9 - FERC Order issued October 25, 1994 (Docket No. ES94-43- 000) (filed herewith). Exhibit 10 - Preliminary opinion of counsel. Exhibit 11 - Final or "past tense" opinion of counsel (to be filed with certificate of notification). Exhibit 12 - Proposed notice of proceeding. Exhibit 13 - Cash-flow projections and inter-company loans and open account balances (to be filed by amendment). Exhibit 14 - Financial statements of Applicants (to be filed by amendment). Item 7. Information as to Environmental Effects. The proposed transactions do not involve major federal action having a significant effect on the human environment. To the best of the Applicants' knowledge no federal agency has prepared or is preparing an environmental impact statement with respect to the proposed transactions. Item 8. Power of Attorney. KNOW ALL MEN BY THESE PRESENTS, that each person signing below constitutes J. Wayne Leonard, Jackson H. Randolph and William L. Sheafer, and each of them, with full power to act without the others, his lawful attorney-in- fact and agent, with full power of substitution and resubstitution, for him and in his name, in any capacity, to sign any further amendment to this Application- Declaration, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Commission granting unto the attorneys-in-fact and agents, and each of them, full authority to do each act necessary to be done, as fully to all purposes as he might do in person, hereby ratifying all that the attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. S I G N A T U R E Pursuant to the requirements of the Public Utility Holding Company Act of 1935, as amended, the undersigned companies have duly caused this document to be signed on their behalf by the undersigned thereunto duly authorized. Dated: April 4, 1995 CINergy CORP. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer PSI ENERGY, INC. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer THE CINCINNATI GAS & ELECTRIC COMPANY By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer THE UNION LIGHT, HEAT AND POWER CO. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer THE WEST HARRISON GAS AND ELECTRIC CO. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer LAWRENCEBURG GAS CO. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer MIAMI POWER CORPORATION By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer CINergy SERVICES, INC. By /s/ J. WAYNE LEONARD J. Wayne Leonard Group Vice President and Chief Financial Officer CINergy INVESTMENTS, INC. By /s/ WILLIAM J. GREALIS William J. Grealis President KO TRANSMISSION CO. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer TRI-STATE IMPROVEMENT CO. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer PSI RECYCLING, INC. By /s/ M. STEPHEN HARKNESS M. Stephen Harkness Treasurer CG&E RESOURCE MARKETING, INC. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer WHOLESALE POWER SERVICES, INC. By /s/ M. STEPHEN HARKNESS M. Stephen Harkness Treasurer POWER EQUIPMENT SUPPLY CO. By /s/ M. STEPHEN HARKNESS M. Stephen Harkness Treasurer BEHEER- EN BELEGGINSMAATSCHAPPIJ BRUWABEL, B.V. By /s/ ROBERT VAN BEEMAN Robert van Beeman Managing Director By /s/ JOHAN LONT Johan Lont Managing Director POWER INTERNATIONAL, INC. By /s/ WILLIAM L. SHEAFER William L. Sheafer Treasurer POWER INTERNATIONAL, s.r.o. By /s/ ROBERT CHELBERG Robert Chelberg Director, Central and Eastern European Operations POWER DEVELOPMENT, s.r.o. By /s/ ROBERT CHELBERG Robert Chelberg Director, Central and Eastern European Operations ENDNOTES /1/ CINergy Services, Inc. ("CINergy Services"); PSI Energy, Inc. ("PSI Energy"); The Cincinnati Gas & Electric Company ("CG&E"); The Union Light, Heat and Power Co. ("ULH&P"); The West Harrison Gas and Electric Co. ("West Harrison"); Lawrenceburg Gas Co. ("Lawrenceburg"); Miami Power Corp. ("Miami"); Tri-State Improvement Co. ("Tri-State"); KO Transmission Co. ("KO"); CINergy Investments, Inc. ("CINergy Investments"); CG&E Resource Marketing, Inc. ("Resource Marketing"); Power International, Inc., formerly named Enertech Associates International, Inc. ("PII"); Beheer- En Belegginsmaatschappij Bruwabel B.V. ("Bruwabel"); Power International s.r.o. ("Power International"); Power Development s.r.o. ("Power Development"); Wholesale Power Services, Inc. ("Wholesale