-----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, Qok1e7rvPStFQc8o/RepOpSV9/VsBaBzLIGCvfN6ErjEgt0yXNptjKi1wlWnLCa2 cLpfIUDDDZzuLzVBP6RkAQ== 0000092122-96-000054.txt : 19960403 0000092122-96-000054.hdr.sgml : 19960403 ACCESSION NUMBER: 0000092122-96-000054 CONFORMED SUBMISSION TYPE: POS AMC PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19960402 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN CO CENTRAL INDEX KEY: 0000092122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 580690070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AMC SEC ACT: 1935 Act SEC FILE NUMBER: 070-08733 FILM NUMBER: 96543629 BUSINESS ADDRESS: STREET 1: 64 PERIMETER CENTER EAST CITY: ATLANTA STATE: GA ZIP: 30346 BUSINESS PHONE: 770-393-06 MAIL ADDRESS: STREET 1: 64 PERIMETER CENTER EAST CITY: ATLANTA STATE: GA ZIP: 30346 POS AMC 1 AMENDMENT NO. 4 (POST-EFFECTIVE NO. 1) File No. 70-8733 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Amendment No. 4 (Post-Effective Amendment No. 1) to APPLICATION OR DECLARATION on FORM U-1 under The Public Utility Holding Company Act of 1935 THE SOUTHERN COMPANY SOUTHERN ELECTRIC MOBILE ENERGY SERVICES 270 Peachtree Street, N.W. INTERNATIONAL, INC. HOLDINGS, INC. Atlanta, Georgia 30303 900 Ashwood Parkway 900 Ashwood Parkway Suite 500 Suite 450 SOUTHERN ELECTRIC Atlanta, Georgia 30338 Atlanta, Georgia 30338 WHOLESALE GENERATORS, INC. SEI HOLDINGS, INC. 900 Ashwood Parkway 900 Ashwood Parkway SEI EUROPE, INC. Suite 500 Suite 500 900 Ashwood Parkway Atlanta, Georgia 30338 Atlanta, Georgia 30338 Suite 500 Atlanta, Georgia 30338 SEI NEWCO 1, INC. 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 (Name of company or companies filing this statement and addresses of principal executive offices) THE SOUTHERN COMPANY (Name of top registered holding company parent of each applicant or declarant) Tommy Chisholm, Secretary Thomas G. Boren, President The Southern Company Southern Electric 270 Peachtree Street, N.W. International, Inc. Atlanta, Georgia 30303 900 Ashwood Parkway Suite 500 Atlanta, Georgia 30338 (Names and addresses of agents for service) The Commission is requested to mail signed copies of all orders, notices and communications to: W.L. Westbrook Thomas G. Boren, President Financial Vice-President Southern Electric The Southern Company International, Inc. 270 Peachtree Street, N.W. 900 Ashwood Parkway Atlanta, Georgia 30303 Suite 500 Atlanta, Georgia 30338 John D. McLanahan, Esq. Troutman Sanders LLP 600 Peachtree Street, N.E. Suite 5200 Atlanta, Georgia 30308-2216 INFORMATION REQUIRED Item 1. Description of Proposed Transaction. 1.1 Background. SEI Holdings, Inc. ("Holdings") is a wholly-owned non-utility subsidiary of The Southern Company ("Southern"), a registered holding company under the Act. Through Holdings and other direct and indirect subsidiaries of Holdings, Southern has acquired and currently holds interests in "exempt wholesale generators" ("EWGs"), as defined in Section 32, and "foreign utility companies" ("FUCOs"), as defined in Section 33. By order dated February 2, 1996 (Holding Company Act Release No. 26468) (the "February 1996 Order"), Holdings was authorized, among other things, to acquire the securities of one or more special-purpose subsidiaries (called "Intermediate Subsidiaries") organized exclusively for the purpose of acquiring and holding one or more EWGs or FUCOs or subsidiaries (called "Energy-Related Companies") which derive or will derive substantially all of their revenues from the ownership and/or operation of certain categories of non-utility businesses, namely: "qualifying facilities" (as defined in the Public Utility Regulatory Policies Act of 1978, as amended; steam production, conversion and distribution; and electricity brokering and marketing. Holdings is also authorized to acquire and hold certain other kinds of non-utility subsidiaries.1 - -------- 1 Specifically, one subsidiary of Holdings (called "Domestic Holdings" in the February 1996 Order) is the umbrella company for Holdings' domestic operations, and another (called "Foreign Holdings" in the February 1996 Order) is the umbrella company for Holdings' international operations. Holdings is also authorized to acquire from Southern the shares of Southern Electric International, Inc. ("Southern Electric"), and to acquire the securities of one or more direct or indirect subsidiaries organized to engage in any of those activities or businesses in which Southern Electric has previously been authorized to engage by order dated December 30, 1994 (Holding Company Act Release No. 26212). 