<PAGE>
As filed with the Securities and Exchange Commission on August 29, 1997
File No. 70-8945
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
AMENDMENT NO. 3
TO
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
-----------------
Ameren Corporation
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Name of company filing this statement
and address of principal executive offices)
None
(Name of top registered holding company)
William E. Jaudes
Registered Agent
Ameren Corporation
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Names and addresses of agents of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application to:
James J. Cook William J. Harmon
William Niehoff Jones, Day, Reavis & Pogue
Union Electric Company 77 West Wacker, Suite 3500
1901 Chouteau Avenue Chicago, Illinois 60601-1692
P.O. Box 149
St. Louis, Missouri 63166
<PAGE>
A. Introduction
This Application/Declaration, originally filed October 31, 1996 and amended
through Amendment No. 2 (the "Application"), seeks approvals relating to the
proposed business combination transaction among Ameren Corporation ("Ameren"),
Union Electric Company ("UE") and CIPSCO Incorporated ("CIPSCO"), by which UE
and CIPSCO's utility subsidiary, Central Illinois Public Service Company
("CIPS"), will become wholly owned subsidiaries of Ameren, a new Missouri
holding company (the "Transaction"). Following the consummation of the
Transaction, Ameren will register with the Securities and Exchange Commission
(the "Commission") as a holding company under the Public Utility Holding Company
Act of 1935 (the "Act").
Ameren submits this Amendment No. 3 (i) to refer to a recently issued
Commission decision which demonstrates significant support for granting the
relief sought in this docket, (ii) to file additional information regarding the
retention by Ameren of the non-utility investments of UE and CIPSCO Investment
Company ("CIPSCO Investment") and (iii) to file certain Exhibits hereto as
described below.
B. The Recent New Century Energies Decision
On August 1, 1997, the Commission issued its decision in New Century
Energies, Inc., Release No. 35-26748 (Aug. 1, 1997) approving the acquisition by
New Century Energies of the electric and gas operations of Public Service
Company of Colorado and Southwestern Public Service Company in a transaction
which will result in New Century Energies becoming a registered holding company
under the Act. In this decision the Commission recognized that circumstances in
the utility industry have changed significantly since the decisions in the New
England Electric System cases finding that a gas utility operation could not be
retained under the A-B-C Clauses by a holding company whose principal system was
electric.
In New Century Energies, the Commission affirmed the traditional analysis
that increased costs attributable to separation of an additional system from the
principal integrated system may be considered as "lost economies" under Clause A
of Section 11(b)(1) of the Act. In an important change from prior decisions,
however, the Commission found that other benefits of separation assumed to exist
in previous cases, i.e., the benefits of increased competition resulting from
separation of gas and electric businesses, should no longer be considered
applicable. In addition to the lost economies resulting from increased costs of
operating the additional system independently, the Commission recognized in New
Century Energies that "separation of gas and electric businesses may cause the
separated entities to be weaker competitors than they would be together. This
factor adds to the quantifiable loss of economies caused by increased costs."
Release 35-26748 at 31 (slip op.) (emphasis added). Further, the Commission
held that "[i]ncreased expenses of separate operation may no longer be offset,
as they were in New England Electric System, by a gain of qualitative
competitive benefits, but rather may be compounded by a loss of such benefits,
as the Commission finds in this matter." Id. at 32.
The Commission found in New Century Energies that the lost economies, as a
percentage of total gas operating revenues, total gas expense, gross gas income
and net gas income presented in that case were within the range of similar
losses in cases where the Commission had permitted
2
<PAGE>
retention of the additional gas system. As demonstrated by the Supplemental
Analysis of the Economic Impact of a Divestiture of the Gas Operations of UE and
CIPS filed as Exhibit K-1.1, the lost economies that would be incurred by a
separation of the combined gas operations of UE and CIPS into a separate entity
would exceed the losses found sufficient to allow retention in other Commission
decisions. The finding of New Century Energies that the effect on competition
caused by separation of the gas business would increase the lost economies (not
decrease them as previously assumed) is equally applicable to this case as has
been pointed out in the Application and exhibits filed thereto.
Accordingly, New Century Energies provides strong support for the
conclusion sought by Ameren in this docket, i.e., that the gas operations of
CIPS and UE may be retained as an additional integrated utility system under
Clause A of Section 11 (b)(1) of the Act.
As will be demonstrated in Part C below, the New Century Energies decision
also supports retention by Ameren of the non-utility investments of UE and
CIPSCO Investment.
C. Retention of Non-Utility Investments
The applicants in New Century Energies operated a number of non-utility
business and held non-utility investments. The Commission noted that such
business and investments were required to be necessary or appropriate in the
public interest or for the protection of investors or consumers and not
detrimental to the proper functioning of the integrated system under Section
11(b)(1) and 10(c)(1) of the Act. All the various non-utility interests (which
are described in Appendix A to the decision) were found to satisfy the statutory
requirements. Release 35-26748 at 38 (slip op.).
New Century Energies also found that the existing investments, as of the
date of the consummation of the merger in that case, should be disregarded for
purposes of calculating the dollar limitation upon investment in energy-related
companies under new Rule 58. Id. Ameren respectfully requests that the amount
invested, or approved to be invested, in its approved non-utility investments,
as of the date of the Merger, also be disregarded for purposes of Rule 58.
The Commission reached its conclusion regarding the retention of the non-
utility investments in New Century Energies in view of the fact that the merger
partners were not subject to the restrictions that Section 11(b)(1) and the
Commission's precedent thereunder places upon the non-utility investments of
registered system companies. Id. As noted in Item 1.b.1. of the Application,
UE and CIPSCO are each exempt public utility holding companies and, as such, are
not subject to the limitations of the Act applicable to registered holding
companies. The non-utility investments of UE and CIPSCO are well within the
general guidelines of what is appropriate for an exempt holding company under
the Act./1/
- ----------------
/1/ As noted in New Century Energies, the Commission has never determined the
limits upon diversification by exempt holding companies. Release 35-26748
at 39, n. 73 (slip op.).
3
<PAGE>
Ameren files herewith, as Exhibit K-4, an updated description of each of
the non-utility investments of UE and CIPSCO Investment. This exhibit provides
additional detail regarding the activities of the investments and notes
applicable Commission precedent as to retainability.
D. Additional or Updated Exhibits.
The Exhibits filed herewith include Exhibits F-1.1 and F-2.1, opinions of
counsel, G-1.2, an updated financial schedule, and I-5.2 and I-6.2, quarterly
reports. As noted, new Exhibit K-4 detailing non-utility investments is also
filed.
