(As filed October 22, 1998)
File No. 70-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________
FORM U-1
APPLICATION OR DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________________________________________
New Century Energies, Inc.
Public Service Company of Colorado
Cheyenne Light, Fuel and Power Company
New Century Services, Inc.
WestGas Interstate, Inc.
NC Enterprises, Inc.
New Century International, Inc.
e prime, inc.
PS Colorado Credit Corporation
Natural Fuels Corporation
P.S.R. Investments, Inc.
Green and Clear Lakes Company
1480 Welton, Inc.
The Planergy Group, Inc.
New Century-Cadence, Inc.
1225 17th Street
Denver, Colorado 80202-5533
Southwestern Public Service Company
Quixx Corporation
Utility Engineering Corporation
Tyler at Sixth
Amarillo, Texas 79101
(Names of companies filing this statement and
addresses of principal executive offices)
_____________________________________________________
New Century Energies, Inc.
(Name of top registered holding company parent)
_____________________________________________________
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Teresa S. Madden
Controller
New Century Energies, Inc
1225 17th Street, Suite 900
Denver, Colorado 80202-5533
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders
and communications in connection with this Application or
Declaration to:
William M. Dudley, Esq. William T. Baker, Jr., Esq.
New Century Energies, Inc. Thelen Reid & Priest LLP
1225 17th Street, Suite 600 40 West 57th Street
Denver, Colorado 80202-5533 New York, New York 10019
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1. INTRODUCTION. New Century Energies, Inc. ("NCE"), a
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Delaware corporation, is a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the
"Act").1 Its public utility subsidiaries are Public Service
Company of Colorado ("PSCo"), Southwestern Public Service Company
("SPS"), and Cheyenne Light, Fuel and Power Company ("Cheyenne")
(collectively, the "Utility Subsidiaries"). The Utility
Subsidiaries together serve approximately 1.6 million electric
customers in parts of Colorado, Texas, Wyoming, New Mexico,
Oklahoma, and Kansas and approximately 1 million gas customers in
parts of Colorado and Wyoming.
NCE also engages through subsidiaries in various other
energy-related and non-utility businesses (collectively, the
"Non-Utility Subsidiaries"). NCE's direct, wholly-owned, Non-
Utility Subsidiaries are: NC Enterprises, Inc. ("Enterprises"),
which serves as an intermediate holding company for certain of
NCE's non-utility subsidiaries and investments; New Century
Services, Inc., a subsidiary service company; and WestGas
Interstate Inc., a gas pipeline that operates in Colorado and
Wyoming.
NCE's indirect Non-Utility Subsidiaries held by Enterprises
include New Century International, Inc., which indirectly holds
NCE's interest in Yorkshire Electricity Group plc, a regional
electric distribution company serving parts of England;2 e prime,
inc., which directly and indirectly through other subsidiaries
sells energy-related products and services and engages in
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1. See New Century Energies, Inc., Holding Company Act Rel. No.
26748 (August 1, 1997).
2. See Public Service Company of Colorado, Holding Company Act
Rel. No. 26671 (February 19, 1997) (granting exemption pursuant
to Section 3(b) to foreign utility subsidiary of PSCo); and New
Century Energies, Inc., et al., Holding Company Act Rel. No. 26871
(May 14, 1998) (authorizing transfer of stock of New Century
International, Inc. by PSCo to Enterprises and related financing).
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brokering, marketing and trading of electricity and natural gas;
Quixx Corporation, which is engaged directly and through other
subsidiaries in development activities relating to "exempt
wholesale generators" ("EWGs") and exempt "foreign utility
companies" ("FUCOs"), as defined in Sections 32 and 33 of the
Act, respectively, "qualifying facilities," as defined under the
Public Utility Regulatory Policies Act of 1978, as amended, and
other energy related projects; Utility Engineering Corporation,
which provides general engineering, development, design,
construction and other services to both associate and non-
associate companies; The Planergy Group, Inc. and New Century-
Cadence, Inc., which engage exclusively in activities permitted
under Rule 58; New Century Energy Communications, Inc. and New
Century-Centrus, Inc., which are "exempt telecommunications
companies" ("ETCs") within the meaning of Section 34 of the Act;
and Natural Fuels Corporation, an 83.63%-owned subsidiary of
Enterprises, which is engaged in the commercialization of
compressed natural gas as a motor fuel. Other indirect Non-
Utility Subsidiaries of NCE are held by PSCo. The primary
purpose of these Subsidiaries is to support PSCo's operations.
They include PS Colorado Credit Corporation ("PSCCC"), which is
engaged in financing and factoring of PSCo's fuel inventories and
accounts receivable.
As used herein, the term Subsidiaries means the Utility
Subsidiaries and the Non-Utility Subsidiaries, and the term Non-
Utility Subsidiaries means each of the direct and indirect non-
utility subsidiaries of NCE, including those identified above,
and their respective subsidiaries, as well as any future direct
or indirect non-utility subsidiaries of NCE whose equity
securities may be acquired in accordance with the Commission's
authorization in this proceeding or in a separate proceeding or
in accordance with an exemption provided under the Act or rules
thereunder.
1.2 NCE AND SUBSIDIARIES' CURRENT FINANCING AUTHORITY. By
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order dated August 1, 1997 in File No. 70-9007,3 as modified
by supplemental order dated May 14, 1998,4 NCE and its
Subsidiaries (collectively, the "Applicants") are currently
authorized to engage in external and internal financing through
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3. Holding Company Act Rel. No. 26750.
4. Holding Company Act Rel. No. 26872.
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December 31, 1999 (except as otherwise noted below), as follows:
(i) NCE is authorized to issue and sell from time to time,
in public or privately negotiated transactions, shares
of common stock, $1 par value per share, for an
aggregate offering price of up to $745 million. In
addition, NCE is authorized to issue and sell an
additional 30 million shares of common stock from time
to time through August 1, 2007 to fund various benefit
and dividend reinvestment plans (the "Stock Plans").
Through June 30, 1998, NCE has issued and sold shares
of common stock for an aggregate offering price of
$252.2 million and issued 1.1 million shares of common
stock pursuant to the Stock Plans.
(ii) NCE is authorized to issue and reissue from time to
time short-term debt aggregating up to $200 million at
any time outstanding, subject to increase to $325
million at such time as PSCCC, a subsidiary of PSCo,
becomes a direct subsidiary of NCE. At June 30, 1998,
NCE had $59 million principal amount of notes and
commercial paper outstanding. The Commission reserved
jurisdiction over the issuance by NCE of other types of
securities for which specific approval was not sought.
(iii) NCE is authorized to provide guarantees and similar
credit support on behalf of Subsidiaries in an
aggregate amount not to exceed $300 million outstanding
at any one time. At June 30, 1998, there were $105
million in NCE guarantees outstanding.
(iv) Cheyenne is authorized to issue short-term debt
aggregating not more than $25 million outstanding at
any one time. At June 30, 1998, Cheyenne had $12
million principal amount of notes and commercial paper
outstanding. The Commission reserved jurisdiction over
other types of securities offerings by the Utility
Subsidiaries as to which the exemption under Rule 52
would not apply.
(v) NCE and its Subsidiaries are authorized to finance
other Subsidiaries in an aggregate amount not to exceed
$300 million outstanding at any one time, exclusive of
financing of Subsidiaries that is exempt pursuant to
Rules 45(b) and 52, as applicable. At June 30, 1998,
there were $82.7 million in loans, extensions of credit
and advances to Subsidiaries (other than Cheyenne)
outstanding, exclusive of those that are exempt
pursuant to Rules 45(b) and 52, as applicable.
(vi) PSCo is authorized to provide up to $450 million in
guarantees and other forms of credit support on behalf
of PSCCC and certain of its other subsidiaries in
connection with borrowings under certain existing
credit facilities and to enter into similar credit
facilities in the future (also with PSCo's guarantee).
These credit facilities are maintained primarily to
support the issuance of commercial paper by PSCo and
PSCCC, but also permit direct borrowings (guaranteed by
PSCo) by certain of PSCo's subsidiaries. The amount of
PSCo's guarantee authority will be reduced if and to
the extent that NCE provides guarantees or credit
support on behalf of PSCo's subsidiaries. At June 30,
1998, there were no guaranteed borrowings outstanding
under the existing credit facilities. All of these
transactions are now exempt under Rule 52 and Rule
45(b), as applicable.
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(vii) Subsidiaries are authorized to provide guarantees and
other forms of credit support on behalf of other
Subsidiaries in an aggregate amount not to exceed $100
million, exclusive of such guarantees as may be exempt
pursuant to Rule 45(b). At June 30, 1998, Subsidiaries
had provided non-exempt guarantees on behalf of other
Subsidiaries in an aggregate amount of $19.7 million
then outstanding.
(viii) Subsidiaries are authorized to organize and acquire the
voting or other equity securities of entities
("Financing Entities") formed to facilitate financings
through the issuance to third parties of income
preferred securities or other securities. Subsidiaries
are also authorized to issue debentures or other
evidences of indebtedness to such Financing Entities in
consideration for the proceeds of external financings
by Financing Entities and to guarantee the obligations
of Financing Entities.
(ix) NCE is authorized to use the proceeds of financing
(including guarantees) to fund investments in one or
more EWGs or FUCOs in an aggregate amount at any time
outstanding which, when added to NCE's "aggregate
investment" (as defined in Rule 53(a)(1)) at any time
in all such entities, will not exceed 50% of NCE's
consolidated retained earnings (also as defined in
Rule 53(a)(1)).