2 1.2 Proposed Modification. Holdings now proposes, on behalf of itself and every direct or indirect subsidiary of Holdings (other than those subsidiary companies that are exempt under the Act), that such companies be permitted to pay dividends with respect to the securities of such companies, from time to time through December 31, 2000, out of capital and unearned surplus (including revaluation reserve), to the extent permitted under applicable corporate law. As an alternative or additional basis for relief with respect to any current or future subsidiary companies of Holdings that derive no material part of their income from sources within the United States, Holdings requests that the Commission grant an order pursuant to Section 3(b) exempting such companies from the requirements of Section 12(c) and Rule 46 thereunder. Holdings anticipates that there will be situations in which it or one or more of its subsidiaries will have unrestricted cash available for distribution in excess of current and retained earnings. In such situations, the declaration and payment of a dividend would have to be charged, in whole or in part, to capital or unearned surplus. As an example, if Holdings (directly or indirectly through an Intermediate Subsidiary) 3 purchases all of the stock of an EWG or FUCO, and following such acquisition, the EWG or FUCO incurs non-recourse borrowings some or all of the proceeds of which are distributed to the Intermediate Subsidiary as a reduction in the amount invested in the EWG or FUCO (i.e., return of capital), the Intermediate Subsidiary (assuming it has no earnings) could not, without the Commission's approval, in turn distribute such cash to Holdings for possible distribution to Southern.2 Similarly, using the same example, if an Intermediate Subsidiary, following its acquisition of all of the stock of an EWG or FUCO, were to sell part of that stock to a third party for cash, the Intermediate Subsidiary would again have substantial unrestricted cash available for distribution, but (assuming no profit on the sale of the stock) would not have current earnings and therefore could not, without the Commission's approval, declare and pay a dividend to Holdings out of such cash proceeds. Further, there may be periods during which unrestricted cash available for distribution by Holdings or a subsidiary exceeds current and retained earnings due to the difference between accelerated depreciation allowed for tax purposes, which may generate significant amounts of distributable cash, and - -------- 2 The same problem would arise where an Intermediate Subsidiary is over-capitalized in anticipation of a bid which is ultimately unsuccessful. In such a case, Holdings would normally desire a return of some or all of the funds invested. 4 depreciation methods required to be used in determining book income.3 Finally, even under circumstances in which an Intermediate Subsidiary or other downstream subsidiary has sufficient earnings, and therefore may declare and pay a dividend to its immediate parent, such immediate parent may have negative retained earnings, even after receipt of the dividend, due to losses from other operations. In this instance, cash would be trapped at a subsidiary level where there is no current need for it. Holdings, on behalf of itself and each of its current and future subsidiaries, represents that it will not declare or pay any dividend out of capital or unearned surplus in contravention of any law restricting the payment of dividends. In this regard, it should be noted that all U.S. jurisdictions limit to one extent or another the authority of corporations to make dividend distributions to shareholders. Most State corporations statutes contain either or both an equity insolvency test or some type of balance sheet test.4 Holdings also states that many of its subsidiaries (including Intermediate Subsidiaries, EWGs and FUCOs) have issued debt securities pursuant to the terms of - -------- 3 See e.g., The Southern Company, et al., Holding Company Act Release No. 26440, dated December 28, 1995. 4 See generally, Fletcher Cyclopedia of the Law of Private Corporations, ss. 5329 (1995 Revised Ed.). 5 credit agreements and indentures that also restrict the amount and timing of distributions to shareholders.5 Holdings' request, if granted, would not contravene the purposes of Section 12(c), which was primarily intended to safeguard the working capital of the public-utility companies.6 In contrast, there is no clear evidence that Congress was specifically concerned with the declaration and payment of dividends by non-utility subsidiaries of registered holding companies,7 at least in the absence of evidence of any indirect impact that a non-utility subsidiary's dividend policy could have on the protected interests. Thus, even if it could be argued that the dividend policies of a non-utility subsidiary that is organized to sell services or goods to its associate public utility companies could somehow have an indirect negative impact on consumers and investors, such logic could not possibly extend - -------- 5 In a non-recourse project financing, the credit documents typically limit the borrower's ability to make any distribution during a default period, and limit distributions at other times to an amount determined after payment of all operations and maintenance expenses and debt service (including funding of any required cash reserves). 