Power"); PSI Recycling, Inc. ("Recycling"); and Power Equipment Supply Co. ("Equipment") (collectively with CINergy, the "Applicants"). /2/ Pursuant to the Commission's order dated November 18, 1994 in File No. 70- 8477, Release No. 35-26159, CINergy was authorized to issue and sell up to 8 million shares of CINergy Common Stock. CINergy heretofore has issued 7,132,675 such shares and retains authority to issue and sell up to 867,375 additional shares. The dollar amount of proceeds from the issuance of such stock would depend on the price at which such shares are sold. Based on the closing price of $24.50 per share on March 20, 1995, the sale of such additional shares would yield gross proceeds of approximately $21,250,000 that (after deductions for underwriting discounts, fees, and expenses) could be used to make loans through the money pools. /3/ For example, if a company borrowed $1 million in External Funds for ten days during a monthly period, and such funds were derived from a $10 million line of credit bearing a 1% annual fee, the borrowing company's share of such fee (assuming a 360-day year) would equal (1% X $10,000,000) X ($1,000,000 / $10,000,000) X (10 / 360), or approximately $277.78. /4/ CINergy's interest in Energy Partners is a minority interest, with the remaining majority interest held by one partner unaffiliated with CINergy. For this and other reasons to be detailed in an amendment to this Application-Declaration, CINergy does not "control" Energy Partners or possess a "controlling influence" over its management or policies, and hereby requests an order by the Commission that Energy Partners is not a "subsidiary company" of CINergy within the meaning of Section 2(a)(8) of the Act. CINergy therefore does not believe that Commission authorization will be required for Energy Partners to issue notes. /5/ For example, if a company borrowed $1 million in funds from External Sources for ten days during a monthly period, and such funds were derived from a $10 million line of credit bearing a 1% annual fee, the borrowing company's share of such fee (assuming a 360-day year) would equal (1% X $10,000,000) X ($1,000,000 / $10,000,000) X (10 / 360), or approximately $277.78. EXHIBIT INDEX The number in parentheses after each exhibit description refers to the number of the amendment to this Application-Declaration with which that exhibit was filed. Exhibits marked "(0)" were filed with the initial Application-Declaration. Exhibit Transmission Number Exhibit Method 1.1 Letter agreement between CG&E Form SE and Star Bank and Grid Note ($5,000,000) (1). 1.2 Letter agreement between CG&E Form SE and The Fifth Third Bank and Promissory Note ($15,000,000) (1). 1.3 Letter agreement between CG&E Form SE and PNC Bank, Ohio, N.A., and Amended and Restated Grid Note ($10,000,000) (1). 1.4 Letter agreement between CG&E Form SE and The Provident Bank ($5,000,000) (1). 1.5 Letter agreement between CG&E Form SE and The First National Bank of Southwestern Ohio ($1,000,000) (1). 1.6 Letter agreement between CG&E Form SE and National City Bank, Kentucky, and Master Promissory Note in favor of First National Bank of Louisville ($5,000,000) (1). 1.7 Letter agreement between CG&E Form SE and NBD Bank, N.A. ($5,000,000) (1). 1.8 Letter agreement between CG&E Form SE and Society National Bank and Master Promissory Note ($6,000,000) (1). 1.9 Letter agreement between CG&E Form SE and The Bank of New York ($10,000,000) (1). 1.10 Letter agreement between CG&E Form SE and Citibank ($10,000,000) (1). 1.11 Letter agreement between CG&E Form SE and The Toronto-Dominion Bank and Note in favor of TD (Texas), Inc. ($5,000,000) (1). 1.12 Letter agreement between CG&E Form SE and Union Bank of Switzerland, Chicago Branch, and Promissory Note ($5,000,000) (1). 1.13 Letter agreement between ULH&P Form SE and Star Bank and Grid Note ($7,500,000) (1). 1.14 Letter agreement between ULH&P Form SE and The Fifth Third Bank and Promissory Note ($7,500,000) (1). 1.15 Letter agreement between ULH&P Form SE and Central Trust Company and Amended and Restated Grid Note in favor of PNC Bank, Ohio, National Association ($7,500,000) (1). 1.16 Letter agreement between ULH&P Form SE and National City Bank, Kentucky, and Master Promissory Note in favor of First National Bank of Louisville ($7,500,000) (1). 