1.3 OTHER PENDING APPLICATIONS. NCE and certain of its
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Subsidiaries currently have pending before the Commission
applications relating to the following proposals:
(i) File No. 70-9199: NCE, Enterprises and PSCo are
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seeking approval for various transactions relating to
the construction and financing of a gas pipeline in the
Front Range area of Colorado which is estimated to cost
approximately $25 million.5
(ii) File No. 70-9341: NCE is requesting a modification to
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the terms of its current financing authority in File
No. 70-9007 that would allow NCE to use the proceeds of
financing (including guarantees) to fund investments in
EWGs and FUCOs in an amount which, when added to NCE's
"aggregate investment" in such entities at any time,
will not exceed 100% of NCE's "consolidated retained
earnings."6
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5. See Holding Company Act Rel. No. 26894 (July 10, 1998)
(notice of filing).
6. See Holding Company Act Rel. No. 26924 (October 2, 1998)
(notice of filing).
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(iii) File No. 70-9345: NCE, Enterprises and e prime are
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requesting authorization to construct or acquire from
time to time through December 31, 2003, certain types
of non-utility energy assets (or the securities of
companies substantially all of whose physical
properties consist of such assets), subject to an
investment limitation of $400 million.
1.4 SUMMARY OF REQUESTED APPROVALS. The Applicants herein
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request approval for a program of external financing and
intrasystem financing and for certain additional related
proposals for the period through December 31, 2001
("Authorization Period"), as follows:
(i) NCE requests authority to issue and sell from time to
time (A) up to $1.25 billion of its common stock, $1
par value per share ("Common Stock"), and an additional
30 million shares of Common Stock (as such number may
hereafter be adjusted during the Authorization Period
to reflect any stock split) from time to time through
December 31, 2008 pursuant to the Stock Plans, (B) debt
securities in an aggregate principal amount of up to
$600 million outstanding at any one time (the "NCE Debt
Limitation") consisting of (1) short-term debt having a
maturity from the date of issue of not more than one
year and/or commercial paper offered to dealers
("Short-term Debt") and (2) unsecured debentures
havinga maturity of up to 40 years (the Debentures ),
provided that the aggregate principal amount of
debentures at any time outstanding shall not exceed
$300 million, and provided further that at such time
asPSCCC becomes a direct subsidiary of NCE, the NCE
Debt Limitation shall be increased to $975 million, of
which $450 million may consist of Debentures, and (C)
other securities not specifically identified above.
NCE requests that the Commission reserve jurisdiction
over the issuance of securities other than Common
Stock, Short-term Debt and Debentures, and represents
that it will file a post-effective amendment in this
proceeding to supplement the record with respect to any
such other securities.
(ii) Cheyenne requests authority to issue and sell from time
to time up to $40 million of Short-term Debt.
(iii) NCE requests authority to provide financing to its
Subsidiaries and the Subsidiaries propose to provide
financing to other Subsidiaries in an aggregate
principal amount of up to $500 million outstanding at
any one time, exclusive of financing that is exempt
pursuant to Rule 45(b) or Rule 52, as applicable.
(iv) NCE requests authority to enter into guarantees and
provide other forms of credit support with respect to
obligations of any direct or indirect subsidiary in an
aggregate principal or nominal amount not to exceed
$800 million at any one time outstanding, exclusive of
any guarantees or other forms of credit support that
are exempt under Rule 45(b), provided that, upon PSCCC
becoming a direct subsidiary of NCE, NCE may provide
guarantees and other forms of credit support in an
aggregate amount not to exceed $850 million. In
addition, the Subsidiaries request authority to issue
guarantees and other forms of credit support with
respect to obligations of other Subsidiaries in an
aggregate principal or nominal amount not to exceed
$100 million at any one time outstanding, exclusive of
guarantees that are exempt pursuant to Rule 45(b) and
Rule 52.
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(v) NCE and, to the extent not exempt under Rule 52, the
Subsidiaries request authority to enter into hedging
transactions ("Hedge Transactions") with respect to
existing indebtedness of such companies in order to
manage and minimize interest rate costs. NCE and the
Subsidiaries also request authority to enter into
hedging transactions with respect to anticipatory debt
issuances in order to lock-in current interest rates
and/or manage interest rate risk exposure.
(vi) NCE and the Subsidiaries request authority to acquire
the equity securities of one or more Financing
Subsidiaries and to guarantee the securities issued by
such Financing Entities, to the extent not exempt
pursuant to Rule 45(b) and Rule 52, and Financing
Subsidiaries request authority to acquire the notes or
other evidence of indebtedness of NCE or any Subsidiary
in consideration for the proceeds of external financing
by Financing Subsidiaries.
(vii) NCE, Enterprises and any direct or indirect subsidiary
of Enterprises request authority to acquire the equity
securities of one or more intermediate subsidiaries
("Intermediate Subsidiaries") organized exclusively for
the purpose of acquiring, financing, and holding the
securities of one or more existing or future Non-
Utility Subsidiaries, including but not limited to
EWGs, FUCOs, companies engaged in activities permitted
by Rule 58 ("Rule 58 Subsidiaries"), or ETCs, provided
that Intermediate Subsidiaries may also provide
management, administrative, project development, and
operating services to such entities.
(viii) Enterprises and any direct or indirect subsidiary of
Enterprises (including Intermediate Subsidiaries and
Rule 58 Subsidiaries) request authority to pay
dividends out of capital and unearned surplus to the
extent allowed under applicable law and the terms of
any credit or security instruments to which they may be
parties.
Upon the effective date of the Commission's order in this
proceeding approving the proposals summarized above in
subsections (i) through (iv) and (vi), NCE and its Subsidiaries
will relinquish their current authorization in File 70-9007.
1.5 USE OF PROCEEDS. The proceeds from the financings
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authorized by the Commission pursuant to this Application or
Declaration will be used for general corporate purposes,
including (i) financing, in part, investments by and capital
expenditures of NCE and its Subsidiaries, (ii) the repayment,
redemption, refunding or purchase by NCE or any of its
Subsidiaries of securities issued by such companies without the
need for prior Commission approval pursuant to Rule 42 or a
successor rule, (iii) financing working capital requirements of
NCE and its Subsidiaries, and (iv) other lawful general purposes.
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Specifically, in consideration for its purchase from PSCo of
the stock of New Century International, Inc., which indirectly
holds a 50% interest in Yorkshire Power Group Limited,
Enterprises issued a note payable to PSCo for $292.6 million,
representing the purchase price. See New Century Energies, Inc.,
et al., supra n. 2. Among other uses of the proceeds of
financing proposed herein, NCE plans to make advances or cash
capital contributions to Enterprises to enable Enterprises to
prepay its note in whole or in part to PSCo.
The Applicants represent that no financing proceeds will be
used to acquire the equity securities of any new subsidiary
unless such acquisition has been approved by the Commission in
this proceeding or in a separate proceeding or in accordance with
an available exemption under the Act or rules thereunder.
1.6 DESCRIPTION OF EXTERNAL FINANCING PROGRAM.
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1.6.1 NCE Financing.
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(i) Common Stock. NCE proposes to issue and sell from
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time to time during the Authorization Period up to $1.25 billion
of its Common Stock. In addition, NCE requests authorization to
issue and sell from time to time through December 31, 2008 up to
30 million additional shares of Common Stock (as such number may
be adjusted for any stock split) pursuant to the Stock Plans
described below.7 Subject to the foregoing, NCE may issue
and sell Common Stock or options exercisable for Common Stock and
issue Common Stock upon the exercise of options. NCE may also
buy back shares of Common Stock or such options during the
Authorization Period in accordance with Rule 42.
NCE may issue and sell Common Stock pursuant to underwriting
agreements of a type generally standard in the industry. Public
distributions may be pursuant to private negotiation with
underwriters, dealers or agents, as discussed below, or effected
through competitive bidding among underwriters. In addition,
sales may be made through private placements or other non-public
offerings to one or more persons. All such common stock sales
will be at rates or prices and under conditions negotiated or
based upon, or otherwise determined by, competitive capital
markets.
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7. NCE currently expects that, during the Authorization Period,
approximately 18 million shares of Common Stock will be issued
pursuant to the dividend reinvestment plan and approximately 12
million shares will be issued pursuant to benefit plans.
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Specifically, NCE may issue and sell Common Stock in any of
the following ways: (i) through underwriters or dealers; (ii)
through agents; (iii) directly to a limited number of purchasers
or a single purchaser; or (iv) directly to officers, directors
and employees (or to trusts established for their benefit)
through various benefit plans and to shareholders through the NCE
dividend reinvestment plan. If underwriters are used in the sale
of Common Stock, such securities will be acquired by the
underwriters for their own account and may be resold from time to
time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying
prices determined at the time of sale. Common Stock may be
offered to the public either through underwriting syndicates
(which may be represented by a managing underwriter or
underwriters designated by NCE) or directly by one or more
underwriters acting alone. Common Stock may be sold directly by
NCE or through agents designated by NCE from time to time. If
dealers are utilized in the sale of Common Stock, NCE will sell
such securities to the dealers, as principals. Any dealer may
then resell such Common Stock to the public at varying prices to
be determined by such dealer at the time of resale. If Common
Stock is being sold in an underwriting offering, NCE may grant
the underwriters thereof a "green shoe" option permitting the
purchase from NCE at the same price additional shares then being
offered solely for the purpose of covering over allotments.