6 See Eastern Utilities Associates, Holding Company Act Release No. 25330 (June 13, 1991), citing S. Rep. No. 621, 74th Cong., 1st Sess. p. 35 (1935); Summary Report of the FTC to the U.S. Senate Pursuant to S.R. No. 83, 70th Cong., 1st Sess. Doc. 92, vol. 73-A, pp. 61-62. 7 In this regard, it should be noted that Section 1(b)(3) of the Act proclaims that the interests of consumers and investors may be adversely affected "when control of subsidiary public-utility companies affects the accounting practices and rate, dividend, and other policies of such companies so as to complicate and obstruct State regulation of such companies . . . ." (Emphasis added). 6 to unregulated subsidiaries such as EWGs and FUCOs (and the Intermediate Subsidiaries which own them) which do not engage in affiliate sales. Finally, it should be noted that the Division of Investment Management has itself recommended that the Commission study the continuing need for any rule restricting the payment of dividends out of capital or unearned surplus, particularly as such restriction may apply to the dividend policies of non-utility subsidiaries.8 The applicants hereby encourage the Division of Investment Management to recommend to the Commission an amendment to or rescission of Rule 46. As an alternative or additional basis for relief, Holdings urges that it would be appropriate and in the public interest for the Commission to exempt any current or future subsidiary of Holdings that does not derive any material part of its income from U.S. sources from Section 12(c) of the Act, pursuant to Section 3(b) thereof. The Commission has granted exemptions pursuant to Section 3(b) from Section 12(c) and other provisions of the Act in comparable situations in the past.9 1.3 Other Matters. Under the terms of the February 1996 Order, Southern, Holdings, Southern Electric and Mobile Energy - --------- 8 See "The Regulation of Public-Utility Holding Companies," Report of the Division of Investment Management (June 1995), pp. 56-57. 9 See e.g., The Southern Company, et. al., Holding Company Act Release No. 25639, dated September 23, 1992 (granting exemption from Section 12(c) and other enumerated provisions of the Act to certain intermediate subsidiaries proposed to be organized in connection with possible Australian project). 7 Services Holdings, Inc. ("Mobile Energy"), also a wholly-owned subsidiary of Southern, were authorized to carry out certain other proposed transactions relating to (i) the transfer of Southern Electric's common stock to Holdings, (ii) the transfer of the stock of certain subsidiaries of Southern Electric to other direct or indirect subsidiaries of Holdings, and (iii) the issuance by Mobile Energy to Southern of a series of preferred stock and contribution thereof by Southern to Holdings. These transactions have not yet been carried out in accordance with Rule 24(c). The applicants request an additional period of up to one year in which to consummate these transactions, and propose to certify that these transactions have been carried out as a part of the quarterly report pursuant to Rule 24 that is prescribed in the February 1996 Order. Item 2. Fees, Commissions and Expenses. The additional fees, commissions and expenses to be paid or incurred in connection with this Post-Effective Amendment are estimated not to exceed $3,000. Item 3. Applicable Statutory Provisions. Section 12(c) of the Act and Rules 23, 46 and 54 thereunder are applicable to the proposed transaction. Section 3(b) of the Act is applicable to the alternative or additional request made by Holdings for an exemption from Section 12(c) for itself and its current and future subsidiaries. 8 Rule 54 Analysis: Rule 54 provides, in pertinent part, that, in determining whether to approve a transaction by a registered holding company or subsidiary thereof other than with respect to an EWG or FUCO, the Commission shall not consider the effect of the capitalization or earnings of any such subsidiary of a registered holding company if the requirements of Rule 53(a), (b) and (c) are satisfied. In this regard, Holdings represents that each of the conditions of Rule 53(a) is met,10 and that none of the circumstances described in Rule 53(b) has occurred. Item 4. Regulatory Approval. No state commission, and no federal commission other than this Commission, has jurisdiction of the transactions proposed herein. Item 5. Procedure. The applicants request that the Commission's order be issued as soon as the rules allow, and that there be no thirty-day waiting period between the issuance of the Commission's order and the date on which it is to become effective. The applicants hereby waive a recommended decision by a hearing officer or other responsible officer of the Commission and hereby consent that the Division of Investment Management may assist in the preparation of the Commission's