4
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Item 6. Exhibits and Financial Statements
A. Exhibits
The following Exhibits are filed with this Amendment No. 3:
F-1.1 Preliminary Opinion of Counsel (William E. Jaudes)
F-2.1 Preliminary Opinion of Counsel (Jones, Day, Reavis & Pogue)
G-1.2 Financial Data Schedule (June 1997) (Electronic filing only)
I-5.2 UE Quarterly Report on Form 10-Q for the quarter ended June 30,
1997 (Incorporated by reference)
I-6.2 CIPSCO and CIPS Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 (Incorporated by reference)
K-4 Description of Non-Utility Investments
B. Financial Statements
FS-3.2 CIPSCO Consolidated Balance Sheets as of June 30, 1997 (see
Quarterly Report of CIPSCO on Form 10-Q for the quarter ended
June 30, 1997 (Exhibit I-6.2 hereto), at p. 5)
FS-5.2 CIPS Balance Sheets as of June 30, 1997 (see Quarterly Report of
CIPS on Form 10-Q for the quarter ended June 30, 1997 (Exhibit
I-6.2 hereto), at p. 8)
FS-7.2 UE Consolidated Balance Sheet as of June 30, 1997 (see Quarterly
Report of UE on Form 10-Q for the quarter ended June 30, 1997
(Exhibit I-5.2 hereto), at p. 2)
5
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned company has duly caused this Amendment No. 3 to
Application/Declaration to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: August 29, 1997
AMEREN CORPORATION
/s/ William E. Jaudes
---------------------------------------------
By: William E. Jaudes
Secretary
6
<PAGE>
Exhibit Index
to Amendment No. 3
A. Exhibits
<TABLE>
<CAPTION>
Form of
Exhibit No. Description Transmission
- ----------- ----------- ------------
<C> <S> <C>
F-1.1 Preliminary Opinion of Counsel (William E. Jaudes) Electronic
F-2.1 Preliminary Opinion of Counsel (Jones, Day, Reavis Electronic
& Pogue)
G-1.2 Financial Data Schedule (June 1997) (Electronic Electronic
filing only)
I-5.2 UE Quarterly Report on Form 10-Q for the quarter By Reference
ended June 30, 1997 (Incorporated by reference)
I-6.2 CIPSCO and CIPS Quarterly Report on Form 10-Q By Reference
for the quarter ended June 30, 1997 (Incorporated
by reference)
K-4 Description of Non-Utility Investments Electronic
</TABLE>
B. Financial Statements
<TABLE>
<CAPTION>
Form of
Exhibit No. Description Transmission
- ----------- ----------- ------------
<C> <S> <C>
FS-3.2 CIPSCO Consolidated Balance Sheets as of June 30, By Reference
1997 (see Quarterly Report of CIPSCO on Form 10-Q
for the quarter ended June 30, 1997 (Exhibit I-6.2
hereto), at p. 5).
FS-5.2 CIPS Balance Sheets as of June 30, 1997 (see By Reference
quarter ended June 30, 1997 (Exhibit I-6.2
hereto), at p. 8)
FS-7.2 UE Consolidated Balance Sheet as of June 30, 1997 By Reference
(see Quarterly Report of UE on Form 10-Q for the
quarter ended June 30, 1997 (Exhibit I-5.2 hereto),
at p. 2)
</TABLE>
7
<PAGE>
EXHIBIT F-1.1
PRELIMINARY OPINION OF COUNSEL
(WILLIAM E. JAUDES)
<PAGE>
EXHIBIT F-1.1
AMEREN CORPORATION
1901 Chouteau Avenue
St. Louis, Missouri 63166
314-621-3222
August 29, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Ameren Corporation
Form U-1 Application-Declaration
(File No. 70-8945)
Dear Sirs:
I refer to the Form U-1 Application/Declaration, as amended (the
"Application"), under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), filed with the Securities and Exchange Commission (the
"Commission") by Ameren Corporation ("Ameren"), a Missouri corporation.
Capitalized terms used in this letter without definition have the meanings
ascribed to such terms in the Application.
The Application seeks approvals relating to the proposed business
combination transaction among Ameren, Union Electric Company ("UE") and CIPSCO
Incorporated ("CIPSCO"), by which UE and Central Illinois Public Service Company
("CIPS"), will become wholly owned subsidiaries of Ameren and Ameren will
acquire all of the issued and outstanding common stock of UE and CIPS and
acquire indirectly 60% of the outstanding common stock of Electric Energy, Inc.
("EEI") (the "Merger Transaction"). In the Application, Ameren also requests
that the Commission approve the following actions or transactions (which,
together with the Merger Transaction, are referred to as the "Transactions"):
(i) the establishment of Ameren Services Corp. ("Ameren Services") in
accordance with Rule 88 under the Act and the acquisition by Ameren
of all of the outstanding voting securities of Ameren Services;
(ii) the execution of the General Services Agreement;
(iii) the issuance of Ameren Common Stock in connection with the
Transaction;
<PAGE>
(iv) the issuance by Ameren (and/or the acquisition by or on behalf of
Ameren in open market transactions) of up to 19 million shares of
Ameren Common Stock, over the period ending five years after the date
of the Commission's approving order in this docket, for purposes of
certain employee benefit and dividend reinvestment plans of UE,
CIPSCO, CIPS and Ameren;
(v) the solicitation of proxies from the holders of Ameren Common Stock
for approvals deemed necessary or desirable in connection with the
establishment or amendment of employee benefit plans referred to in
(iv);
(vi) the acquisition by Ameren of all of the outstanding voting securities
of CIPSCO Investment Company (currently a wholly owned subsidiary of
CIPSCO) ("CIPSCO Investment"), which serves as a holding company for
certain nonutility investments;
(vii) the retention by Ameren of the gas properties of UE and CIPS and the
continued operation of UE and CIPS as combination utilities;
(viii) the retention by Ameren of the nonutility activities, businesses
and investments of UE and CIPSCO Investment;
(ix) the retention by Ameren of the nonutility activities, businesses and
investments of UE and CIPSCO Investment and the making of certain
similar investments over a period ending five years after the date of
the Commission's approving order in this docket;
(x) the continuation of all outstanding intrasystem debt, guaranties and
support agreements; and
(xi) the transfer by UE to CIPS of the Transferred Utility Facilities
located in Illinois.
I have acted as counsel for Ameren in connection with the Application
and, as such counsel, I am familiar with the corporate proceedings taken by
Ameren, UE and CIPSCO in connection with the Transactions as described in the
Application.
I have examined originals, or copies certified to my satisfaction, of
such corporate records of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment,
certificates of public officials, certificates of officers and representatives
of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment, and other documents as I have
deemed it necessary to examine as a basis for the opinions hereinafter
expressed. In such examination I have assumed the genuineness of all signatures
and the authenticity of all documents submitted to me as originals and the
conformity with the originals of all documents submitted to me as copies. As to
various questions of fact material to such opinions I have, when relevant facts
were not independently established, relied upon certificates of
2.
<PAGE>
officers of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment and other appropriate
persons and statements contained in the Application and the exhibits thereto.
The opinions expressed below are subject to the following further
assumptions and conditions:
a. The authorization and approval of the Transactions, by the Boards
of Directors and shareholders of Ameren, UE and CIPSCO and subsidiaries
thereof remain in full force and effect.
b. All required approvals, authorizations, consents, certificates,
and orders of, and all filings and registrations with, all applicable
federal and state commissions and regulatory authorities with respect to
the Transactions shall have been obtained or made, as the case may be, and
shall remain in effect (including the approval and authorization of the
Commission under the Act, the Federal Energy Regulatory Commission under
the Federal Power Act, as amended, and the rules and regulations
thereunder, the Nuclear Regulatory Commission under the Atomic Energy Act,
the Missouri Public Service Commission under the applicable laws of the
State of Missouri, and the Illinois Commerce Commission under the
applicable laws of the State of Illinois), and the Transactions shall have
been accomplished in accordance with all such approvals, authorizations,
consents, certificates, orders, filings and registrations.
c. The Commission shall have duly entered an appropriate order or
orders with respect to the Transactions as described in the Application
granting and permitting the Application to become effective under the Act
and the rules and regulations thereunder.
d. No stop order shall have been entered with respect to the S-4
Registration Statement (File No. 33-64165), which has become effective
pursuant to the Securities Act of 1933, as amended, with respect to the
shares of Ameren Common Stock to be issued in connection with the
Transactions; and the issuance of shares of Ameren Common Stock in
connection with the Transactions shall have been consummated in compliance
with the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
e. The applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder shall have expired.
f. With respect to those Transactions occurring after Ameren shall
have become subject to registration pursuant to Section 5 of the Act and
the rules of the Commission thereunder, Ameren shall have duly registered
with the Commission as a holding company pursuant to Section 5 of the Act
and the rules of the Commission thereunder.