NCE may also issue Common Stock in public or privately-
negotiated transactions in exchange for the equity securities or
assets of other companies, provided that the acquisition of any
such equity securities or assets has been authorized in a
separate proceeding or is exempt under the Act or the rules
thereunder.
NCE currently maintains for its and its Subsidiaries'
employees three different benefit plans which provide for the
issuance and/or sale of Common Stock. In addition, NCE has
adopted the New Century Energies, Inc. Omnibus Incentive Plan,
which authorizes grants of Common Stock, stock options and other
stock-based awards to eligible executives and other key
employees, and the Outside Directors' Compensation Plan, under
which non-employee directors may elect to receive director
compensation in the form of Common Stock.8 NCE may issue
shares of its Common Stock under the authorization and within the
limitations set forth herein in order to satisfy its obligations
under such Stock Plans. Shares of Common Stock for use under the
Stock Plans may either be newly issued shares, treasury shares or
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8. A detailed description of the Omnibus Incentive Plan and
Outside Directors' Compensation Plan is contained in NCE's Proxy
Statement on Form 14A, dated March 30, 1998, in File No. 1-12927.
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shares purchased in the open market. NCE will make open-market
purchases of Common Stock in accordance with the terms of or in
connection with the operation of the plans pursuant to Rule 42.
NCE may also acquire treasury shares through other open-market
purchases. NCE also proposes to issue and/or sell shares of
Common Stock pursuant to these existing Stock Plans and similar
plans or plan funding arrangements hereafter adopted, and to
engage in other sales of its treasury shares for general business
purposes, without any additional prior Commission order. Stock
transactions of this variety would thus be treated the same as
other stock transactions permitted pursuant to this Application.
Finally, NCE may also issue and sell shares of its Common
Stock under the authorization, and within the limitations set
forth herein, in connection with the operation of the NCE
Dividend Reinvestment Plan. Shares of Common Stock for use under
the plan may either be newly-issued shares, treasury shares or
shares purchased in the open market pursuant to Rule 42. NCE
hereby seeks authority for the issuance and sale of Common Stock
in accordance with the NCE Dividend Reinvestment Plan.
(ii) NCE Debt.
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(A) Short-Term Debt. The aggregate principal
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amount of Short-term Debt of NCE at any time outstanding during
the Authorization Period shall not exceed the NCE Debt Limitation
($600 million), provided that, upon PSCCC becoming a direct
subsidiary of NCE, it is proposed that the NCE Debt Limitation be
increased to $975 million in order to provide liquidity for PSCCC
as discussed in subparagraph (C) below. The effective cost of
money on Short-term Debt authorized in this proceeding will not
exceed the competitive market rates available to companies with
comparable credit ratings.
To provide financing for general corporate purposes, other
working capital requirements and construction spending until
long-term financing can be obtained, NCE may sell commercial
paper, from time to time, in established domestic or European
commercial paper markets. Such commercial paper would typically
be sold to dealers at the discount rate per annum prevailing at
the date of issuance for commercial paper of comparable quality
and maturities sold to commercial paper dealers generally. It is
expected that the dealers acquiring commercial paper from NCE
will reoffer such paper at a discount to corporate, institutional
and, with respect to European commercial paper, individual
investors. It is anticipated that NCE's commercial paper will be
reoffered to investors such as commercial banks, insurance
companies, pension funds, investment trusts, foundations,
colleges and universities, finance companies and nonfinancial
corporations.
NCE also proposes to establish bank lines in an aggregate
principal amount not to exceed the NCE Debt Limitation. Loans
under these lines will have a maturity date not more than one
year from the date of each borrowing. NCE may engage in other
types of short-term financing generally available to borrowers
with comparable credit ratings as it may deem appropriate in
light of its needs and market conditions at the time of issuance.
(B) Debentures. NCE proposes to issue and sell
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from time to time through the Authorization Period up to $300
million principal amount of Debentures in one or more series,
provided that the aggregate principal amount of Short-term Debt
and Debentures at any time outstanding shall not exceed the NCE
Debt Limitation. At such time as PSCCC becomes a direct
subsidiary of NCE, it is proposed that the limitation on the
amount of Debentures NCE may issue be increased from $300 million
to $450 million. The Debentures (a) may be convertible into any
other securities of NCE, (b) will have maturities ranging from
one to 40 years, (c) may be subject to optional and/or mandatory
redemption, in whole or in part, at par or at various premiums
above the principal amount thereof, (d) may be entitled to
mandatory or optional sinking fund provisions, (e) may provide
for reset of the coupon pursuant to a remarketing arrangement,
and (f) may be called from existing investors by a third party.
In addition, NCE may have the right from time to time to defer
the payment of interest on the Debentures of one or more series
(which may be fixed or floating or "multi-modal" debentures,
i.e., debentures where the interest is periodically reset,
alternating between fixed and floating interest rates for each
reset period). The Debentures will be issued under an indenture
(the "Indenture") to be entered into between NCE and a national
bank, as trustee (the "Trustee," including any successor trustee
appointed pursuant to the Indenture), with a supplemental
indenture to be executed in respect of each separate offering of
one or more series of Debentures (each a "Supplemental
Indenture"). Forms of the Debentures, Indenture and Supplemental
Indenture will be filed by amendment hereto.
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NCE contemplates that the Debentures would be issued and
sold directly to one or more purchasers in privately-negotiated
transactions or to one or more investment banking or underwriting
firms or other entities who would resell the Debentures without
registration under the Securities Act of 1933 in reliance upon
one or more applicable exemptions from registration thereunder,
or to the public either (i) through underwriters selected by
negotiation or competitive bidding or (ii) through selling agents
acting either as agent or as principal for resale to the public
either directly or through dealers. A form of Purchase Agreement
with respect to any private offerings of Debentures through
investment banking or underwriting firms will be filed by
amendment hereto.
The maturity dates, interest rates, redemption and sinking
fund provisions and conversion features, if any, with respect to
the Debentures of a particular series, as well as any associated
placement, underwriting or selling agent fees, commissions and
discounts, if any, will be established by negotiation or
competitive bidding and reflected in the applicable Supplemental
Indenture and Purchase Agreement or underwriting agreement
setting forth such terms; provided, however, that NCE will not
issue and sell any Debentures at interest rates in excess of
those generally obtainable at the time of pricing or repricing of
such Debentures for securities having the same or reasonably
similar maturities and having reasonably similar terms,
conditions and features issued by utility companies or utility
holding companies of the same or reasonably comparable credit
quality, as determined by the competitive capital markets.
Finally, NCE undertakes that without further Commission
authorization it will not issue any Debentures that are not at
the time of original issuance rated at least investment grade by
a nationally recognized statistical rating organization.
(C) Increase in NCE Debt Limitation. As
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previously indicated, PSCCC currently finances (factors) certain
of PSCo's accounts receivable and fuel inventories and may in the
future finance accounts receivable and fuel inventories for other
affiliated and non-affiliated entities, subject to the
limitations described in August 1, 1997 order approving the
creation of NCE (supra, n. 1). To provide financing for its
business, PSCCC sells commercial paper and issues other debt
securities. Historically, these have included credit facilities
shared with PSCo. These financing and credit support
arrangements are exempt under Rule 52 and Rule 45(b), as
applicable. Upon PSCCC becoming a direct subsidiary of NCE, NCE
proposes to increase the NCE Debt Limitation by $375 million (to
$975 million), which is the amount corresponding to PSCCC's
expected seasonal debt peak of $375 million. Up to $150 million
of such increased debt limitation may be represented by
Debentures. Thus, at that time, the maximum aggregate principal
amount of Debentures NCE may issue would be $450 million.
Borrowings by PSCCC would continue to be exempt pursuant to Rule
52(b).
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(iii) Other Securities. In addition to the specific
----------------
securities for which authorization is sought herein, NCE may also
find it necessary or desirable in order to minimize financing
costs or to obtain new capital under then existing market
conditions to issue and sell other types of securities from time
to time during the Authorization Period. NCE requests that the
Commission reserve jurisdiction over the issuance of additional
types of securities and the amount thereof. NCE also undertakes
to file a post-effective amendment in this proceeding which will
describe the general terms of each such security and the amount
thereof to be issued and request a supplemental order of the
Commission authorizing the issuance thereof by NCE.
1.6.2 Utility Subsidiary Financing.
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Rule 52 under the Act provides an exemption from the
prior authorization requirements of the Act for most of the
issuances and sales of securities by the Utility Subsidiaries, as
they will have been approved by the Colorado Public Utility
Commission ("CPUC") in the case of PSCo, the New Mexico Public
Utility Commission ("NMPUC") in the case of SPS and the Wyoming
Public Service Commission ("WPSC") in the case of Cheyenne.
However, certain external financings by the Utility Subsidiaries
for which authorization is requested herein may be outside the
scope of the Rule 52 exemption.
(i) Short Term Debt of Cheyenne. All securities of
---------------------------
Cheyenne, except for securities with maturities of less than 12
months, are approved by the WPSC. Accordingly, authority is
requested for Cheyenne to issue Short-term Debt. The aggregate
amount of such Short-term Debt to be outstanding at any one time
during the Authorization Period shall not exceed $40 million.
Cheyenne may engage in short-term financing as it may deem
appropriate in light of its needs and market conditions at the
time of issuance. Such short-term financing could include,
without limitation, commercial paper sold in established domestic
or European commercial paper markets in a manner similar to NCE,
bank lines and debt securities issued under its indentures and
note programs. Borrowings under bank lines and other borrowings
shall have a maturity of not more than one year from the date of
each borrowing.
