-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R8P8AAnMPi6LTF+QLVQEBHTRHjPFQLbtoK3W+SRTVIyU2oFDDd1VEQmaCezDL8fC pPt3jvP7Xgeo3P4qHPNnkg== 0000899652-98-000137.txt : 19980923 0000899652-98-000137.hdr.sgml : 19980923 ACCESSION NUMBER: 0000899652-98-000137 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19980922 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: SEC FILE NUMBER: 070-09319 FILM NUMBER: 98712877 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-1A File No. 70-9319 SECURITIES AND EXCHANGE COMMISSION 450 FIFTH STREET, N.W. 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 Investments, Inc. Cinergy Global Resources, Inc. 139 East Fourth Street Cincinnati, Ohio 45202 (Name of companies filing this statement and addresses of principal executive offices) Cinergy Corp. (Name of top registered holding company parent) William L. Sheafer Vice President and Treasurer Cinergy Corp. (address above) (Name and address of agent of service) Applicants request that the Commission send copies of all notices, orders and communications in connection herewith to: Jerome A. Vennemann William T. Baker, Jr. Associate General Counsel Thelen, Reid & Priest LLP Cinergy Corp. 40 West 57th Street (address above) New York, New York 10019 The application in this proceeding, originally filed on June 19, 1998, is hereby amended in the following respects: 1. The penultimate paragraph of Item 1.B ("Description of Proposed Transactions/Overview of Requested Authorization") is replaced in its entirety by the following text: Applicants propose that upon issuance of the requested order certain outstanding orders be superseded, in whole or in part, or amended./1/ 2. Item 1.D.2 ("Description of Proposed Transactions/Proposed Transactions/Issuance by Cinergy of guarantees") is replaced in its entirety by the following text: 2. Issuance by Cinergy of guarantees Under prior Commission orders, Cinergy is currently authorized to issue guarantees on behalf of certain system companies, subject to different ceilings on the total amount of guarantees that Cinergy can issue. As explained below, one ceiling applies to guarantees of Exempt Projects and EWG/FUCO Project Parents; another to guarantees of rule 58 subsidiaries and certain other Cinergy subsidiaries; and still another to guarantees of Cinergy Solutions and its subsidiaries. In addition, the guarantee authority in the prior orders expires at varying dates. Applicants propose to centralize and consolidate the existing guarantee authority and to substitute a single ceiling limiting the maximum amount of guarantees in place of the three different ceilings that now apply. The requested authorization would also expand the roster of Cinergy system companies on whose behalf Cinergy can issue guarantees, throughout the Authorization Period, to include (among other system companies) Intermediate Parents and Nonutility Companies. a. Existing Cinergy guarantee authority Under the Project Parent Order as amended by the 100% Order, Cinergy can issue guarantees on behalf of obligations of Exempt Projects and EWG/FUCO Project Parents from time to time through December 31, 1999, provided that Cinergy's "aggregate investment" as determined pursuant to rule 53 does not exceed 100% of Cinergy's consolidated retained earnings ("100% Limitation"). Under the May 1997 Order, Cinergy is authorized to guarantee, through December 31, 2002, obligations of (a) certain existing Cinergy system companies (i.e., Cinergy Services, KO, Tri-State, Cinergy Resources, Cinergy Capital & Trading, Cinergy Technology and Enertech Associates) and (b) rule 58 companies in which Cinergy or any of its subsidiaries thereafter acquires an interest. Initially, these guarantees were subject to a $1 billion cap (in addition to the aggregate investment provisions of rule 58, where applicable), which also covered short-term debt and commercial paper issued by Cinergy. Under the terms of the January 1998 Order, the cap was raised to $2 billion, covering these guarantees, Cinergy short-term debt and commercial paper as well as up to $400 million of Cinergy debentures if and when authorized by the Commission./2/ Finally, the Cinergy Solutions Order authorized Cinergy to guarantee debt and other obligations of Cinergy Solutions and its subsidiaries from time to time through December 31, 2001 in a maximum principal amount at any time outstanding not to exceed $250 million. b. Proposed Cinergy guarantee authority To the extent not otherwise exempt under the Act, Cinergy requests authority from time to time through the Authorization Period to guarantee the debt or other securities or obligations of (i) any and all existing and future Intermediate Parents (including