3.
<PAGE>
g. Instruments of merger shall have been duly and validly filed with
the Secretary of State of Missouri and Illinois, and such other corporate
formalities as are required by the laws of such states for the consummation
of the mergers contemplated by the Transactions shall have been taken; and
such mergers shall have become effective in accordance with the laws of
Missouri and Illinois.
h. The parties shall have obtained all consents, waivers and
releases, if any, required for the Transactions under all applicable
governing corporate documents, contracts, agreements, debt instruments,
indentures, franchises, licenses and permits.
i. No act or event other than as described herein shall have occurred
subsequent to the date hereof which would change the opinions expressed
herein.
j. The Transactions shall have been consummated as described in the
Application and under the supervision of the General Counsel of Ameren
Services Company acting for Ameren and Jones, Day, Reavis & Pogue and all
legal matters incident thereto shall be satisfactory to each of us.
k. For purposes of this opinion, with respect to all matters governed
by the laws of Illinois, I have relied upon the opinion of even date of
Jones, Day, Reavis & Pogue, Chicago, Illinois, filed as an Exhibit to the
Application.
Based upon the foregoing, and subject to the assumptions and
conditions set forth herein, and having regard to legal considerations which I
deem relevant, I am of the opinion that, in the event that the proposed
Transactions are consummated in accordance with the Application:
1. All laws of the State of Missouri applicable to the proposed
Transactions will have been complied with.
2. Each of Ameren, UE and Arch Merger is validly organized and duly
existing under the laws of the State of Missouri.
3. The shares of Ameren Common Stock to be issued in connection with
the proposed Transactions will be validly issued, fully paid and
nonassessable, and the holders thereof will be entitled to the rights and
privileges appertaining thereto set forth in the Restated Articles of
Incorporation of Ameren. The shares of common stock of UE to be converted
into shares of Ameren Common Stock in connection with the Transactions are
validly issued, fully paid and nonassessable, and Ameren, as the holder
thereof, will be entitled to the rights and privileges appertaining thereto
set forth in the Restated Articles of Incorporation of UE. The shares of
common stock of Arch Merger to be issued to Ameren in connection with the
establishment of Arch Merger will be validly issued, fully paid and
nonassessable, and Ameren, as the holder thereof, will be entitled to the
4.
<PAGE>
rights and privileges appertaining thereto set forth in the Articles of
Incorporation of Arch Merger.
4. Ameren will legally acquire (a) the shares of common stock of UE
that will be acquired by Ameren in connection with the merger of Arch
Merger with and into UE, (b) the shares of common stock of CIPS as a result
of the merger of CIPSCO with and into Ameren, and (c) the shares of Arch
Merger that will be issued to Ameren in connection with the organization of
Arch Merger.
5. The consummation of the proposed Transaction will not violate the
legal rights of the holders of any securities issued by Ameren or any
associate company of Ameren.
I hereby consent to the use of this opinion as an exhibit to the
Application.
Very truly yours,
William E. Jaudes
5.
<PAGE>
EXHIBIT F-2.1
PRELIMINARY OPINION OF COUNSEL
(JONES, DAY, REAVIS & POGUE)
<PAGE>
EXHIBIT F-2.1
JONES, DAY, REAVIS & POGUE
77 West Wacker Drive
Suite 3500
Chicago, Illinois 60601-1692
312-782-3939
August 29, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Ameren Corporation
Form U-1 Application-Declaration
(File No. 70-8945)
Dear Sirs:
We refer to the Form U-1 Application/Declaration, as amended (the
"Application"), under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), filed with the Securities and Exchange Commission (the
"Commission") by Ameren Corporation ("Ameren"), a Missouri corporation.
Capitalized terms used in this letter without definition have the meanings
ascribed to such terms in the Application.
The Application seeks approvals relating to the proposed business
combination transaction among Ameren, Union Electric Company ("UE") and CIPSCO
Incorporated ("CIPSCO"), by which UE and Central Illinois Public Service Company
("CIPS"), will become wholly owned subsidiaries of Ameren and Ameren will
acquire all of the issued and outstanding common stock of UE and CIPS and
acquire indirectly 60% of the outstanding common stock of Electric Energy, Inc.
("EEI") (the "Merger Transaction"). In the Application, Ameren also requests
that the Commission approve the following actions or transactions (which,
together with the Merger Transaction, are referred to as the "Transactions"):
(i) the establishment of Ameren Services Corp. ("Ameren Services") in
accordance with Rule 88 under the Act and the acquisition by Ameren of
all of the outstanding voting securities of Ameren Services;
(ii) the execution of the General Services Agreement;
<PAGE>
(iii) the issuance of Ameren Common Stock in connection with the
Transaction;
(iv) the issuance by Ameren (and/or the acquisition by or on behalf of
Ameren in open market transactions) of up to 19 million shares of
Ameren Common Stock, over the period ending five years after the date
of the Commission's approving order in this docket, for purposes of
certain employee benefit and dividend reinvestment plans of UE,
CIPSCO, CIPS and Ameren;
(v) the solicitation of proxies from the holders of Ameren Common Stock
for approvals deemed necessary or desirable in connection with the
establishment or amendment of employee benefit plans referred to in
(iv);
(vi) the acquisition by Ameren of all of the outstanding voting securities
of CIPSCO Investment Company (currently a wholly owned subsidiary of
CIPSCO) ("CIPSCO Investment"), which serves as a holding company for
certain nonutility investments;
(vii) the retention by Ameren of the gas properties of UE and CIPS and the
continued operation of UE and CIPS as combination utilities;
(viii) the retention by Ameren of the nonutility activities, businesses
and investments of UE and CIPSCO Investment;
(ix) the retention by Ameren of the nonutility activities, businesses and
investments of UE and CIPSCO Investment and the making of certain
similar investments over a period ending five years after the date of
the Commission's approving order in this docket;
(x) the continuation of all outstanding intrasystem debt, guaranties and
support agreements; and
(xi) the transfer by UE to CIPS of the Transferred Utility Facilities
located in Illinois.
We have acted as counsel for CIPSCO in connection with the Application
and, as such counsel, we are familiar with the corporate proceedings taken by
Ameren, UE and CIPSCO in connection with the Transactions as described in the
Application.
We have examined originals, or copies certified to our satisfaction,
of such corporate records of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment,
certificates of public officials, certificates of officers and representatives
of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment, and other documents as we
have deemed necessary to examine as a basis for the opinions hereinafter
expressed. In such examination we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals and the
conformity with the originals of all documents submitted to us as copies. As to
various questions of fact material to such opinions we
2.
<PAGE>
have, when relevant facts were not independently established, relied upon
certificates of officers of Ameren, UE, CIPSCO, CIPS and CIPSCO Investment and
other appropriate persons and statements contained in the Application and the
exhibits thereto.