(ii) Other Securities. The Utility Subsidiaries may
----------------
also issue and sell other types of securities which do not
qualify for use of Rule 52 but which are considered appropriate
during the Authorization Period. The Utility Subsidiaries
request that the Commission reserve jurisdiction over the
issuance of such additional types of securities and the amounts
thereof. They also undertake to cause a post-effective amendment
to be filed in this proceeding which will describe the general
terms of each such security and the amounts thereof and request a
supplemental order of the Commission authorizing the issuance
thereof by the subject Utility Subsidiary.
1.6.3 Non-Utility Subsidiary Financings.
---------------------------------
The Non-Utility Subsidiaries are engaged in and expect
to continue to be active in the development and expansion of
their existing energy-related, telecommunications-related or
otherwise functionally-related, non-utility businesses in the NCE
holding company system. They will be competing in different
sectors of the energy and other industries. In order to finance
investments in such competitive arenas, it will be necessary for
the Non-Utility Subsidiaries to have the ability to engage in
financing transactions which are commonly accepted for such types
of investments. It is believed that, in almost all cases, such
financings will be exempt from prior Commission authorization
pursuant to Rule 52(b). The Non-Utility Subsidiaries request
that the Commission reserve jurisdiction over the issuance of any
other securities with respect to which the exemption under Rule
52(b) would not apply. They also undertake to cause a post-
effective amendment to be filed in this proceeding which will
describe the general terms of each such non-exempt security and
the amounts thereof and request a supplemental order of the
Commission authorizing the issuance thereof by the subject Non-
Utility Subsidiary.
1.7 DESCRIPTION OF INTRASYSTEM FINANCING PROGRAM.
--------------------------------------------
1.7.1 General.
-------
NCE may finance certain of its Subsidiaries and certain
Subsidiaries may finance other Subsidiaries in an aggregate
amount not exceeding $500 million outstanding at any one time
during the Authorization Period. The $500 million excludes
financing that is exempt pursuant to Rules 45(b) and 52, as
applicable. Such financings would generally be in the form of
cash capital contributions, open account advances, inter-company
loans, and/or capital stock purchases. Intrasystem financing
will provide funds for general corporate purposes and other
working capital requirements, investments and capital
expenditures. NCE or the lending Subsidiary will determine, at
its discretion, how much financing to give each borrowing
Subsidiary as its needs dictate during the Authorization Period.
Generally, NCE's or the lending Subsidiary's loans to, and
purchase of capital stock from, such borrowing Subsidiaries will
be exempt under Rule 52, and capital contributions and open
account advances without interest will be exempt under Rule
45(b).
11
<PAGE>
To the extent that any intrasystem loans or extensions of
credit are not exempt under Rule 45(b) or Rule 52, as applicable,
the company making such loan or extending such credit may charge
interest at the same effective rate of interest as the daily
weighted average effective rate of commercial paper, revolving
credit and/or other short-term borrowings of such company,
including an allocated share of commitment fees. If no such
borrowings are outstanding, then the interest rate shall be
predicated on the Federal Funds' effective rate of interest as
quoted daily by the Federal Reserve Bank of New York.
The Subsidiaries may issue and NCE or other Subsidiaries may
acquire other types of securities which do not qualify for use of
Rule 52 but which are considered appropriate during the
Authorization Period. NCE and the Subsidiaries request that the
Commission reserve jurisdiction over the issuance of such
additional types of securities and the amounts thereof. They
also undertake to cause a post-effective amendment to be filed in
this proceeding which will describe the general terms of each
such security and the amounts thereof and request a supplemental
order of the Commission authorizing the issuance thereof by the
subject Subsidiary.
1.7.2 Guarantees.
----------
(i) NCE Guarantees. NCE requests authorization to
--------------
enter into guarantees, obtain letters of credit, enter into
expense agreements or otherwise provide credit support
(collectively, "NCE Guarantees") with respect to the obligations
of any Subsidiary as may be appropriate to enable such Subsidiary
to carry on in the ordinary course of its business, in an
aggregate principal amount not to exceed $800 million outstanding
at any one time, exclusive of any such guarantees that may be
exempt pursuant to Rule 45(b), provided that the limitation on
NCE Guarantees shall be increased to $850 million at such time as
PSCCC becomes a direct subsidiary of NCE. NCE will charge each
Subsidiary a fee for each guarantee provided on behalf of such
Subsidiary that is determined by multiplying the amount of the
NCE guarantee provided by the cost of obtaining the liquidity
necessary to perform the guarantee (for example, bank line
commitment fees or letter of credit fees) for the period of time
the guarantee remains outstanding.
(ii) Subsidiary Guarantees. In addition, authority is
---------------------
requested for Subsidiaries to provide to other Subsidiaries
guarantees and other forms of credit support ("Subsidiary
Guarantees") in an aggregate principal amount not to exceed $100
million outstanding at any one time, exclusive of any guarantees
and other forms of credit support that are exempt pursuant to
Rule 45(b) and Rule 52. Subsidiaries may also charge each
Subsidiary a fee for each guarantee provided on its behalf
determined in the same manner as specified above.
The amount of NCE Guarantees and Subsidiary Guarantees
outstanding at any one time shall not be counted against the
aggregate respective limits applicable to external financings or
the limits on intrasystem financing requested elsewhere herein.
1.8 HEDGE TRANSACTIONS.
------------------
1.8.1 Interest Rate Hedging Program.
-----------------------------
NCE, and to the extent not exempt pursuant to Rule 52,
the Subsidiaries, request authorization to enter into interest
rate hedging transactions with respect to existing indebtedness
("Interest Rate Hedges"), subject to certain limitations and
restrictions, in order to reduce or manage interest rate cost.
Interest Rate Hedges would only be entered into with
counterparties ("Approved Counterparties") whose senior debt
ratings, or the senior debt ratings of the parent companies of
the counterparties, as published by Standard and Poor's Ratings
Group, are equal to or greater than BBB, or an equivalent rating
from Moody's Investors Service, Fitch Investor Service or Duff
and Phelps.
Interest Rate Hedges will involve the use of financial
instruments commonly used in today's capital markets, such as
interest rate swaps, caps, collars, floors, and structured notes
(i.e., a debt instrument in which the principal and/or interest
payments are indirectly linked to the value of an underlying
asset or index), or transactions involving the purchase or sale,
including short sales, of U.S. Treasury Securities. The
transactions would be for fixed periods and stated notional
amounts. Fees, commissions and other amounts payable to the
counterparty or exchange (excluding, however, the swap or option
payments) in connection with an Interest Rate Hedge will not
exceed those generally obtainable in competitive markets for
parties of comparable credit quality.
12
<PAGE>
1.8.2 Anticipatory Hedges.
-------------------
In addition, the Applicants request authorization to
enter into interest rate hedging transactions with respect to
anticipated debt offerings (the "Anticipatory Hedges"), subject
to certain limitations and restrictions. Such Anticipatory
Hedges would only be entered into with Approved Counterparties,
and would be utilized to fix and/or limit the interest rate risk
associated with any new issuance through (i) a forward sale of
exchange-traded U.S. Treasury futures contracts, U.S. Treasury
Securities and/or a forward swap (each a "Forward Sale"), (ii)
the purchase of put options on U.S. Treasury Securities (a "Put
Options Purchase"), (iii) a Put Options Purchase in combination
with the sale of call options on U.S. Treasury Securities (a
"Zero Cost Collar"), (iv) transactions involving the purchase or
sale, including short sales, of U.S. Treasury Securities, or (v)
some combination of a Forward Sale, Put Options Purchase, Zero
Cost Collar and/or other derivative or cash transactions,
including, but not limited to structured notes, caps and collars,
appropriate for the Anticipatory Hedges.
Anticipatory Hedges may be executed on-exchange ("On-
Exchange Trades") with brokers through the opening of futures
and/or options positions traded on the Chicago Board of Trade
("CBOT"), the opening of over-the-counter positions with one or
more counterparties ("Off-Exchange Trades"), or a combination of
On-Exchange Trades and Off-Exchange Trades. NCE or a Subsidiary
will determine the optimal structure of each Anticipatory Hedge
transaction at the time of execution. NCE or a Subsidiary may
decide to lock in interest rates and/or limit its exposure to
interest rate increases. All open positions under Anticipatory
Hedges will be closed on or prior to the date of the new issuance
and neither NCE nor any Subsidiary will, at any time, take
possession or make delivery of the underlying U.S. Treasury
Securities. Further, no Anticipatory Hedge position will be
outstanding (open) for more than 180 days.
The Applicants will comply with the then existing financial
disclosure requirements of the Financial Accounting Standards
Board associated with hedging transactions.
1.9 FINANCING SUBSIDIARIES. NCE and the Subsidiaries
----------------------
request authority to acquire, directly or indirectly, the equity
securities of one or more corporations, trusts, partnerships or
other entities created specifically for the purpose of
facilitating the financing of the authorized and exempt
activities (including exempt and authorized acquisitions) of NCE
and the Subsidiaries through the issuance of debt or equity
securities, including but not limited to monthly income preferred
securities, to third parties and the loaning of the proceeds of
such financings to NCE or such Subsidiaries. Such Financing
Subsidiaries would issue and sell securities to third parties
pursuant to Rule 52. NCE may, if required, guarantee or enter
into expense agreements in respect of the obligations of any such
Financing Subsidiaries, the amount of which would be counted
against the NCE Guarantee limit proposed in Item 1.7, above.
Subsidiaries may also provide guarantees and enter into expense
agreements, if required, on behalf of such entities pursuant to
Rules 45(b)(7) and 52, as applicable.