Cinergy Investments and Cinergy Global Resources) and Nonutility Companies (excluding Nth Power Fund), and (ii) Cinergy Services and the existing nonutility subsidiaries of CG&E and PSI - KO, Tri-State and South Construction. The terms and conditions of any guarantees would be established at arm's length based upon market conditions. Any guarantees issued by Cinergy over the Authorization Period would not exceed at any time outstanding $1,000,000,000 in aggregate principal amount ("$1 Billion Guarantee Cap"), provided further that (1) any guarantees of Exempt Projects would also be subject to the 100% Limitation, and (2) any guarantees of rule 58 companies would also be subject to the aggregate investment limitation of rule 58. In connection with the proposed guarantee authority, Applicants request that the Commission's order in this proceeding: 1. supersede the Project Parent Order in its entirety; 2. supersede the May 1997 Order and the Cinergy Solutions Order in part, i.e., solely to the extent these orders authorize Cinergy to issue guarantees on behalf of the respective system companies specified therein; and 3. amend the terms of the January 1998 Order solely to exclude the applicable Cinergy guarantees covered by that order (i.e., any guarantees issued on behalf of Cinergy Services, KO, Tri-State, Cinergy Resources, Cinergy Capital & Trading, Cinergy Technology, Enertech Associates together with future rule 58 companies) from the scope of the $2 Billion Debt Cap prescribed by that order. Henceforth, those guaran- tees would be covered by the $1 Billion Guarantee Cap, and the $2 Billion Debt Cap would be limited to Cinergy short-term notes, commercial paper and debentures. 3. The current text under Item 3 ("Applicable Statutory Provisions") is replaced in its entirety by the following: Applicants believe that sections 6(a), 7, 9(a), 10, 12(b), 12(c), 13, 32, 33 and 34 of the Act and rules 43, 45, 46, 53, 54, 58, 83, 87 and 90 are or may be applicable to the proposed transactions. Rule 54 provides that in determining whether to approve the issue or sale of a security by a registered holding company for purposes other than the acquisition of an EWG or 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 a FUCO upon the registered holding company system if the conditions of rule 53(a), (b) and (c) are satisfied. Cinergy currently does not meet the conditions of rule 53(a). At June 30, 1998, Cinergy's "aggregate investment," as defined in rule 53(a)(1), in EWGs and FUCOs was approximately $590 million. This amount equals approximately 62% of Cinergy's "consolidated retained earnings," also as defined in rule 53(a)(1) (approximately $948 million), which exceeds the 50% "safe harbor" limitation contained in rule 53(a). The 100% Order authorized Cinergy to increase its total investments in EWGs and FUCOs to 100% of consolidated retained earnings. Accordingly, although Cinergy's aggregate investment exceeds the 50% safe harbor, that circumstance is expressly permitted under the 100% Order. At September 30, 1997, the most recent period for which financial statement information was evaluated in the 100% Order, Cinergy's consolidated capitalization consisted of 44.1% equity and 55.9% debt. As shown in Item I filed herewith, Cinergy's pro forma consolidated capitalization at June 30, 1998, taking into account all non-recourse debt applicable to Cinergy's ownership interest in EWGs and FUCOs, is 35.9% equity and 64.1% debt. With respect to earnings, the 100% Order stated that Cinergy did not report a full-year operating loss attributable to its investments in EWGs and FUCOs for any year 1992 through 1996. That order also stated that Midlands Electricity plc ("Midlands"), a FUCO in the United kingdom in which Cinergy has an ownership interest, recorded a one-time extraordinary charge in the third quarter of 1997 as a result of a windfall profits tax imposed by the authorities in the United Kingdom, of which $109 million was allocable to Cinergy. However, the 100% Order noted that Midland's credit ratings by Standard and Poor's remained unchanged following the charge. Since the date of the 100% Order, Cinergy's investments in EWGs and FUCOs have continued to make a positive contribution to Cinergy's earnings. With respect to the remaining conditions of rule 54, Cinergy has complied and will continue to comply with the record-keeping requirements of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of operating company personnel in rendering services to EWGs and FUCOs, and the requirements of rule 53(a)(4) concerning submission of specified filings under the Act to retail rate regulatory agencies. In addition, none of the conditions in rule 53(b) has occurred. 