The opinions expressed below are subject to the following further
assumptions and conditions:
a. The authorization and approval of the Transactions by the Boards
of Directors and shareholders of Ameren, UE and CIPSCO and subsidiaries
thereof remain in full force and effect.
b. All required approvals, authorizations, consents, certificates,
and orders of, and all filings and registrations with, all applicable
federal and state commissions and regulatory authorities with respect to
the Transactions shall have been obtained or made, as the case may be, and
shall remain in effect (including the approval and authorization of the
Commission under the Act, the Federal Energy Regulatory Commission under
the Federal Power Act, as amended, and the rules and regulations
thereunder, the Nuclear Regulatory Commission under the Atomic Energy Act,
the Missouri Public Service Commission under the applicable laws of the
State of Missouri, and the Illinois Commerce Commission under the
applicable laws of the State of Illinois), and the Transactions shall have
been accomplished in accordance with all such approvals, authorizations,
consents, certificates, orders, filings and registrations.
c. The Commission shall have duly entered an appropriate order or
orders with respect to the Transactions as described in the Application
granting and permitting the Application to become effective under the Act
and the rules and regulations thereunder.
d. No stop order shall have been entered with respect to the S-4
Registration Statement, which has become effective pursuant to the
Securities Act of 1933, as amended, with respect to the shares of Ameren
Common Stock to be issued in connection with the Transactions; and the
issuance of shares of Ameren Common Stock in connection with the
Transactions shall have been consummated in compliance with the Securities
Act of 1933, as amended, and the rules and regulations thereunder.
e. The applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder shall have expired.
f. With respect to those Transactions occurring after Ameren shall
have become subject to registration pursuant to Section 5 of the Act and
the rules of the Commission thereunder, Ameren shall have duly registered
with the Commission as a holding company pursuant to Section 5 of the Act
and the rules of the Commission thereunder.
3.
<PAGE>
g. Instruments of merger shall have been duly and validly filed with
the Secretary of State of Missouri and Illinois, and such other corporate
formalities as are required by the laws of such states for the consummation
of the mergers contemplated by the Transactions shall have been taken; and
such mergers shall have become effective in accordance with the laws of
Missouri and Illinois.
h. The parties shall have obtained all consents, waivers and
releases, if any, required for the Transactions under all applicable
governing corporate documents, contracts, agreements, debt instruments,
indentures, franchises, licenses and permits.
i. No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change the opinions
expressed herein.
j. The Transactions shall be consummated as described in the
Application and under the supervision of Jones, Day, Reavis & Pogue and the
General Counsel of Ameren and all legal matters incident thereto shall be
satisfactory to each of us.
Based upon the foregoing, but subject to the assumptions,
qualifications and limitations set forth herein, we are of the opinion that, in
the event that the proposed Transactions are consummated in accordance with the
Application:
1. All laws of the State of Illinois applicable to the proposed
Transactions will have been complied with.
2. Each of CIPSCO and CIPS is validly organized and duly existing
under the laws of the State of Illinois.
3. The shares of common stock of CIPSCO to be converted into shares
of Ameren Common Stock in connection with the Transactions will be validly
issued, fully paid and nonassessable. The shares of common stock of CIPS
to be acquired by Ameren as a result of the Merger of CIPSCO into Ameren
will be validly issued, fully paid and nonassessable, and Ameren, as the
holder thereof, will be entitled to the rights and privileges appertaining
thereto set forth in the Restated Articles of Incorporation of CIPS.
We hereby consent to the use of this opinion as an exhibit to the
Application.
Respectfully yours,
Jones, Day, Reavis & Pogue
4.
<PAGE>
EXHIBIT G-1.2
FINANCIAL DATA SCHEDULE
<PAGE>
EXHIBIT G-1.2
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA SCHEDULE UT
(Thousands of Dollars Except Per Share Amounts)
Six Months Ended June 30, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Caption Heading UE CIPSCO Adjustments Combined
--------------- --------- --------- ----------- ---------
<C> <S> <C> <C>
1 Total net utility plant 5,403,626 1,468,982 103,237 6,975,845
2 Other property and investments 112,578 117,798 0 230,376
3 Total current assets 487,358 199,634 57,312 744,304
4 Total deferred charges 36,186 28,946 (3,775) 61,357
5 Balancing amount for total assets 836,784 169,838 0 1,006,622
6 Total assets 6,876,532 1,985,198 156,774 9,018,504
7 Common stock 510,619 356,812 (866,059) 1,372
8 Capital surplus, paid in 716,879 0 866,059 1,582,938
9 Retained earnings 1,093,678 296,923 0 1,390,601
10 Total common stockholders equity 2,321,176 653,735 0 2,974,911
11 Preferred stock subject to mandatory redemption 0 0 0 0
12 Preferred stock not subject to mandatory redemption 155,197 80,000 0 235,197
13 Long term debt, net 1,861,800 570,379 115,556 2,547,735
14 Short term notes 68,000 0 0 68,000
15 Notes payable 0 0 0 0
16 Commercial paper 0 55,481 0 55,481
17 Long term debt-current portion 0 0 14,444 14,444
18 Preferred stock-current portion 0 0 0 0
19 Obligations under capital leases 81,386 0 0 81,386
20 Obligations under capital leases-current portion 32,734 0 0 32,734
21 Balancing amount for capitalization and liabilities 2,356,239 625,603 26,774 3,008,616
22 Total capitalization and liabilities 6,876,532 1,985,198 156,774 9,018,504
23 Gross operating revenue 1,037,212 420,261 96,842 1,554,315
24 Federal and state income taxes expense 69,628 16,165 4,136 89,929
25 Other operating expenses 797,913 356,661 81,859 1,236,433
26 Total operating expenses 867,541 372,826 85,995 1,326,362
27 Operating income (loss) 169,671 47,435 10,847 227,953
28 Other income (loss), net (1,011) (109) (5,925) (7,045)
29 Income before interest charges 168,660 47,326 4,922 220,908
30 Total interest charges 67,388 17,684 4,922 89,994
31 Net income 96,863 27,800 0 124,663
32 Preferred stock dividends 4,409 1,842 0 6,251
33 Earnings available for common stock 96,863 27,800 0 124,663
34 Common stock dividends 129,697 35,773 8,794 174,264
35 Total annual interest charges on all bonds* 0 0 0 0
36 Cash flow from operations 193,403 5,063 20,992 219,458
37 Earnings per share-primary $0.95 $0.82 0 $0.91
38 Earnings per share-fully diluted $0.95 $0.82 0 $0.91
*Required on fiscal year-end only
</TABLE>
<PAGE>
EXHIBIT K-4
DESCRIPTION OF NON-UTILITY INVESTMENTS
<PAGE>
EXHIBIT K-4
DESCRIPTION OF NON-UTILITY INVESTMENTS
As a result of the Transaction, the nonutility businesses and interests of
UE and CIPSCO described in Item l.B.3 of the Application will become businesses
and interests of Ameren. The total assets of all nonutility investments of UE
and CIPSCO at June 30, 1997 ($144.5 million) constituted less than 1.6% of pro
forma consolidated assets of Ameren or about 2.4% of pro forma consolidated
capitalization.