13
<PAGE>
1.10 INTERMEDIATE SUBSIDIARIES. NCE and Enterprises
-------------------------
propose to acquire the securities of one or more Intermediate
Subsidiaries, which would be organized exclusively for the
purpose of acquiring, holding and/or financing the acquisition of
the securities of or other interest in one or more EWGs or FUCOs,
Rule 58 Subsidiaries, ETCs or other non-exempt Non-Utility
Subsidiaries, provided that Intermediate Subsidiaries may also
engage in development activities and administrative activities
relating to such subsidiaries.9 To the extent such
transactions are not exempt from the Act or otherwise authorized
or permitted by rule, regulation or order of the Commission
issued thereunder, NCE requests authority for Intermediate
Subsidiaries to provide management, administrative, project
development and operating services to such entities.
There are several legal and business reasons for the use of
special-purpose subsidiaries such as the Intermediate
Subsidiaries in connection with making investments in EWGs and
FUCOs, Rule 58 Subsidiaries, ETCs and other non-exempt Non-
Utility Subsidiaries. For example, the formation and acquisition
of special-purpose subsidiaries is often necessary or desirable
to facilitate financing the acquisition and ownership of a FUCO,
an EWG or another non-utility enterprise. Furthermore, the laws
of some foreign countries may require that the bidder in a
privatization program be organized in that country. In such
cases, it would be necessary for NCE or Enterprises to form a
foreign subsidiary as the entity (or participant in the entity)
that submits the bid or other proposal. In addition, the
interposition of one or more Intermediate Subsidiaries may allow
NCE to defer the repatriation of foreign source income, or to
take full advantage of favorable tax treaties among foreign
countries, or otherwise to secure favorable U.S. income tax
treatment that would not otherwise be available. Intermediate
Subsidiaries would also serve to isolate business risks,
facilitate subsequent adjustments to, or sales of, ownership
interests by or among the members of the ownership group, or to
raise debt or equity capital in domestic or foreign markets.
An Intermediate Subsidiary may be organized, among other
things, (1) in order to facilitate the making of bids or
proposals to develop or acquire an interest in any EWG or FUCO,
Rule 58 Subsidiary, ETC or other non-exempt Non-Utility
Subsidiary; (2) after the award of such a bid proposal, in order
to facilitate closing on the purchase or financing of such
acquired company; (3) at any time subsequent to the consummation
of an acquisition of an interest in any such company in order,
among other things, to effect an adjustment in the respective
ownership interests in such business held by NCE or Enterprises
------------------
9. Utility Engineering Corporation already has authority under
the terms of the Commission's order approving the formation of
NCE as a holding company to organize intermediate subsidiaries to
engage in its authorized activities. Likewise, there are special
purpose intermediate subsidiary companies in the chain of
ownership over Yorkshire Power Group Limited.
14
<PAGE>
and non-affiliated investors; (4) to facilitate the sale of
ownership interests in one or more acquired non-utility
companies; (5) to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership
of domestic companies by foreign nationals; (6) as a part of tax
planning in order to limit NCE's exposure to U.S. and foreign
taxes; (7) to further insulate NCE and the Utility Subsidiaries
from operational or other business risks that may be associated
with investments in non-utility companies; or (8) for other
lawful business purposes.
Investments in Intermediate Subsidiaries may take the form
of any combination of the following: (1) purchases of capital
shares, partnership interests, member interests in limited
liability companies, trust certificates or other forms of equity
interests; (2) capital contributions; (3) open account advances
with or without interest; (4) loans; and (5) guarantees issued,
provided or arranged in respect of the securities or other
obligations of any Intermediate Subsidiaries. Funds for any
direct or indirect investment by NCE or Enterprises in any
Intermediate Subsidiary will be derived from (1) financings
authorized in this proceeding; (2) any appropriate future debt or
equity securities issuance authorization obtained by NCE from the
Commission; and (3) other available cash resources, including
proceeds of securities sales by Enterprises pursuant to Rule 52.
To the extent that NCE provides funds or guarantees directly or
indirectly to an Intermediate Subsidiary which are used for the
purpose of making an investment in any EWG or FUCO or a Rule 58
Subsidiary, the amount of such funds or guarantees will be
included in NCE's "aggregate investment" in such entities, as
calculated in accordance with Rule 53 or Rule 58, as applicable.
1.11 PAYMENT OF DIVIDENDS OUT OF CAPITAL AND UNEARNED
------------------------------------------------
SURPLUS.
------- Enterprises also proposes, on behalf of itself and its
direct or indirect Rule 58 Subsidiaries and Non-Utility
Subsidiaries, that such companies be permitted to pay dividends
with respect to the securities of such companies, from time to
time through the Authorization Period, out of capital and
unearned surplus (including revaluation reserve), to the extent
permitted under applicable corporate law.
Enterprises anticipates that there will be situations in
which it or one or more of its direct or indirect subsidiaries
will have unrestricted cash available for distribution in excess
of any such company's 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 Enterprises (directly or indirectly
through an Intermediate Subsidiary) 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 New 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 Enterprises for possible distribution to NCE.10
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 its parent out of such cash
proceeds.
Further, there may be periods during which unrestricted cash
available for distribution by Enterprises or a direct or indirect
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 depreciation methods required to be used in determining
book income.
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.
Enterprises, on behalf of itself and each of its current and
future direct and indirect 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. Enterprises
also states that its subsidiaries will comply with the terms of
___________________
10. 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, Enterprises would
normally desire a return of some or all of the funds invested.
15
<PAGE>
any credit agreements and indentures that restrict the amount and
timing of distributions to shareholders.
1.12 CERTIFICATES OF NOTIFICATION. It is proposed that,
----------------------------
with respect to NCE, the reporting system of the 1933 Act and the
1934 Act be integrated with the reporting system under the 1935
Act. This would eliminate duplication of filings with the
Commission that cover essentially the same subject matters,
resulting in a reduction of expense for both the Commission and
NCE. To effect such integration, the portion of the 1933 Act and
1934 Act reports containing or reflecting disclosures of
transactions occurring pursuant to the authorization granted in
this proceeding would be incorporated by reference into this
proceeding through Rule 24 certificates of notification. The
certificates would also contain all other information required by
Rule 24, including the certification that each transaction being
reported on had been carried out in accordance with the terms and
conditions of and for the purposes represented in this
Application. Such certificates of notification would be filed
within 60 days after the end of each of the first three calendar
quarters, and 90 days after the end of the last calendar quarter,
in which transactions occur. It is also proposed that such
certificates, which will include information with respect to all
securities issuances that are exempt under Rule 52, be in lieu of
any separate certificates required on Form U-6B-2 pursuant to
Rule 52.
The Rule 24 certificates will contain the following
information:
(a) If sales of Common Stock by NCE are reported, the
purchase price per share and the market price per share at
the date of the agreement of sale;
(b) The total number of shares of Common Stock issued
during the quarter, under (i) NCE's dividend reinvestment
plan and (ii) NCE system employee benefit and executive
compensation plans, including any such plans hereinafter
adopted;
(c) If a guarantee or other form of credit support is
issued during the quarter, the name of the parent or issuing
company, the name of the subsidiary and the amount, terms
and purpose of the guarantee;
(d) The amount and terms of any Short-term Debt issued
by NCE during the quarter;
(e) The amount and terms of any financings consummated
by any Utility Subsidiary during the quarter, which
financings are not exempt under Rule 52;
(f) The amount and terms of any financings consummated
by any Non-Utility Subsidiary during the quarter, which
financings are not exempt under Rule 52;
16
<PAGE>
(g) The amount and terms of any financings consummated
by any Utility Subsidiary during the quarter pursuant to the
exemption provided under Rule 52;
(h) The amount and terms of any financings consummated
by any Non-Subsidiary during the quarter pursuant to the
exemption provided under Rule 52;
(i) The notional amount and principal terms of any
Interest Rate Hedge or Anticipatory Hedge entered into
during the quarter and the identity of the parties to such
instruments;
(j) The name, parent company, and amount invested in
any new Intermediate Subsidiary or Financing Subsidiary
during the quarter;
(k) Consolidated balance sheets as of the end of the
quarter, and separate balance sheets as of the end of the
quarter for each company, including NCE, that has engaged in
financing transactions during the quarter; and
(l) Future registration statements filed under the
1933 Act with respect to securities that are the subject of
the Application will be filed (or incorporated by reference)
as exhibits to the next certificate filed pursuant to Rule
24.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
------------------------------
The fees, commissions and expenses incurred or to be
incurred in connection with the transactions proposed herein are
estimated at $15,000. The above fees do not include underwriting
fees and all other expenses incurred in consummating financings
covered hereby. It is estimated that such fees and expenses will
not exceed 5% of the proceeds.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
-------------------------------
3.1 GENERAL. Sections 6(a) and 7 of the Act are applicable
to the issuance and sale of Common Stock, Debentures and Short-
term Debt by NCE and to the issuance and sale of certain
securities by the Subsidiaries that are not exempt under Rule 52.
In addition, Sections 6(a) and 7 of the Act are applicable to
Interest Rate Hedges, except to the extent that they may be
exempt under Rule 52, and to Anticipatory Hedges. Section 12(b)
of the Act and Rule 45(a) are applicable to the issuance of NCE
Guarantees and to Subsidiary Guarantees, to the extent not exempt
under Rules 45(b) and 52. Sections 9(a)(1), 10 and 12(f) of the
Act are applicable to the acquisition by NCE or any Subsidiary of
any securities issued by an associate company, except to the
extent that such transaction are exempt under Rule 52. Sections
9(a)(1) and 10 of the Act are also applicable to NCE's or any
Subsidiary's acquisition of the equity securities of any
Financing Subsidiary or Intermediate Subsidiary. Section 12(c)
of the Act and Rule 46 are applicable to the payment of dividends
from capital and unearned surplus by Enterprises or any direct or
indirect subsidiary of Enterprises. Sections 32 and 33 and Rules
53 and 54 are also deemed applicable to the proposed transactions.