4. The following exhibits are filed herewith: Exhibit G-1 Revised Form of Notice Exhibit I Pro Forma Capitalization at June 30, 1998 SIGNATURE Pursuant to the requirements of the Act, the undersigned companies have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. Dated: September 22, 1998 CINERGY CORP. By:/s/William L. Sheafer Vice President and Treasurer CINERGY INVESTMENTS, INC. By:/s/William L. Sheafer Vice President and Treasurer CINERGY GLOBAL RESOURCES, INC. By:/s/William L. Sheafer Vice President and Treasurer ENDNOTES /1/ Specifically, Applicants propose that, upon issuance of the order requested herein, the Project Parent Order and Commission order dated May 22, 1997 (HCAR No. 26719) (authorizing Cinergy Investments and certain other Cinergy nonutility subsidiaries to pay dividends out of capital surplus to their respective parent companies through December 31, 2002) be superseded in their entirety. Applicants also request that Commission orders dated February 7, 1997 (HCAR No. 26662) (authorizing the formation of Cinergy Solutions, Inc. and related transactions) and May 30, 1997 (HCAR No. 26723) (authorizing Cinergy to issue guarantees on behalf of Cinergy Services, Inc., certain Cinergy nonutility subsidiaries, and future rule 58 companies in which Cinergy or its subsidiaries acquires an interest) ("May 1997 Order") be superseded in part by the requested order, i.e., to the extent that these prior orders relate to guarantees issued by Cinergy. Finally, Applicants propose that the requested order amend the terms of Commission order dated January 20, 1998 (HCAR No. 26819) (authorizing Cinergy to issue short-term notes and commercial paper in an aggregate principal amount not to exceed $2 billion, when added to the principal amount of certain other outstanding securities, including guarantees issued pursuant to the May 1997 Order ("$2 Billion Debt Cap")), solely to the extent of excluding the principal amount of guarantees issued pursuant to the May 1997 Order from the coverage of the $2 Billion Debt Cap. Henceforth, those guarantees would be covered by the $1 billion cap applicable solely to guarantees as proposed below, and the $2 Billion Debt Cap would be limited to Cinergy short-term notes, commercial paper and debentures. /2/ By order dated August 21, 1998 (HCAR No. 26909), the Commission authorized Cinergy to issue up to $400 million principal amount of debentures, subject to various terms and conditions. /3/ See quarterly rule 24 certificates filed in File No. 70-9011. EX-99. 2 EXHIBIT G-1 Exhibit G-1 SECURITIES AND EXCHANGE COMMISSION (Release No. 35- _____________) Cinergy Corp., a registered holding company ("Cinergy"), and its nonutility subsidiaries, Cinergy Investments, Inc. ("Cinergy Investments") and Cinergy Global Resources, Inc. ("Cinergy Global Resources"), all at 139 East Fourth Street, Cincinnati Ohio 45202, have filed an application-declaration as amended under sections 6(a), 7, 9(a), 10, 12(b), 12(c), 13, 32, 33 and 34 of the Act and rules 43, 45, 46, 53, 54, 58, 83, 87 and 90 thereunder. Applicants propose to establish one or more special-purpose subsidiaries to hold Cinergy's direct or indirect interests in any or all of Cinergy's existing and future nonutility businesses (excluding certain existing nonutility interests held by Cinergy's utility subsidiaries) and to engage in various related transactions from time to time through December 31, 2003 ("Authorization Period"). The requested order is intended to supersede certain Commission orders now in effect, in whole or in part, or amended./1/ Specifically, to the extent not otherwise exempt under the Act, Applicants request authority over the Authorization Period to organize and hold securities of one or more special-purpose subsidiaries (each an "Intermediate Parent") to be formed for the exclusive purpose of acquiring, owning and holding, directly or indirectly (including through one or more additional Intermediate Parents), securities of or interests in, and/or providing services to, any or all of Cinergy's existing and future nonutility associate companies (other than existing nonutility interests held by Cinergy's utility subsidiaries), including Cinergy's interests in: 1. existing and future exempt wholesale generators ("EWGs") and foreign utility companies ("FUCOs" and, together with EWGs, "Exempt Projects"); 2. special-purpose subsidiaries formed pursuant to the Project Parent Order prior to the date of the Commission's order in this proceeding ("EWG/FUCO Project Parents"); 3. existing and future exempt telecommunications companies ("ETCs"); 4. existing and future "energy-related companies" as defined in rule 58; and/or 5. other nonutility companies in