From UE, Ameren will hold the following nonutility subsidiaries,
investments or businesses:
1. Steam heating operations of UE.
The steam heating business of UE will continue to be owned and operated by
UE. This operation, which is located exclusively in its service territory and
limited to Jefferson City, Missouri, serves the needs of the Missouri State
Capitol complex. The steam is supplied by a plant formerly used by UE to
generate electricity for its system. The retention of this business will further
Ameren's ability to be an energy service company providing consumers with
additional options to meet their energy needs, thereby allowing Ameren to
compete more effectively in the energy-service business./1/
2. Union Electric Development Corporation ("UEDC")
Ownership of energy related or civic and community development related
investments in the UE service area. All of UE's nonutility investments are made
through UEDC (with one exception noted below). At June 30, 1997, the total
amount invested in such nonutility investments was $19.1 million. Except as
noted below, all of these investments are passive
- ---------------
/1/ In re General Public Utility Corp., 32 SEC 807, 840-841 (Dec. 28, 1951)
(Commission authorized retention of steam heating systems. Steam from such
systems was used to generate electricity and sold to customers for heating
purposes.) See also In re The North American Co., 11 SEC 194 (Apr. 14, 1942)
(Commission authorized retention of steam heating operations which provided
steam heat to customers and was used in the generation of electricity.) In
CINergy Corp., 61 SEC Docket 823 (Feb. 20, 1996) (Release No. 35-26474), the
Commission found a district heating and cooling business which also provided
steam to be functionally related to the utility business. Since the Commission
has determined that steam heating operations, whether used for internal
generation purposes or for direct sale to customers, are reasonably incidental
to the operation of an electric utility system, this business may be retained.
The production, conversion and distribution of thermal energy products,
including process steam and chilled water, is also permitted by proposed Rule
58. Thus, the production and distribution of thermal energy is reasonably
incidental to Ameren's utility operations and may be retained.
<PAGE>
investments in entities in which neither UE nor any of its affiliates
participates in management or exercises control. As noted in the Application, UE
has authority from the ICC to invest up to $100 million in UEDC "for the purpose
of benefitting and improving" its business and/or service area and for
charitable purposes. (ICC Docket No. 94-0237, Sept. 24, 1994). Missouri law does
not require prior approval to make non-utility investments.
Ameren requests authority to continue the investments listed below and to
make additional investments in UEDC up to the $100 million authorized by the ICC
and to have such investment disregarded for purpose of Rule 58. These
investments are categorized as follows:
a. Energy/Utility Related
Gateway Energy Alliance -- At June 30, 1997, $429,792 was invested in
a 50% interest in this limited liability corporation, which is proposing to
develop a chilled water/steam project in the St. Louis, Missouri area. In
addition, this corporation is exploring other non-electric or gas utility
related activities in St. Louis./2/
CellNet, Inc. -- At June 30, 1997, $9.9 million was invested
(representing 1.3% of the equity) in this corporation, which is developing
an automated meter reading system for UE as well as other utility
companies./3/
EnviroTech Investment Fund LLC -- At June 30, 1997, $700,000 was
invested in or committed directly by UE (not UEDC) to a 6% interest in this
limited liability corporation, which will make investments in various
companies developing alternative and renewable energy technologies,
environmental and waste treatment technologies and services, energy
efficiency technologies, and other technologies related to improving the
generation, transmission and delivery of electricity. In addition, a UE
pension fund over which UE exercises investment discretion holds a 9%
interest in EnviroTech, with $3 million invested or committed. One UE
officer is one of a 10-member advisory board of EnviroTech, which is
empowered to approve investments that fall outside of the types
specifically approved by EnviroTech's charter documents./4/
- ---------------
/2/ See cases cited in Note 1. UEDC, through a joint venture limited liability
company, is negotiating with a municipal utility to construct a new generating
unit to be owned and operated by the municipal utility. See, e.g., Southern Co.,
Release No. 22132 (July 17, 1981); American Electric Power Co., Inc., Release
No. 22468 (Apr. 28, 1982) (consulting services). See also Release 26667
(Adoption of Rule 58) at Part II,A,1,b.(7).
/3/ Central and South West Corp. Release No. 35-26250 (Mar. 14, 1995) (develop
and provide meter reading services to non-affiliated companies).
/4/ Several other registered holding companies have received approval to invest
in EnviroTech partnerships. See, e.g., Southern Co., Release No. 35-26240
(Feb. 28, 1995).
2
<PAGE>
On-Call Appliance Plan -- UEDC operates an appliance warranty program
where, for a fee, it provides warranty coverage for certain appliances
including heating and cooling equipment and water heaters. UEDC has
invested less than $500,000 in this business./5/
Demand Side Management -- UEDC has engaged in providing energy audit
and energy management services to enable a client to modify its facilities
and energy usage to reduce energy consumption./6/
Gateway Energy Systems, L.C. -- At June 30, 1997, UEDC had invested
$125,000 in a 49% interest in a limited liability company which seeks to
develop new markets for the provision of energy services. Individual
projects developed through this entity would in most cases be performed by
separate limited liability companies of which UEDC will be an investor./7/
b. Community and Civic Development/Venture Capital
Civic Ventures LLC -- At June 30, 1997, $200,000 was committed, of
which $20,000 was invested, in a 4.67% interest in this limited liability
corporation, which is a venture capital fund for minority business
development. It is expected that such venture capital investments will
primarily be made in enterprises in Missouri and Illinois./8/
- ----------------
/5/ Appliance sales, installation and servicing businesses have been approved.
See, e.g., Consolidated Natural Gas, Release No. 36-26234 (Feb. 23, 1995).
/6/ See, e.g., Eastern Utilities Associates, Release No. 35-26232 (Feb. 15,
1995).
/7/ See Notes 4 and 6.
/8/ The Commission has on numerous occasions permitted investments in various
economic development activities. In UE's case, the Commission approved an
investment in 1962 (at which time UE was a registered holding company) in a
Civic Center Redevelopment Corporation, which was sponsored by a group of
citizens of St. Louis and supported by newspapers, banks, department stores,
manufacturers, merchants, labor unions, and public utility companies in
metropolitan St. Louis. This venture was to assist in the complete redevelopment
of an area of 31 blocks of about 82 acres in the main business district of St.
Louis. Union Electric Co., Release No. 35-14608 (Mar. 22, 1962). See also,
Appalachian Power Co., Release No. 35-25266 (growth capital in new and expanding
small, rural firms to improve local economy); Missouri Power & Light Co.,
Release No. 35-12524 (June 3, 1954) (industrial enterprises supported by
community businesses to fulfil civic responsibility).
See also, e.g., East Ohio Gas Co., 45 SEC Docket 766 (Feb. 27, 1990)
(authorizing $500,000 investment in limited partnerships engaged in financing
development of urban real estate projects aimed at "impact[ing] favorably upon
urban blight"); Ohio Power Co., 52 SEC Docket
(continued...)
3
<PAGE>
Gateway National Bank -- At June 30, 1997, approximately $60,000 was
invested in preferred stock of this corporation, which specializes in
minority business development lending activities and residential mortgages
in minority areas. It is expected that such business development loan
activities will be made primarily in enterprises in Missouri or
Illinois./9/
Laclede's Landing Redevelopment -- At June 30, 1997, $10,000 was
invested in a less than 5% limited partnership interest in this limited
partnership, which is engaged in neighborhood commercial redevelopment
projects in St. Louis, Missouri./10/
Kiel Investments -- At June 30, 1997, $5.86 million was invested in a
7% limited partnership interest in limited partnerships that own and
operate the Kiel Center, a 20,000-seat multipurpose arena located two
blocks from UE's headquarters in St. Louis, Missouri. The partnership also
owns the St. Louis Blues Hockey Club. In addition, a charitable trust over
which UE exercises investment discretion holds a 1.37% limited partnership
interest with a $650,000 investment. These investments were made to further
economic development of downtown St. Louis.