17
<PAGE>
3.2 RULE 54 ANALYSIS. The transactions proposed herein are
also subject to Section 32(h)(4) of the Act and Rule 54
thereunder. Rule 54 provides that, in determining whether to
approve any transaction that does not relate to an EWG or FUCO,
the Commission shall not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or
FUCO upon the registered holding company system if paragraphs
(a), (b) and (c) of Rule 53 are satisfied.
Initially, NCE has complied or will comply with the record-
keeping requirements of Rule 53(a)(2), the limitation under Rule
53(a)(3) on the use of the NCE system's domestic public-utility
company personnel to render services to EWGs and FUCOs, and the
requirements of Rule 53(a)(4) concerning the submission of copies
of certain filings under the Act to retail regulatory
commissions. Further, none of the circumstances described in
Rule 53(b) has occurred or is continuing.
Rule 53(a)(1) limits a registered holding company's
financing of investments in EWGs if such holding company's
"aggregate investment" in EWGs and FUCOs exceeds 50% of its
"consolidated retained earnings." NCE's "aggregate investment"
(as defined in Rule 53(a)(1)(i)) in all EWGs and FUCOs, pro forma
to include NCE's indirect investment in Yorkshire Electricity
Group plc ("Yorkshire"), which will become a FUCO, and
Independent Power Corporation plc ("IPC"), which will become
either an EWG or a FUCO, is currently equal to 55% of NCE's
"consolidated retained earnings" (as defined in Rule
53(a)(1)(ii)) for the four quarters ended June 30, 1998. At the
present time, therefore, NCE does not satisfy all of the
requirements of Rule 53(a).
However, even if the Commission were to take into account
the effect of the capitalization and earnings of EWGs and FUCOs
(including, on a pro forma basis, Yorkshire and IPC) in which NCE
has invested, it would have no basis for denying the transactions
proposed herein. The transactions proposed herein relate to a
program of external and intrasystem financing for a variety of
corporate purposes, including the refunding of significant
amounts of indebtedness of PSCo. NCE's ability to finance future
investments in any EWGs and FUCOs is limited by Rule 53, and, in
addition, is the subject of a separate application in File No.
70-9341.
Moreover, there has been no material impact on NCE's
consolidated capitalization by reason of the inclusion therein of
the capitalization and earnings of EWGs and FUCOs (including on a
pro forma basis Yorkshire and IPC) in which NCE has an interest.
NCE believes that its current capitalization ratios (43% equity
and 57% debt and preferred securities as of June 30, 1998) and
relevant measurements of earning capacity (e.g., earnings per
share) are within acceptable ranges established by peer group
utilities. Finally, although NCE's consolidated earnings for the
year ended December 31, 1997, were negatively affected by its
investment in Yorkshire, this was solely as the result of the
imposition by the United Kingdom of a one-time, non-recurring,
windfall tax on Yorkshire. Importantly, this tax did not affect
earnings from ongoing operations, and, therefore, would not have
any negative financial impact on earnings in future periods.
18
<PAGE>
ITEM 4. REGULATORY APPROVALS.
--------------------
No state commission, and no federal commission, other than
the Commission, has jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
---------
The Commission is requested to publish a notice under Rule
23 with respect to the filing of this Application or Declaration
as soon as practicable. The Applicants request that the
Commission's Order be issued as soon as the rules allow, and in
any event not later than December 31, 1998, and that there should
not be a 30-day waiting period between issuance of the
Commission's order and the date on which the order is to become
effective. The Applicants hereby waive a recommended decision by
a hearing officer or any other responsible officer of the
Commission and consents that the Division of Investment
Management may assist in the preparation of the Commission's
decision and/or order, unless the Division opposes the matters
proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
---------------------------------
A. EXHIBITS. (To be filed by amendment unless otherwise
--------
indicated)
A None.
B-1 Form of Commercial Paper Note.
B-2 Form of Standard Purchase Agreement - Common
Stock.
B-3 Form of Debentures.
B-4 Form of Debenture Indenture.
B-5 Form of Supplemental Indenture.
B-6 Form of Debenture Purchase Agreement.
F Opinion of Counsel.
G Financial Data Schedule. (incorporated by
reference to the Quarterly Report on Form 10-Q of
NCE for the quarter ended June 30, 1998) (File No.
1-12927).
H Proposed Form of Federal Register Notice. (Filed
herewith).
19
<PAGE>
B. FINANCIAL STATEMENTS.
1.1 Balance Sheet of NCE and consolidated
subsidiaries, as of June 30, 1998 (incorporated by
reference to the Quarterly Report on Form 10-Q of
NCE for the quarter ended June 30, 1998) (File No.
1-12927).
1.2 Statements of Income of NCE and consolidated
subsidiaries for the three and six-month periods
ended June 30, 1998 (incorporated by reference to
the Quarterly Report on Form 10-Q of NCE for the
quarter ended June 30, 1998) (File No. 1-12927).
2.1 Balance Sheet of PSCo and consolidated
subsidiaries, as of June 30, 1998 (incorporated by
reference to the Quarterly Report on Form 10-Q of
PSCo for the quarter ended June 30, 1998) (File
No. 1-3280).
2.2 Statements of Income of PSCo and consolidated
subsidiaries for the three and six-month periods
ended June 30, 1998 (incorporated by reference to
the Quarterly Report on Form 10-Q of PSCo for the
quarter ended June 30, 1998) (File No. 1-3280).
3.1 Balance Sheet of SPS, as of June 30, 1998
(incorporated by reference to the Quarterly Report
on Form 10-Q of SPS for the quarter ended June 30,
1998) (File No. 1-3789).
3.2 Statements of Income of SPS for the three and six-
month periods ended June 30, 1998 (incorporated by
reference to the Quarterly Report on Form 10-Q of
SPS for the quarter ended June 30, 1998) (File No.
1-3789).
4.1 Unaudited Balance Sheet of Enterprises and
consolidated subsidiaries as of June 30, 1998
(incorporated by reference to Exhibit 2.1 to
Application/Declaration filed in File No. 70-
9345).
4.2 Unaudited Statement of Income of Enterprises and
consolidated subsidiaries for the six months ended
June 30, 1998 (incorporated by reference to
Exhibit 2.2 to Application/Declaration filed in
File No. 70-9345).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
---------------------------------------
None of the matters that are the subject of this Application
or Declaration involve a "major federal action" nor do they
"significantly affect the quality of the human environment" as
those terms are used in section 102(2)(C) of the National
Environmental Policy Act. The transaction that is the subject of
this Application or Declaration will not result in changes in the
operation of the Applicants that will have an impact on the
environment. The Applicants are not aware of any federal agency
that has prepared or is preparing an environmental impact
statement with respect to the transactions that are the subject
of this Application or Declaration.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have
duly caused this Application or Declaration filed herein to be
signed on their behalf by the undersigned thereunto duly
authorized.
NEW CENTURY ENERGIES, INC.
PUBLIC SERVICE COMPANY OF COLORADO
NEW CENTURY SERVICES, INC.
NC ENTERPRISES, INC.
E PRIME, INC.
GREEN AND CLEAR LAKES COMPANY
THE PLANERGY GROUP, INC.
NEW CENTURY-CADENCE, INC.
SOUTHWESTERN PUBLIC SERVICE COMPANY
By: /s/ Richard C. Kelly
-----------------------------------
Name: Richard C. Kelly
Title: Executive Vice President
of New Century Energies,
Inc., Public Service
Company of Colorado, New
Century Services, Inc.,
NC Enterprises, Inc., and
Southwestern Public
Service Company;
President of e prime,
inc.; Treasurer of Green
and Clear Lakes Company
and New Century-Cadence,
Inc.; and Vice President
of The Planergy Group,
Inc.
(signatures continued on the next page)
21
<PAGE>
CHEYENNE LIGHT, FUEL AND POWER
COMPANY
WESTGAS INTERSTATE, INC.
NEW CENTURY INTERNATIONAL, INC.
PS COLORADO CREDIT CORPORATION
1480 WELTON, INC.
P.S.R. INVESTMENTS, INC.
By: /s/ Cathy J. Hart
-----------------------------------
Name: Cathy J. Hart
Title: Secretary
NATURAL FUELS CORPORATION
QUIXX CORPORATION
UTILITY ENGINEERING CORPORATION
By: /s/ Bill D. Helton
-----------------------------------
Name: Bill D. Helton
Title: Chairman of the Board
Date: October 22, 1998
22
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
H Proposed Form of Federal Register Notice. (Filed
herewith).
EXHIBIT H
FORM OF FEDERAL REGISTER NOTICE
New Century Energies, Inc. ("NCE"), a registered holding
company under the Public Utility Holding Company Act of 1935, as
amended (the "Act") whose principal business address is at 1225
17th Street, Denver, Colorado 802-5533, and certain of its direct
and indirect subsidiaries have filed an Application/Declaration
requesting authority for a program of external and intrasystem
financing and for certain additional related matters. NCE owns
all of the issued and outstanding common stock of Public Service
Company of Colorado ("PSCo"), Southwestern Public Service Company
("SPS"), and Cheyenne Light, Fuel and Power Company ("Cheyenne")
(collectively, the "Utility Subsidiaries"), which together serve
approximately 1.6 million electric customers in parts of
Colorado, Texas, Wyoming, New Mexico, Oklahoma, and Kansas and
approximately 1 million gas customers in parts of Colorado and
Wyoming.