1.17 Letter agreement between The Form SE Lawrenceburg Gas Company and Star Bank N.A., Indiana ($400,000) (1). 1.18 Revolving Note between Enertech Form SE Associates International Inc. and The Fifth Third Bank ($1,000,000) (1). 1.19 Letter agreement between PSI Form SE Energy and Bank One, Indianapolis, N.A. and Master Note ($5,000,000) (1). 1.20 Committed Line of Credit Form SE Agreement between PSI Energy and Barclays Bank PLC and Grid Note ($15,000,000) (1). 1.21 Letter agreement between PSI Form SE Energy and Canadian Imperial Bank of Commerce and Master Note ($30,000,000) (1). 1.22 Letter agreement between PSI Form SE Energy and The Chase Manhattan Bank, N.A., Promissory Note, and amendment letters ($30,000,000) (1). 1.23 Letter agreement between PSI Form SE Energy and Citibank, N.A. and Master Note ($15,000,000) (1). 1.24 Amended and Restated Revolving Form SE Note by PSI Energy in favor of The Fifth Third Bank ($15,000,000) (1). 1.25 Letter agreement between PSI Form SE Energy and The First National Bank of Chicago and Master Note ($15,000,000) (1). 1.26 Letter agreement between PSI Form SE Energy and Bank of Montreal and Unsecured Note ($27,000,000) (1). 1.27 Letter agreement between PSI Form SE Energy and NBD Bank, N.A., and Renewal Master Note ($5,000,000) (1). 1.28 Letter agreement between PSI Form SE Energy and National City Bank, Indiana, and Commercial Time Note ($3,000,000) (1). 1.29 Letter agreement between PSI Form SE Energy and The Mitsubishi Bank, Ltd., Chicago Branch, and Master Note ($40,000,000) (1). 1.30 Revolving Credit Agreement Form SE between PSI Energy and Swiss Bank Corporation, New York Branch, Promissory Note, and Amendment No. 2 ($15,000,000) (1). 1.31 Letter Agreement between PSI Form SE Energy and The Chase Manhattan Bank, N.A., and Master Note ($15,000,000) (1). 2 Form of note to evidence Electronic borrowings from banks (0). 3 Form of commercial paper note Electronic (0). 4 Form of note to be executed by Electronic borrowing Applicants to lending Applicants (0). 5 Form of Utility Money Pool -- Agreement (to be filed by amendment). 6.1 Revised Form of Non-Utility Electronic Money Pool Agreement (1). 7 PUCO Order dated June 9, 1994 Form SE (Case No. 94-811-GE-AIS) (1). 8 IURC Order dated September 9, Form SE 1992 (Case No. 39438) (1). 9 FERC Order issued October 26, Form SE 1994 (Docket No. ES94-43-000) (1). 10 Preliminary opinion of counsel Electronic (0). 11 Final or "past tense" opinion -- of counsel (to be filed with certificate of notification). 12 Proposed notice of proceeding Electronic (0). 13 Cash-flow projections and -- inter-company loans and open account balances (to be filed by amendment). 14 Financial statements of -- Applicants (to be filed by amendment). EX-99.6.1 2 EXHIBIT 6.1 EXHIBIT 6.1 Non-Utility Money Pool Agreement This NON-UTILITY MONEY POOL AGREEMENT is made and entered into this ___ day of _________, 1995 by and among CINergy Corp. ("CINergy"), a Delaware corporation and a registered holding company under the Public Utility Holding Company Act of 1935, as amended (the "Act"); CINergy Services, Inc. ("CINergy Services"), a Delaware corporation and a subsidiary service company of CINergy; CINergy Investments, Inc. ("CINergy Investments"), a Delaware corporation and a subsidiary of CINergy; Wholesale Power Services, Inc. ("PSI Wholesale"), an Indiana corporation and a subsidiary of CINergy Investments; Power International, Inc., formerly named Enertech Associates International, Inc. ("PII"), an Ohio corporation and a subsidiary of CINergy Investments; Beheer- En Belegginsmaatschappij Bruwabel B.V. ("Bruwabel"), a Netherlands corporation and a subsidiary of PII; Power International s.r.o., a Czech limited liability company and a subsidiary of Bruwabel; Power Development s.r.o., a Czech limited liability company and a subsidiary of Bruwabel; PSI Recycling, Inc. ("Recycling"), an Indiana corporation and a subsidiary of CINergy Investments; Power Equipment Supply Co. ("Equipment"), an Indiana corporation and a subsidiary of CINergy Investments; and CG&E Resource Marketing, Inc. ("Resource Marketing"), a Delaware corporation and a subsidiary of CINergy Investments (each a "party" and collectively, the "parties"). Recitals The parties