The Kiel Center provides substantial economic and civic benefits to
the St. Louis area. In addition to professional hockey, the Kiel Center
hosts professional soccer, college basketball, concerts, meetings,
conventions and other similar events. Kiel Center is a unique facility in
the region and is a major stimulator of economic activity in the downtown
area.
- ----------------
/8/ (...continued)
919 (Aug. 11, 1992) (authorizing loan to non-profit corporation for construction
of building in service territory); Northeast Utilities, 40 SEC Docket 412
(Feb. 24, 1988) ($250,000 investment in locally focused venture capital fund);
Consolidated Natural Gas Co., 33 SEC Docket 1192 (Aug. 20, 1985) ($100,000
investment in fund formed to encourage and finance local entrepreneurial
ventures). Further, the Commission has approved investments in limited
partnerships formed to make venture capital investments within the affiliated
utility's service area. See, e.g., Georgia Power Co., 55 SEC Docket 1860
(Dec. 15, 1993) (limited partnership formed to provide venture capital to high-
technology companies within utility's service territory); Hope Gas, Inc., 53 SEC
Docket 633 (Jan. 26, 1993) (venture capital partnership designed to provide
venture capital to local business); The Potomac Edison Co., 48 SEC Docket 1409
(May 14, 1991) (risky, for-profit, economic development corporation created to
stimulate and promote growth and retain jobs). See also Middle South Utilities,
Inc., 26 SEC Docket 1693 (Jan. 11, 1983) (authorizing the creation of a
nonutility subsidiary to investigate new business opportunities).
/9/ See Notes 7 and 10.
/10/ See Note 7.
4
<PAGE>
The partnership that constructed and now owns Kiel Center consists of the
largest corporations operating in the St. Louis area. Ownership of the St.
Louis Blues is incidental to and as a result of ownership of the Kiel Center.
Consolidating ownership of the Blues and the Kiel Center in one group was
accomplished in part to provide financial stability to the Kiel Center and thus
support the existence of space for other civic and community purposes. The
financial stability of the Kiel Center is vital to the success of its overall
economic development purposes. Furthermore, the Blues presence in St. Louis
makes a positive contribution to the image and economic well-being of the
region. Retaining local ownership of the hockey teams assures that these
benefits will continue.
UE's Kiel investments, though relatively small, are extremely important to
the continued ability of the partnership to provide the essential community
benefits described above. Shareholders and customers also benefit because the
Kiel Center is located in UE's service territory and is a significant electric
customer.
Any impairment of UE's continued participation in Kiel investments would
have an extremely negative impact on UE's ability to fulfill its necessary and
beneficial civic obligations. Moreover, the partnerships are structured so that
it would be very difficult for UE to withdraw therefrom./11/
St. Louis Equity Fund -- At June 30, 1997, $2.59 million was invested in or
committed to be invested in varying percentages (not greater than 23%) of
limited partnership interests or limited liability interests in eight limited
partnerships or limited liability corporations that own low-income housing in
the St. Louis, Missouri area. Such investments produce low-income housing
federal and state income tax credits for UE. Such investments have been made or
committed each year since 1989 in an amount not in excess of $600,000 in any
year. An officer of UE and Ameren acts as chairman of the board of the Fund and
an officer of UE is on the investment policy committee of the Fund. More than
30 major St. Louis corporations are investors and also participate in various
committees./12/
- ----------------
/11/ See the cases cited in Note 9 for decisions approving economic development
and civic responsibility investments. In addition, the Commission has allowed
investments in other businesses which clearly had no connection to the utility
business in special circumstances. In National Fuel Gas Co. Release No. 23466
(Nov. 1, 1984), the Commission approved an investment in a venture capital firm
whose sole investment was to be a regional commercial airline company which
provided air service to the utility's headquarters city. It appears from the
decision that the utility was concerned that vital air service would be lost to
the community without the support of the venture capital investment. UE's
support of the Kiel Center, together with that of other community leaders, was
instrumental in the success of the project which is providing significant
economic development advantages to St. Louis.
/12/ Georgia Power Co., Release No. 35-26220 (Jan. 24, 1995) (limited
partnership investments in low-income housing projects that qualify for low-
income housing tax credit under
(continued...)
5
<PAGE>
Housing Missouri -- At June 30, 1997, $34,003 was invested in or
committed to a 14% interest in this limited liability corporation, which
owns low income housing in Missouri outside the St. Louis area. Such
investments produce low income housing federal income tax credits for
UE./13/ One officer of UE is on the board of directors and investment
policy committee of Housing Missouri.
Other Activities -- UEDC is involved in certain other activities
including acting as a finder for bank or other lender financing for capital
improvement projects within UE's service territory; offering inspection and
maintenance services for electric distribution systems on the customers'
side of the meter;/14/ providing energy audits and consulting regarding
energy efficiency equipment and practices./15/
c. Other Activities
----------------
Marketing -- UE and UEDC have applied for a power marketing license
from FERC. No power marketing activities have yet been undertaken and no
significant investment has been made./16/
From CIPSCO, Ameren will hold the following nonutility subsidiaries and
investments:
3. CIPSCO Investment Company ("CIPSCO Investment")
- ----------------
/12/(...continued)
Section 42 of the Internal Revenue Code). UEDC's investments in limited
partnerships which are engaged in providing low income housing are
distinguishable from the situation in Michigan Consolidated Gas Co., 44 SEC 361,
aff'd, 444 F.2d 913 (D.D.C. 1971) ("Michigan Consolidated"). In that case, the
registered holding company, through wholly owned subsidiaries, was actively
engaged in the development, financing, construction and other aspects of the
business of providing low income housing. The Commission found that this
business was not functionally related to the utility business and could not be
retained. Here, UEDC is a passive, limited partner investor in a number of low
income housing projects developed and managed by non-affiliated entities. UEDC's
investments in these limited partnerships are for the purposes of obtaining
federal and state income tax credits and fulfilling UE's civic responsibilities
in the communities it serves. UEDC's investments appear to be substantially
identical to those approved in Georgia Power referred to above.
/13/ See Note 11.
/14/ See Note 3.
/15/ See Note 4.
/16/ Wholesale and retail power and energy marketing activities have been
approved for several registered holding companies. See, e.g., SEI Holdings,
Release No. 35-26581 (Sept. 26, 1996).
6
<PAGE>
CIPSCO Investment manages CIPSCO's nonutility investments and has four
first-tier subsidiaries: CIPSCO Securities Company, CIPSCO Leasing Company,
CIPSCO Energy Company, and CIPSCO Venture Company. CIPSCO Investment has no
other direct investments or business./17/ At June 30, 1997, the total amount
invested through CIPSCO Investment and its subsidiaries was $125.4 million as
follows:
a. CIPSCO Securities Company.
Invests in marketable securities./18/ At June 30, 1997 $54.1 million
was invested in hedged portfolios of preferred and common stocks and other
marketable securities. Of this amount, approximately $26.2 million relates
to common and preferred stock of utility companies. All of these
investments are made through mutual funds or investment managers. In no
case does CIPSCO Securities (together with any of its affiliates) own more
than 5% of any class of securities of any issuer thereof. Details regarding
the marketable securities investments are as follows:
1. Flaherty & Crumrine Preferred Stock Portfolio -- A portfolio of
adjustable rate, sinking fund, and perpetual preferred stock hedged with
financial futures and options. Flaherty & Crumrine acts as investment
manager pursuant to investment guidelines established by CIPSCO Securities.