NCE engages through direct and indirect non-utility
subsidiaries (collectively, the "Non-Utility Subsidiaries") in
various energy-related and non-utility businesses. These
include: NC Enterprises, Inc. ("Enterprises"), which serves as an
intermediate holding company for certain of NCE's non-utility
subsidiaries and investments; New Century Services, Inc., a
subsidiary service company; WestGas Interstate Inc., a gas
pipeline that operates in Colorado and Wyoming; New Century
International, Inc., which indirectly holds NCE's interest in
Yorkshire Electricity Group plc, a regional electric distribution
company serving parts of England; e prime, inc., which sells
energy-related products and services and engages in brokering,
marketing and trading of electricity and natural gas; Quixx
Corporation, which is engaged in development activities relating
to "exempt wholesale generators" ("EWGs") and exempt "foreign
utility companies" ("FUCOs"), as defined in Sections 32 and 33 of
the Act, respectively, "qualifying facilities," as defined under
the Public Utility Regulatory Policies Act of 1978, as amended,
and other energy related projects; Utility Engineering
Corporation, which provides general engineering, development,
design, construction and other services to both associate and
non-associate companies; The Planergy Group, Inc. and New
Century-Cadence, Inc., which engage exclusively in activities
permitted under Rule 58; New Century Energy Communications, Inc.
and New Century-Centrus, Inc., which are "exempt
telecommunications companies" ("ETCs") within the meaning of
Section 34 of the Act; Natural Fuels Corporation, an 83.63%-owned
subsidiary of Enterprises, which is engaged in the
commercialization of compressed natural gas as a motor fuel; PS
Colorado Credit Corporation ("PSCCC"), a subsidiary of PSCo which
is engaged in financing and factoring of PSCo's fuel inventories
and accounts receivable; and 1480 Welton, Inc., also a subsidiary
of PSCo, which holds certain of PSCo's real estate interests for
use in the utility business.
NCE and Subsidiaries' Current Financing Authority. By order
-------------------------------------------------
dated August 1, 1997 in File No. 70-9007,1 as modified by
supplemental order dated May 14, 1998, 2 NCE and its
--------------------------
1. Holding Company Act Rel. No. 26750.
2. Holding Company Act Rel. No. 26872.
<PAGE>
Subsidiaries (collectively, the "Applicants") are currently
authorized to engage in external and internal financing through
December 31, 1999 (except as otherwise noted below), as follows:
(1) NCE is authorized to issue and sell from time to time, in
public or privately negotiated transactions, shares of common
stock, $1 par value per share, for an aggregate offering price of
up to $745 million. In addition, NCE is authorized to issue and
sell an additional 30 million shares of common stock from time to
time through August 1, 2007 to fund various benefit and dividend
reinvestment plans (the "Stock Plans"); (2) NCE is authorized to
issue and reissue from time to time short-term debt aggregating
up to $200 million at any time outstanding, subject to increase
to $325 million at such time as PSCCC, a subsidiary of PSCo,
becomes a direct subsidiary of NCE; (3) NCE is authorized to
provide guarantees and similar credit support on behalf of
Subsidiaries in an aggregate amount not to exceed $300 million
outstanding at any one time; (4) Cheyenne is authorized to issue
short-term debt aggregating not more than $25 million outstanding
at any one time; (5) NCE and its Subsidiaries are authorized to
finance other Subsidiaries in an aggregate amount not to exceed
$300 million outstanding at any one time, exclusive of financing
of Subsidiaries that is exempt pursuant to Rules 45(b) and 52, as
applicable; (6) PSCo is authorized to provide up to $450 million
in guarantees and other forms of credit support on behalf of
PSCCC and certain of its other subsidiaries in connection with
borrowings under certain existing credit facilities and to enter
into similar credit facilities in the future (also with PSCo s
guarantee); (7) Subsidiaries are authorized to provide
guarantees and other forms of credit support on behalf of other
Subsidiaries in an aggregate amount not to exceed $100 million,
exclusive of such guarantees as may be exempt pursuant to Rule
45(b); (8) Subsidiaries are authorized to organize and acquire
the voting or other equity securities of entities ("Financing
Entities") formed to facilitate financings through the issuance
to third parties of income preferred securities or other
securities. Subsidiaries are also authorized to issue debentures
or other evidences of indebtedness to such Financing Entities in
consideration for the proceeds of external financings by
Financing Entities and to guarantee the obligations of Financing
Entities; and (9) NCE is authorized to use the proceeds of
financing (including guarantees) to fund investments in one or
more EWGs or FUCO in an aggregate amount at any time outstanding
which, when added to NCE's "aggregate investment" (as defined in
Rule 53(a)(1)) at any time in all such entities, will not exceed
50% of NCE's "consolidated retained earnings" (also as defined in
Rule 53(a)(1)).
<PAGE>
Requested Approvals. The Applicants are now requesting
-------------------
authorization for a program of external financing and intrasystem
financing and for certain additional related proposals for the
period through December 31, 2001 ("Authorization Period"), as
follows: (1) NCE requests authority to issue and sell from time
to time (A) up to $1.25 billion of its common stock, $1 par value
per share ("Common Stock"), and an additional 30 million shares
of Common Stock (as such number may hereafter be adjusted during
the Authorization Period to reflect any stock split) from time to
time through December 31, 2008 pursuant to certain pension and
executive compensation plans and the NCE dividend reinvestment
plan, or similar plans adopted in the future ("Stock Plans"), (B)
debt securities in an aggregate principal amount outstanding at
any one time not to exceed $600 million (the "NCE Debt
Limitation"), consisting of short-term debt having a maturity
from the date of issue of not more than one year and/or
commercial paper offered to dealers ("Short-term Debt") and
unsecured debentures (the "Debentures") having a maturity of up
to 40 years; provided that the aggregate principal amount of
Debentures at any time outstanding shall not exceed $300 million,
and provided further that, at such time as PSCCC becomes a direct
subsidiary of NCE, the NCE Debt Limitation shall be increased to
$975 million, of which up to $450 million may consist of
Debentures, and (C) securities other than those described above,
which would be described in a post-effective amendment to the
Application/Declaration; (2) Cheyenne requests authority to
issue and sell from time to time up to $40 million of Short-term
Debt; (3) NCE requests authority to provide financing to its
Subsidiaries and the Subsidiaries propose to provide financing to
other Subsidiaries in an aggregate principal amount of up to $500
million outstanding at any one time, exclusive of financing that
is exempt pursuant to Rule 45(b) or Rule 52, as applicable; (4)
NCE requests authority to enter into guarantees and provide other
forms of credit support with respect to obligations of any direct
or indirect subsidiary in an aggregate principal or nominal
amount not to exceed $800 million at any one time outstanding,
exclusive of any guarantees or other forms of credit support that
are exempt under Rule 45(b), provided that, upon PSCCC becoming a
direct subsidiary of NCE, NCE may provide guarantees and other
forms of credit support in an aggregate amount not to exceed $850
million; (5) Subsidiaries request authority to issue guarantees
and other forms of credit support with respect to obligations of
other Subsidiaries in an aggregate principal or nominal amount
not to exceed $100 million at any one time outstanding, exclusive
of guarantees that are exempt pursuant to Rule 45(b); (6) NCE
and, to the extent not exempt under Rule 52, the Subsidiaries
request authority to enter into hedging transactions with respect
to existing indebtedness of such companies in order to manage and
minimize interest rate costs, and NCE and the Subsidiaries also
request authority to enter into hedging transactions with respect
to anticipatory debt issuances in order to lock-in current
interest rates and/or manage interest rate risk exposure; (7) NCE
and the Subsidiaries request authority to acquire the equity
securities of one or more Financing Subsidiaries and to guarantee
the securities issued by such Financing Subsidiaries, to the
extent not exempt pursuant to Rule 45(b), and Financing
Subsidiaries request authority to acquire the notes or other
evidence of indebtedness of NCE or any Subsidiary in
consideration for the proceeds of external financing by Financing
Subsidiaries; (8) NCE, Enterprises and any direct or indirect
subsidiary of Enterprises request authority to acquire the equity
securities of one or more subsidiaries ("Intermediate
Subsidiaries") organized exclusively for the purpose of
acquiring, financing, and holding the securities of one or more
existing or future Non-Utility Subsidiaries, including but not
limited to EWGs, FUCOs, companies engaged in activities permitted
by Rule 58 ("Rule 58 Subsidiaries"), or ETCs, provided that
Intermediate Subsidiaries may also provide management,
administrative, project development, and operating services to
such entities; and (9) Enterprises and any direct or indirect
subsidiary of Enterprises (including Intermediate Subsidiaries
and Rule 58 Subsidiaries) request authority to pay dividends out
of capital and unearned surplus to the extent allowed under
applicable law and the terms of any credit or security
instruments to which they may be parties.