from time to time have need to borrow funds on a short- term basis. Some of the parties from time to time have funds available to loan on a short-term basis. The parties desire to establish a pool (the "Non-Utility Money Pool") to coordinate and provide for certain of their short-term cash and working capital requirements. NOW THEREFORE, in consideration of the premises, and the mutual promises set forth herein, the parties hereto agree as follows: ARTICLE I CONTRIBUTIONS AND BORROWINGS Section 1.1 Contributions to Non-Utility Money Pool. Each party will determine each day, on the basis of cash flow projections and other relevant factors, in such party's sole discretion, the amount of funds it has available for contribution to the Non-Utility Money Pool, and will contribute such funds to the Non-Utility Money Pool. The determination of whether a party at any time has surplus funds to lend to the Non-Utility Money Pool or shall lend funds to the Non-Utility Money Pool will be made by an appropriate officer of such party, or by a designee thereof, on the basis of cash flow projections and other relevant factors, in such party's sole discretion. Each party may withdraw any of its funds at any time upon notice to CINergy Services as administrative agent of the Non-Utility Money Pool. Section 1.2 Rights to Borrow. Subject to the provisions of Section 1.4(b) of this Agreement, all short-term borrowing needs of the parties, with the exception of CINergy, will be met by funds in the Non-Utility Money Pool to the extent such funds are available. Each party (other than CINergy) shall have the right to make short-term borrowings from the Non-Utility Money Pool from time to time, subject to the availability of funds and the limitations and conditions set forth herein and in the applicable orders of the Securities and Exchange Commission. Each party (other than CINergy) may request loans from the Non-Utility Money Pool from time to time during the period from the date hereof until this Agreement is terminated by written agreement of the parties; provided, however, that the aggregate amount of all loans requested by any party hereunder shall not exceed the applicable borrowing limits set forth in applicable orders of the Securities and Exchange Commission and other regulatory authorities, resolutions of such party's shareholders and Board of Directors or similar governing body, such party's governing corporate documents, and agreements binding upon such party. No loans through the Non-Utility Money Pool will be made to, and no borrowings through the Non-Utility Money Pool will be made by, CINergy. Section 1.3 Source of Funds. (a) Funds will be available through the Non-Utility Money Pool from the following sources for use by the parties from time to time: (i) surplus funds in the treasuries of parties other than CINergy, (ii) surplus funds in the treasury of CINergy, and (iii) proceeds from bank borrowings by parties and the sale by CINergy of commercial paper ("External Sources"). Funds will be made available from such sources in such order as CINergy Services, as administrator of the Non-Utility Money Pool, may determine will result in a lower cost of borrowing to companies borrowing from the Non-Utility Money Pool, consistent with the individual borrowing needs and financial standing of the parties providing funds to the Non-Utility Money Pool. (b) Borrowing parties will borrow pro rata from each lending party in the proportion that the total amount loaned by such lending party bears to the total amount then loaned through the Non-Utility Money Pool. On any day when more than one fund source (e.g., surplus treasury funds of CINergy and other Non-Utility Money Pool participants ("Internal Sources") and funds from External Sources), with different rates of interest, is used to fund loans through the Non-Utility Money Pool, each borrowing party will borrow pro rata from each such fund source in the Non-Utility Money Pool in the same proportion that the amount of funds provided by that fund source bears to the total amount of short-term funds available to the Non-Utility Money Pool. Section 1.4 Authorization. (a) Each loan shall be authorized by the lending party's chief financial officer or treasurer, or by a designee thereof. (b) All