decision and/or order in the matter unless such Division opposes the matters covered hereby. - -------- 10 In a separate proceeding (File No. 70-8725), Southern has been authorized to issue securities (including guaranties) in order to finance investments in EWGs (as well as FUCOs) in amounts which would exceed the limitation in Rule 53(a)(1). Holdings' representation regarding compliance with Rule 54 is therefore expressly subject to the Commission's order in File No. 70-8725. Item 6. Exhibits and Financial Statements. (a) Exhibits: G - Form of Federal Register Notice. (b) Financial Statements. Not applicable. Item 7. Information as to Environmental Effects. (a) In light of the nature of the proposed transactions, as described in Item 1 hereof, the Commission's action in this matter will not constitute any major federal action significantly affecting the quality of the human environment. (b) No other federal agency has prepared or is preparing an environmental impact statement with regard to the proposed transactions. SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this statement to be signed on their behalf by the undersigned thereunto duly authorized. Dated: April 2, 1996 THE SOUTHERN COMPANY By:_/s/Tommy Chisholm______________ Tommy Chisholm Secretary (Signatures Continued on Next Page) 10 MOBILE ENERGY SERVICES HOLDINGS, INC. By:_/s/Tommy Chisholm______________ Tommy Chisholm Secretary SOUTHERN ELECTRIC INTERNATIONAL, INC. By:_/s/Tommy Chisholm______________ Tommy Chisholm Vice President and Secretary SEI HOLDINGS, INC. By:_/s/Tommy Chisholm______________ Tommy Chisholm Secretary SOUTHERN ELECTRIC WHOLESALE GENERATORS, INC. By:_/s/Tommy Chisholm_____________ Tommy Chisholm Secretary SEI EUROPE, INC. By:_/s/Tommy Chisholm_____________ Tommy Chisholm Secretary SEI NEWCO 1, INC. By:_/s/Tommy Chisholm______________ Tommy Chisholm Secretary 11 EX-99 2 EXHIBIT G Exhibit G FORM OF FEDERAL REGISTER NOTICE The Southern Company ("Southern"), a registered holding company whose address is 270 Peachtree Street, N.W., Atlanta, Georgia 30303, its wholly-owned subsidiary, SEI Holdings, Inc. ("Holdings"), and certain other direct and indirect subsidiaries of Holdings, have filed a post-effective amendment to their application or declaration in File No. 70-8733, pursuant to Sections 3(b) and 12(c) of the Act and Rules 46 and 54 thereunder. By order dated February 2, 1996 (HCAR No. 26468) (the "February 1996 Order"), Southern, Holdings, Southern Electric International, Inc. ("Southern Electric"), also a wholly-owned subsidiary of Southern, and certain other direct and indirect subsidiaries of Southern were authorized to carry out certain transactions involved in the final restructuring of Southern's portfolio of "exempt wholesale generators" ("EWGs") and "foreign utility companies" ("FUCOs") (collectively, "Exempt Projects") and related intermediate subsidiaries (called "Intermediate Subsidiaries"). The February 1996 Order also authorized Holdings to make future investments in certain other specified categories of entities, called "Energy-Related Companies." The applicants now seek a modification to the February 1996 Order that would allow Holdings and its direct and indirect subsidiaries (other than Exempt Projects, which are exempt from the Act) to declare and pay dividends out of capital and unearned surplus to the extent permitted under applicable corporate law. In support of its request, the applicants provide several examples of situations in which Holdings or a subsidiary may receive substantial amounts of unrestricted and distributable cash which, in the ordinary course, Holdings or such subsidiary would typically wish to distribute to its immediate parent as a partial return of capital. The amounts of such distributions may, however, exceed current and retained earnings of Holdings or a subsidiary, as the case may be. The applicants state that distributions from capital and unearned surplus would only be made to the extent permitted under applicable law, as well as any applicable financing agreements to which Holdings or any of its subsidiaries may be a party which restricts distributions to shareholders. As an alternative or additional basis for relief under Section 12(c) and Rule 46, the applicants state that it would be in the public interest for the Commission to issue an order under Section 3(b) of the Act exempting from Section 12(c) any current or future subsidiary of Holdings that does not derive any material part of its income from U.S. sources. The applicants also request an extension for one year in the period in which certain transactions approved as a part of the February 1996 Order may be consummated. Such transactions relate to the final steps in the internal reorganization of Southern's ownership of Southern Electric and certain of its subsidiaries and of Mobile Energy Services Holdings, Inc., a non-exempt project holding company. -----END PRIVACY-ENHANCED MESSAGE-----