CIPSCO Securities is beneficial owner of the portfolio of securities but
all buy and sell orders are made by the investment manager. Investment
guidelines include limitations on amounts invested in any one issue and
exposure to any issuer as well as minimum ratings. Initial Investment Cost:
$12,000,000 in June 1991. Market Value as of June 30, 1997: $20,360,761.
Investment in utility preferred stock: 52%, $10.7 million.
- ----------------
/17/ Certain of the marketable securities described below as being held by
CIPSCO Securities and the Illinois Equity Fund Limited Partnerships described
below as being held by CIPSCO Venture Company (see Note 23) are held directly by
CIPSCO Investment.
/18/ Under Section 9(c)(2) and Rule 40(a)(1), registered holding company systems
are permitted to acquire marketable securities. Substantially all the
investments of CIPSCO Securities qualify for this exception (except to the
extent non-debt securities do not fall under such Rule). To the extent any
holdings are not marketable, the Commission will view the "functional
relationship" requirement of Section 9(c)(3) less strictly when the investment
at issue--as here--evolved in connection with the system's utility business, is
not significant in relation to the utility system's total financial resources,
and has potential to benefit investors and/or consumers. See Jersey Central
Power & Light Co., 37 SEC Docket 1243 (Mar. 18, 1987). CIPSCO Securities
Company's investments (including the common and preferred stocks) are all highly
liquid temporary investments or readily marketable securities that are held
pending application to long-term investment opportunities. Such opportunities
could include investments in UE or CIPS to the extent necessary and appropriate
and as approved, to the extent required, by regulators.
7
<PAGE>
2. Spectrum Preferred Stock Portfolio -- A portfolio of high quality
fixed-dividend, utility sinking fund and perpetual preferred stocks hedged
with financial futures and options. Spectrum acts as investment manager
pursuant to investment guidelines established by CIPSCO Securities. CIPSCO
Securities is beneficial owner of the portfolio of securities but all buy
and sell orders are made by the investment manager. Investment guidelines
include limitations on amounts invested in any one issue and exposure to
any issuer as well as minimum ratings. Initial Investment Cost: $10,000,000
in June 1991. Market Value as of June 30, 1997: $15,685,593. Investment in
utility preferred stock: 99%, $15.5 million.
3. Gateway Index Risk Adjusted Program -- A portfolio consisting of
substantially all common stocks represented in the S&P 100 Index and hedged
with S&P 100 and S&P 500 Index options. Gateway acts as investment manager
pursuant to investment guidelines established by CIPSCO Securities. CIPSCO
Securities is beneficial owner of the portfolio of securities but all buy
and sell orders are made by the investment manager. Investment guidelines
limit investment to no more than 2% of the outstanding amount of any class
of equity security of an issuer. Total exposure to any issuer is limited to
10% of the portfolio. Initial Investment Cost: $5,200,000 in September
1990. Market Value as of June 30, 1997: $9,091,774. Since this fund is
meant to match the S&P 100, those utilities included in the S&P 100 Index
will be proportionally included (approximate June 30, 1997 value: $47,100).
4. Mesirow Alternative Strategies Fund, L.P. -- A multi-manager
investment partnership that seeks to achieve a superior long-term return in
equity securities with a lower degree of volatility than the S&P 500 Index.
CIPSCO Securities holds a limited partnership interest. The partnership is
beneficial owner of all securities but all buy and sell orders are made by
the investment manager. Initial Investment Cost: $2,900,000 in March of
1995. Market Value as of June 30, 1997: $3,916,522. This investment is in
liquidation which is to be completed in September, 1997.
5. Genesee Eagle Fund -- A multi-manager investment partnership that
seeks to achieve a superior long-term return with a lower degree of
volatility than the S&P 500 Index through equity and other investments.
CIPSCO Securities holds a limited partnership interest. The partnership is
beneficial owner of all securities but all buy and sell orders are made by
the investment manager. Initial Investment Cost: $2,900,000 in July 1994.
Market Value as of June 30, 1997: $4,583,553. This investment is in
liquidation which is to be completed in September, 1997.
In addition, at June 30, 1997, CIPSCO Securities had $2.0 million of
temporary marketable investments in the Dreyfus Treasury Prime Cash
Management Fund, a money market mutual fund designed for institutional
investors with the objective of preserving capital and maintaining
liquidity. This fund invests only in securities issued or guarantied by the
U.S. Government.
8
<PAGE>
b. CIPSCO Leasing Company.
Passive, financial investments in long-term leveraged lease transactions.
At June 30, 1997, $34.7 million was invested pursuant to four holdings in leased
assets consisting of a commercial jet aircraft, an interest in a natural gas
liquids plant, natural gas processing equipment and retail department store
properties./19/
c. CIPSCO Energy Company.
Passive, financial energy-related investment opportunities.
Turbine Leases. At June 30, 1997, $23.5 million was invested in
leases, or interests in such leases, for nine combustion turbine generating
units leased to five investor-owned utilities in the United States./20/
Cogeneration. At June 30, 1997, $5.5 million was invested in a 24.75
percent interest in Appomattox Cogeneration Limited Partnership, which owns a
power sales agreement for electricity produced at a 40-MW cogeneration facility
at Hopewell, Virginia./21/
d. CIPSCO Venture Company.
- ----------------
/19/ Central and South West Corp. Release No. 35-23578 (Jan. 22, 1985
(investment in equipment, manufacturing or processing equipment for lease to
nonaffiliate for term of years on a net basis through leveraged lease
structure). Leveraged lease transactions provide tax benefits to the investor in
the property and provide a method of financing for the lessee. In this case the
Commission found that the holding company did not acquire an ownership interest
in the leased property sufficient to make it an "owner" in the variety of large
business which would seek lease financing of this type. Thus, the nature of the
property subject to the lease is immaterial to the conclusion that leveraged
lease investments are permitted under the Act. CIPSCO Leasing has only 4
leveraged lease investments and each is substantially identical to the lease
transaction of Central and South West Corp.
Details regarding the leveraged lease transactions are presented in
Attachment 1 to this Exhibit K-4.
/20/ Each of these investments is in the form of a leveraged lease like those
referred to in Note 19. Although the turbines which are subject of the leases
would constitute electric utility facilities under Section 2(a)(3), by virtue of
Rule 7(d), the entities that hold title to the turbines are not "electric
utility companies." In each of these transactions the appropriate certificate
on Form U-7D has been filed. Additional details, including the docket number of
the Form U-7D filing, are included in Attachment 1 to this Exhibit K-4.
/21/ The cogeneration facility is a qualifying facility under PURPA pursuant to
FERC determination in docket QF 87-250-000. See Attachment 1 to this Exhibit K-
4 for details.
9
<PAGE>
Invests within the CIPS service territory. These investments are the civic
and economic development investments of CIPSCO important to the fulfillment of
CIPSCO's responsibilities as a good corporate citizen. In addition, enhancement
of economic development in the CIPS service territory is beneficial to CIPS's
customers and to shareholders./22/ At June 30, 1997, $3,250,000 was invested or
committed as follows:
CIPSCO Venture Company (CVC) Total current asset book value $3 million.