borrowings from the Non-Utility Money Pool shall be authorized by the borrowing party's chief financial officer or treasurer, or by a designee thereof. No party shall be required to effect a borrowing through the Non-Utility Money Pool if such party determines that it can (and is authorized to) effect such borrowing at lower cost directly from banks or through the sale of its own commercial paper. Section 1.5 Interest. Each party receiving a loan shall accrue interest monthly on the unpaid principal amount of such loan to the Non-Utility Money Pool from the date of such loan until such principal amount shall be paid in full. (a) If only funds from Internal Sources comprise the funds available in the Non-Utility Money Pool, the interest rate applicable to loans of such funds from Internal Sources shall be the CD yield equivalent of the 30-day Federal Reserve "AA" Industrial Commercial Paper Composite Rate (or, if no such Composite Rate is established for that day, then the applicable rate shall be the Composite Rate for the next preceding day for which such Composite Rate was established). (b) If only funds from External Sources comprise the funds available in the Non-Utility Money Pool, the interest rate applicable to loans of such funds from External Sources shall be equal to the lending party's cost for such funds from External Sources (or, if more than one party had made available funds from External Sources on such day, the applicable interest rate shall be a composite rate, equal to the weighted average of the cost incurred by the respective parties for such funds from External Sources). (c) In cases where funds from both Internal Sources and External Sources are concurrently borrowed through the Non-Utility Money Pool, the rate applicable to all loans comprised of such "blended" funds shall be a composite rate, equal to the weighted average of the (i) cost of all funds contributed by parties from Internal Sources (as determined pursuant to Section 1.5(a) above) and (ii) the cost of all such funds from External Sources (as determined pursuant to Section 1.5(b) above); provided, that in circumstances where funds from Internal Sources and External Sources are available for loans through the Non-Utility Money Pool, loans may be made exclusively with funds from Internal Sources or External Sources, rather than from a "blend" of such funds, to the extent it is expected that such loans would result in a lower cost of borrowing. Section 1.6 Certain Costs. The cost of compensating balances and fees paid to banks to maintain credit lines by parties lending funds from External Sources to the Non-Utility Money Pool shall initially be paid by the party maintaining such line. A portion of such costs shall be retroactively allocated every month to the parties borrowing funds from such External Sources through the Non-Utility Money Pool in proportion to their respective daily outstanding borrowings of funds from such External Sources. Section 1.7 Repayment. Each party receiving a loan hereunder shall repay the principal amount of such loan, together with all interest accrued thereon, on demand and in any event within 365 days of the date on which such loan was made. All loans made through the Non-Utility Money Pool may be prepaid by the borrower without premium or penalty. Section 1.8 Form of Loans to Parties. Loans to the parties through the Non-Utility Money Pool will be made pursuant to open-account advances, repayable upon demand and in any event not later than one year after the date of the advance; provided, that each lending party shall at all times be entitled to receive upon demand one or more promissory notes evidencing any and all loans by such lender. Any such note shall: (a) be substantially in the form to be filed as Exhibit 4 to the Form U-1 Application-Declaration in File No. 70-8587, (b) be dated as of the date of the initial borrowing, (c) mature on demand or on a date agreed to by the parties to the transaction, but in any event not later than one year after the date of the applicable borrowing, and (d) be prepayable in whole at any time or in part from time to time, without premium or penalty. ARTICLE II OPERATION OF NON-UTILITY MONEY POOL Section 2.1 Operation. Operation of the Non-Utility Money Pool, including record