which Cinergy (i) holds an interest pursuant to certain prior orders of the Commission or (ii) hereafter acquires (or is authorized to retain) an interest pursuant to one or more (a) orders of the Commission issued in subsequent proceedings or (b) exemptions from the requirement of prior Commission approval subsequently adopted under the Act (collectively, "Authorized Companies" and, together with the companies included in the preceding categories "1" through "4," "Nonutility Companies"). Any services provided by Intermediate Parents to other Intermediate Parents or to Nonutility Companies would include project development and administrative services and other support services. Without further Commission approval, Intermediate Parents will not provide services to any associate companies other than Intermediate Parents and Nonutility Companies. To the extent not exempt under rule 90(d)(1) or otherwise under the Act, Applicants request an exemption pursuant to section 13(b) from the "at cost" requirements of rules 90 and 91 with respect to the provision of services among the Intermediate Parents and Nonutility Companies. Cinergy Services will continue to provide services to Intermediate Parents and Nonutility Companies pursuant to the Cinergy system nonutility service agreement. Intermediate Parents may be wholly- or partly-owned direct or indirect subsidiaries of Cinergy, Cinergy Investments or Cinergy Global Resources. Initial capitalization by Applicants of Intermediate Parents will involve (1) purchases of shares of capital stock, partnership interests, limited liability company member interests, trust certificates or other forms of equity interests; (2) capital contributions or open account advances without interest; and/or (3) debt financing. Cinergy will obtain funds for initial and subsequent investments in Intermediate Parents from available internal sources or from external sources involving sales of short-term notes and commercial paper or additional shares of Cinergy common stock pursuant to the January 1998 Order. Cinergy Investments and Cinergy Global Resources will obtain funds for initial and subsequent investments in Intermediate Parents from available cash, capital contributions or loans from Cinergy, or external borrowings or sales of capital stock. To the extent that Applicants provide funds to Intermediate Parents which in turn are applied to (1) investments in Exempt Projects or rule 58 companies, the amount of such funds will be included in Cinergy's "aggregate investment" therein, as calculated in accordance with rule 53 or rule 58, as applicable; or (2) investments in Authorized Companies, such investments will conform to applicable rules under the Act (including rules 52 and 45(b)(4)) and applicable terms and conditions of any relevant Commission orders. To the extent not exempt under rule 43(b) or otherwise under the Act, Applicants request authority on behalf of themselves and Intermediate Parents and Nonutility Companies to sell to and purchase from each other (but to or from no other associate companies) securities or other interests in the businesses of Intermediate Parents and Nonutility Companies. Cinergy also proposes to issue guarantees in respect of Intermediate Parents and Nonutility Companies and certain other subsidiaries of Cinergy. Specifically, to the extent not otherwise exempt under the Act, Cinergy requests authority from time to time through the Authorization Period to guarantee the debt or other securities or obligations of (i) any and all existing and future Intermediate Parents (including Cinergy Investments and Cinergy Global Resources) and Nonutility Companies (excluding Cinergy's investment in Nth Power Technologies Fund, HCAR No. 26562, August 28, 1996), and (ii) Cinergy Services, Inc., Cinergy's service company subsidiary, and the existing nonutility subsidiaries of Cinergy's utility subsidiaries, The Cincinnati Gas & Electric Company and PSI Energy, Inc. - KO Transmission Company ("KO"), Tri-State Improvement Company ("Tri-State") and South Construction Company, Inc. ("South Construction"). The terms and conditions of any guarantees would be established at arm's length based upon market conditions. Any guarantees issued by Cinergy over the Authorization Period would not exceed at any time outstanding $1,000,000,000 in aggregate principal amount, provided further that (1) any guarantees of Exempt Projects would also be subject to the aggregate investment limitation prescribed in the Commission's order dated March 23, 1998 (HCAR No. 26848) in File No. 70-9011 ("100% Order"), and (2) any guarantees of rule 58 companies would also be subject to the aggregate investment limitation of rule 58. Finally, to