1. Effingham Development Building II Limited Liability Company -- A 40% equity
investment in a $6.5 million Limited Liability Corporation which owns a
manufacturing facility leased to an industrial customer of CIPS. CVC is not the
managing member of this LLC, but has certain voting rights up to the percent of
equity ownership in the LLC. (September 1994) The facility is a 267,056 square
foot manufacturing facility located in an Effingham, Illinois industrial park.
2. Mattoon Enterprise Park -- A 20% equity investment in a Limited Liability
Company which owns 231 acres of farmland to be used for development of an
industrial park within the boundaries of the City of Mattoon and CIPS service
territory. CVC's share of the investment is $165,200. This site is currently
being improved to be ready for resale to another LLC of which CEC may be a
participant.
3. Illinois Equity Fund Limited Partnerships -- The funds are real estate
investment funds that finance rental housing developments in Illinois outside
the six-county Chicagoland area. They consist of limited partnerships that
develop low income housing so that they can receive tax savings generated by the
Section 42 federal low-income housing tax credits. There are three separate
funds: 1992, 1994 and 1996. The Investment Company's commitment to those funds
is: $2.5 million./23/
August 1997
- ----------------
/22/ See Notes 8, 9, 11 and 12.
/23/ See Note 12.
10
<PAGE>
Attachment 1 to Exhibit K-4
Additional Information on CIPSCO Leveraged Leases
and Turbine Investments
CIPSCO Leasing Company (CLC) Total current asset book value $34.7 million.
1. CIPSCO Leasing Company (KN Energy)
Transaction: A 17.5% undivided interest in a leveraged lease
financing of a natural gas liquids plant. All operations are the
responsibility of lessee. (November 1991)
Equipment Description: The plant removes natural gas liquids and
moisture from natural gas thereby improving the operational efficiency
of the natural gas pipeline. The equipment consists of gas processing
and related equipment; lean oil absorption unit, turbo expander,
fractionist unit, helium unit, and truck rack.
Lessee: KN Energy (with guarantee from original lessee, ENRON Corp.)
Lease Term: 21 years (subject to certain lessee purchase or renewal
options)
Lease Termination Date: May 25, 2012
2. CLC Leasing Company A (Amoco)
Transaction: An equity investment in a leveraged lease financing of
various oil and gas production treating and processing equipment with
Amoco Corporation. This investment represents 25% of a $63 million
lease transaction. All operations are the responsibility of lessee.
(December 1991)
Equipment Description: New oil and gas production, treating and
processing equipment such as pumping units, pressure vessels, tanks,
compressors and related equipment. The equipment is located in various
locations within five southwestern states.
Lessee: Amoco Equipment Leasing Company
Lease Term: 18 years (subject to certain lessee purchase or renewal
options)
Lease Termination Date: June 18, 2009
<PAGE>
3. CLC Aircraft Leasing Company (Delta)
Transaction: An equity investment in a leveraged lease financing of
one new McDonnell Douglas MD-88 aircraft for lease to Delta Airlines.
All operations are the responsibility of lessee. (September 1991)
Equipment Description: One (1) McDonnell Douglas MD-88 narrow body
aircraft, primarily used on Delta's domestic routes and on a limited
basis, outside the U.S.
Lessee: Delta Airlines, Inc.
Lease Term: 22 years (subject to certain lessee purchase and renewal
options)
Lease Termination Date: September 23, 2013
4. CLC Leasing Company B
Properties: A sale/leaseback of 15 Wal-Mart stores in six states. The
properties were completed in 1991 or early 1992. Wal-Mart retains
ownership of the underlying land and grants a site lease for the term
of the lease and any renewals thereof. All operations are the
responsibility of lessee. (December 1992)
Structure: There are individual leases on each store in the package.
The lease is a triple net lease with lessee responsible for
maintenance, insurance and most taxes.
Lease Term: 20 years (subject to certain lessee purchase and renewal
options)
Lease Termination Date: December 21, 2012
CIPSCO Energy Company (CEC) Total current asset book value $29 million.
1. Beaver Generating Station Combustion Turbine Units
Lessee: Portland General Electric Company
Transaction: 51% interest in a Partnership which owns two turbine
generators currently serving Portland General Electric. Lessee has
full responsibility for operation and maintenance of the equipment.
All units are currently connected to a 150 MW combined cycle system
with individual HRSGs, which are owned by the lessee. These units are
currently operated as base to intermediate load units. CEC is the
general partner of the Partnership. (August 1993)
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Location: Beaver Generating Station, Units 5 & 6 Beaver, Oregon.
Original Delivery Date: August 8, 1974. Lease Termination Date: August
8, 1999 (subject to certain lessee purchase and renewal options).
SEC U-7D: #32-334, 9/21/93
2. Blytheville Generating Station Combustion Turbine Units
Transaction: 51% interest in a Partnership which owns three combustion
turbines currently serving Arkansas Power & Light (Entergy). The units
are currently used as peaking units. Lessee has full responsibility
for operation and maintenance of the equipment. CEC is the general
partner of the Partnership. (August 1993) Location: Blytheville
Generation Station, Units 1, 2 & 3 Blytheville, Arkansas. Original
Delivery Date: August 28, 1974. Lease Termination Date: August 28,
1999.
SEC U-7D: #32-341, 9/21/93
3. Whitehorn Station Combustion Turbine Units
Transaction: 51% interest in a Partnership which owns two combustion
turbines which drive one power generator (twin pac) currently serving
Puget Sound Power & Light Company. Lessee has full responsibility for
operation and maintenance of the equipment. The unit is gas fired and
has black start capability. It is currently used for peaking capacity.
CEC is the general partner of the Partnership. Location: Whitehorn,
Washington. Original Delivery Date: December 11, 1974. Lease
Termination Date: December 11, 1999 (subject to certain lessee
purchase and renewal options).
SEC U-7D: # not known, but filed, 9/21/93
4. Greenwood Energy Center Combustion Turbine Units
Transaction: 28.5% interest in a Partnership which owns two gas fired
combustion turbines currently serving Missouri Public Service, a
subsidiary of Utilicorp. Lessee has full responsibility for operation
and maintenance of the equipment. The units are currently used as
peaking units. CEC is the general partner of the Partnership.
Location: Jackson County, Missouri. Original Delivery Date: June 30,
1975. Lease Termination Date: June 30, 2000 (subject to certain lessee
purchase and renewal options).
SEC U-7D: #32-345, 6/21/94
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5. Mickleton Plant Combustion Turbine Unit
Transaction: 100% interest in a Partnership which owns a single
turbine generator with dual fuel capability, currently serving
Atlantic City Electric. Unit is currently run as a peaking unit and
for voltage support. Lessee has full responsibility for operation and
maintenance of the equipment. Lease includes additional equipment such
as transmission transformer, black start equipment and fuel tanks. CEC
is the general partner of the Partnership. (July 1995). Location: Near
Paulsboro, New Jersey. Original Delivery Date: July 2, 1974. Lease
Termination Date: July 2, 1999 (subject to certain lessee purchase and
renewal options).
SEC U-7D: #32-338, 8/3/94
6. Appomattox Cogeneration Limited Partnership (ACLP)
Description: A 24.75% limited partnership interest in a limited
partnership which owns a Power Sales Agreement associated with a 40 MW
cogeneration facility. Term: Through October 2004. Power Purchase
Agreement: ACLP sells the net electrical output from this Qualifying
Facility to Virginia Electric Power Company under an agreement
expiring in 2004. Volume is approximately 3500 MW per year.
Qualifying Facility: QF87-250-000
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