keeping and coordination of loans, will be handled by CINergy Services under the authority of the appropriate officers of the parties. CINergy Services shall be responsible for the determination of all applicable interest rates and charges to be applied to advances outstanding at any time hereunder, shall maintain records of all advances, interest charges and accruals and interest and principal payments for purposes hereof, and shall prepare periodic reports thereof for the parties. CINergy Services will administer the Non-Utility Money Pool on an "at cost" basis. Separate records shall be kept by CINergy Services for the money pool established by this agreement and any other money pool administered by CINergy Services. Section 2.2 Investment of Surplus Funds in the Non-Utility Money Pool. Funds not required to meet Non-Utility Money Pool loans (with the exception of funds required to satisfy the Non-Utility Money Pool's liquidity requirements) will ordinarily be invested in one or more short-term investments, including: (i) interest-bearing accounts with banks; (ii) obligations issued or guaranteed by the U.S. government and/or its agencies and instrumentalities, including obligations under repurchase agreements; (iii) obligations issued or guaranteed by any state or political subdivision thereof, provided that such obligations are rated not less than A by a nationally recognized rating agency; (iv) commercial paper rated not less than A-1 or P-1 or their equivalent by a nationally recognized rating agency; (v) money market funds; (vi) bank certificates of deposit; (vii) Eurodollar funds; and (viii) such other investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder. Section 2.3 Allocation of Interest Income and Investment Earnings. The interest income and other investment income earned by the Non-Utility Money Pool on loans and on investment of surplus funds will be allocated among the parties in accordance with the proportion each party's contribution of funds in the Non-Utility Money Pool bears to the total amount of funds in the Non-Utility Money Pool and the cost of any External Sources provided to the Non-Utility Money Pool by such party. Interest and other investment earnings will be computed on a daily basis and settled once per month. Section 2.4 Event of Default. If any party shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors, or any proceeding shall be instituted by or against any party seeking to adjudicate it a bankrupt or insolvent, then the other parties may declare the unpaid principal amount of any loans to such party, and all interest thereon, to be forthwith due and payable and all such amounts shall forthwith become due and payable. ARTICLE III MISCELLANEOUS Section 3.1 Amendments. No amendment to this Agreement shall be adopted except in a writing executed by the parties. Section 3.2 Legal Responsibility. Nothing herein contained shall render any party liable for the obligations of any other party hereunder and the rights, obligations and liabilities of the parties are several in accordance with their respective obligations, and not joint. Section 3.3 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Ohio. IN WITNESS WHEREOF, the undersigned companies have duly caused this document to be signed on their behalf on the date first written above by the undersigned thereunto duly authorized. CINergy CORP. By________________________________ Name: Title: CINergy SERVICES, INC. By_________________________________ Name: Title: CINergy INVESTMENTS, INC. By________________________________ Name: Title: WHOLESALE POWER SERVICES, INC. By________________________________ Name: Title: POWER INTERNATIONAL, INC. By________________________________ Name: Title: BEHEER- EN BELEGGINSMAATSCHAPPIJ BRUWABEL, B.V. By________________________________ Name: Title: By________________________________ Name: Title: POWER INTERNATIONAL, s.r.o. By________________________________ Name: Title: POWER DEVELOPMENT, s.r.o. By________________________________ Name: Title: PSI RECYCLING, INC. By________________________________ Name: Title: POWER EQUIPMENT SUPPLY CO. By________________________________ Name: Title: CG&E RESOURCE MARKETING, INC. By________________________________ Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----