the extent not otherwise exempt under the Act, Applicants request authorization for all of Cinergy's existing and future nonutility subsidiaries - namely, Cinergy Investments, Cinergy Global Resources, any and all existing and future Intermediate Parents and Nonutility Companies (other than Nth Power Technologies Fund), and KO, Tri-State and South Construction - to declare and pay dividends out of capital or unearned surplus to their respective parent companies from time to time through the Authorization Period, where permitted under applicable corporate law and agreements with lenders or other third parties. Cinergy states that it is in compliance with all the requirements of rule 54 other than rule 53(a). Specifically, at June 30, 1998, Cinergy's consolidated retained earnings were approximately $948 million and its aggregate investment approximately $590 million (or about 62% of consolidated retained earnings). Cinergy states that this incremental aggregate investment above 50% but not in excess of 100% of consolidated retained earnings is specifically permitted by the 100% Order. With respect to the remaining conditions of rule 54, Cinergy states that it has complied and will continue to comply with the record-keeping requirements of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of operating company personnel in rendering services to EWGs and FUCOs, and the requirements of rule 53(a)(4) concerning submission of specified filings under the Act to retail rate regulatory agencies. In addition, none of the conditions in rule 53(b) has occurred. For the Commission, by the Division of Investment Management, pursuant to delegated authority. ENDNOTES /1/ Specifically, Applicants propose that upon issuance of the requested order in the present proceeding the following Commission orders be superseded in their entirety: (1) HCAR Nos. 26376 and 26486, dated September 21, 1995 and March 8, 1996, in File No. 70-8589 (collectively, "Project Parent Order") and (2) HCAR No. 26719, dated May 22, 1997, in File No. 70-9023. Applicants also request that two additional Commission orders be superseded in part. Specifically, HCAR No. 26723, dated May 30, 1997, in File No. 70-9015 and HCAR No. 26662, dated February 7, 1997, in File No. 70-8933 would be superseded by the Commission's order in this proceeding to the extent that those approvals relate to guarantees issued by Cinergy. Finally, Applicants propose that the requested order amend the terms of Commission order dated January 20, 1998 (HCAR No. 26819) ("January 1998 Order") (authorizing Cinergy to issue short-term notes and commercial paper in an aggregate principal amount not to exceed $2 billion, when added to the principal amount of certain other outstanding securities, including guarantees issued pursuant to the May 1997 Order ("$2 Billion Debt Cap")), solely to the extent of excluding the principal amount of guarantees issued pursuant to the May 1997 Order from the coverage of the $2 Billion Debt Cap. Henceforth, those guarantees would be covered by the $1 billion cap applicable solely to guarantees as proposed below, and the $2 Billion Debt Cap would be limited to Cinergy short-term notes, commercial paper and debentures. EX-99.I 3 EXHIBIT I Exhibit I in File No. 70-9319 CINERGY CORP. CONSOLIDATED CAPITALIZATION ACTUAL JUNE 30, 1998 $ Millions Percentage Common Stock Equity Common stock $ 2 Paid-in capital 1,599 Retained earnings 905 Accumulated other comprehensive income (3) Total common stock equity 2,503 40.6% Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 93 1.5% Debt Long-term debt 2,193 Long-term debt due within one year 252 Notes payable and other short-term obligations 1,120 Total debt 3,565 57.9% Total capitalization $ 6,161 100.0% The following table sets forth Cinergy's pro forma capitalization, assuming that the entire amount of non-recourse debt applicable to Exempt Entities which is attributable to Cinergy's ownership interest ($1.1 billion) is consolidated. It should be noted that such consolidation is inconsistent with the requirements of GAAP, and is being provided to the staff of the Securities and Exchange Commission solely at its request. CINERGY CORP. CONSOLIDATED CAPITALIZATION PRO FORMA JUNE 30, 1998 $ Millions Percentage Common Stock Equity Common stock $ 2 Paid-in capital 1,599 Retained earnings 905 Accumulated other comprehensive income (3) Total common stock equity 2,503 34.6% Cumulative Preferred Stock of Subsidiaries Not subject to mandatory redemption 93 1.3% Debt Long-term debt 3,150 Long-term debt due within one year 254 Notes payable and other short-term obligations 1,231 Total debt 4,635 64.1% Total capitalization $7,231 100.0% -----END PRIVACY-ENHANCED MESSAGE-----