<PAGE>
The proceeds from the financings authorized by the
Commission pursuant to this Application or Declaration will be
used for general corporate purposes, including (1) financing, in
part, investments by and capital expenditures of NCE and its
Subsidiaries, (2) the repayment, redemption, refunding or
purchase by NCE or any of its Subsidiaries of securities issued
by such companies without the need for prior Commission approval
pursuant to Rule 42 or a successor rule, (3) financing working
capital requirements of NCE and its Subsidiaries, and (4) other
lawful general purposes. The Applicants represent that no
financing proceeds will be used to acquire the equity securities
of any new subsidiary unless such acquisition has been approved
by the Commission in this proceeding or in a separate proceeding
or in accordance with an available exemption under the Act or
rules thereunder. Upon the effective date of the Commission's
order in this proceeding approving the proposals summarized
above, NCE and its Subsidiaries will relinquish their current
authorization in File 70-9007.
NCE may issue and sell Common Stock pursuant to underwriting
agreements of a type generally standard in the industry. Public
distributions may be pursuant to private negotiation with
underwriters, dealers or agents, as discussed below, or effected
through competitive bidding among underwriters. In addition,
sales may be made through private placements or other non-public
offerings to one or more persons. All such common stock sales
will be at rates or prices and under conditions negotiated or
based upon, or otherwise determined by, competitive capital
markets.
NCE may also issue Common Stock in public or privately-
negotiated transactions in exchange for the equity securities or
assets of other companies, provided that the acquisition of any
such equity securities or assets has been authorized in a
separate proceeding or is exempt under the Act or the rules
thereunder.
Shares of Common Stock for use under Stock Plans may either
be newly issued shares, treasury shares or shares purchased in
the open market. NCE will make open-market purchases of Common
Stock in accordance with the terms of or in connection with the
operation of the plans pursuant to Rule 42. NCE may also acquire
treasury shares through other open-market purchases.
To provide financing for general corporate purposes, other
working capital requirements and construction spending until
long-term financing can be obtained, NCE may sell commercial
paper, from time to time, in established domestic or European
commercial paper markets. Such commercial paper would typically
be sold to dealers at the discount rate per annum prevailing at
the date of issuance for commercial paper of comparable quality
and maturities sold to commercial paper dealers generally. NCE
also proposes to establish bank lines in an aggregate principal
amount not to exceed the NCE Debt Limitation. Loans under these
lines will have a maturity date not more than one year from the
date of each borrowing. NCE may engage in other types of short-
term financing generally available to borrowers with investment
grade credit ratings as it may deem appropriate in light of its
needs and market conditions at the time of issuance.
<PAGE>
The Debentures (a) may be convertible into any other
securities of NCE, (b) will have maturities ranging from one to
40 years, (c) may be subject to optional and/or mandatory
redemption, in whole or in part, at par or at various premiums
above the principal amount thereof, (d) may be entitled to
mandatory or optional sinking fund provisions, (e) may provide
for reset of the coupon pursuant to a remarketing arrangement,
and (f) may be called from existing investors by a third party.
In addition, NCE may have the right from time to time to defer
the payment of interest on the Debentures of one or more series
(which may be fixed or floating or "multi-modal" debentures,
i.e., debentures where the interest is periodically reset,
alternating between fixed and floating interest rates for each
reset period), with all accrued and unpaid interest (together
with interest thereon) becoming due and payable at the end of
each such extension period. The Debentures will be issued under
an indenture (the "Indenture") to be entered into between NCE and
a national bank, as trustee (the "Trustee," including any
successor trustee appointed pursuant to the Indenture), with a
supplemental indenture to be executed in respect of each separate
offering of one or more series of Debentures (each a
"Supplemental Indenture").
NCE contemplates that the Debentures would be issued and
sold directly to one or more purchasers in privately-negotiated
transactions or to one or more investment banking or underwriting
firms or other entities who would resell the Debentures without
registration under the Securities Act of 1933 in reliance upon
one or more applicable exemptions from registration thereunder,
or to the public either (i) through underwriters selected by
negotiation or competitive bidding or (ii) through selling agents
acting either as agent or as principal for resale to the public
either directly or through dealers.
The maturity dates, interest rates, redemption and sinking
fund provisions and conversion features, if any, with respect to
the Debentures of a particular series, as well as any associated
placement, underwriting or selling agent fees, commissions and
discounts, if any, will be established by negotiation or
competitive bidding and reflected in the applicable Supplemental
Indenture and Purchase Agreement or underwriting agreement
setting forth such terms; provided, however, that NCE will not
issue and sell any Debentures at interest rates in excess of
those generally obtainable at the time of pricing or repricing of
such Debentures for securities having the same or reasonably
similar maturities and having reasonably similar terms,
conditions and features issued by utility companies or utility
holding companies of the same or reasonably comparable credit
quality, as determined by the competitive capital markets. NCE
will not, without further approval of the Commission, issue any
Debentures that are not at the time of original issuance rated at
least investment grade by a nationally recognized statistical
rating organization.
<PAGE>
NCE also proposes to issue other types of securities from
time to time as necessary or desirable in order to minimize
financing costs or obtain new capital under then existing market
conditions. NCE requests the Commission to reserve jurisdiction
over the issuance of securities other than the specific
securities described above and undertakes to file a post-
effective amendment in this proceeding which will describe the
amount and terms of such securities and request a supplemental
order authorizing the issuance thereof.
Rule 52 under the Act provides an exemption from the prior
authorization requirements of the Act for most of the issuances
and sales of securities by the Utility Subsidiaries, as they will
have been approved by the Colorado Public Utility Commission
("CPUC") in the case of PSCo, the New Mexico Public Utility
Commission ("NMPUC") in the case of SPS and the Wyoming Public
Service Commission ("WPSC") in the case of Cheyenne. However,
certain external financings by the Utility Subsidiaries for which
authorization is requested herein may be outside the scope of the
Rule 52 exemption.
All securities of Cheyenne, except for securities with
maturities of less than 12 months, are approved by the WPSC.
Accordingly, Cheyenne requests authority to issue Short-term Debt
in an aggregate amount at any one time outstanding not exceed $40
million. Cheyenne also proposes to engage in other short-term
financing as it may deem appropriate in light of its needs and
market conditions at the time of issuance. Such short-term
financing could include, without limitation, commercial paper
sold in established domestic or European commercial paper markets
in a manner similar to NCE, bank lines and debt securities issued
under its indentures and note programs. Borrowings under bank
lines and other borrowings shall have a maturity of not more than
one year from the date of each borrowing.
The Utility Subsidiaries have requested that the Commission
reserve jurisdiction over the issuance of other types of
securities with respect to which the exemption under Rule 52
would not apply. They also undertake to cause a post-effective
amendment to be filed in this proceeding which will describe the
general terms of each such security and the amounts thereof and
request a supplemental order of the Commission authorizing the
issuance thereof by the subject Utility Subsidiary.
It is believed that, in almost all cases, financings by Non-
Utility Subsidiaries will also be exempt from prior Commission
authorization pursuant to Rule 52(b). The Non-Utility
Subsidiaries request that the Commission reserve jurisdiction
over the issuance of any other securities with respect to which
the exemption under Rule 52(b) would not apply. They also
undertake to cause a post-effective amendment to be filed in this
proceeding which will describe the general terms of each such
non-exempt security and the amounts thereof and request a
supplemental order of the Commission authorizing the issuance
thereof by the subject Non-Utility Subsidiary.
NCE proposes to finance certain of its Subsidiaries and
Subsidiaries propose to finance other Subsidiaries in an
aggregate amount not exceeding $500 million outstanding at any
one time during the Authorization Period. The $500 million
excludes financing that is exempt pursuant to Rules 45(b) and 52,
as applicable. Such financings would generally be in the form of
cash capital contributions, open account advances, loans and/or
capital stock purchases. Open account advances will provide
funds for general corporate purposes and other working capital
requirements and temporarily for investments and capital
expenditures until long-term financing is obtained and/or cash is
generated internally. NCE or the lending Subsidiary will
determine, at its discretion, how much financing to give each
borrowing Subsidiary as its needs dictate during the
Authorization Period. Generally, NCE's or the lending
Subsidiary's loans to, and purchase of capital stock from, such
borrowing Subsidiaries will be exempt under Rule 52, and capital
contributions and open account advances without interest will be
exempt under Rule 45(b).
<PAGE>
To the extent that any intrasystem loan or extension of
credit is not exempt under Rule 45(b) or Rule 52, the company
making such loan or extending such credit may charge interest at
the same effective rate of interest as the daily weighted average
effective rate of commercial paper, revolving credit and/or other
short-term borrowings of NCE or the lending Subsidiary, as the
case may be, including an allocated share of commitment fees. If
no such borrowings are outstanding, then the interest rate shall
be predicated on the Federal Funds effective rate of interest as
quoted daily by the Federal Reserve Bank of New York.
The Subsidiaries may issue and NCE or other Subsidiaries may
acquire other types of securities which do not qualify for use of
Rule 52 but which are considered appropriate during the
Authorization Period. NCE and the Subsidiaries request that the
Commission reserve jurisdiction over the issuance of such
additional types of securities and the amounts thereof. They
also undertake to cause a post-effective amendment to be filed in
this proceeding which will describe the general terms of each
such security and the amounts thereof and request a supplemental
order of the Commission authorizing the issuance thereof by the
subject Subsidiary.
NCE requests authorization to enter into guarantees, obtain
letters of credit, enter into expense agreements or otherwise
provide credit support (collectively, "NCE Guarantees") with
respect to the obligations of any Subsidiary as may be
appropriate to enable such Subsidiary to carry on in the ordinary
course of its business, in an aggregate principal amount not to
exceed $800 million outstanding at any one time, exclusive of any
such guarantees that may be exempt pursuant to Rule 45(b),
provided that the limitation on NCE Guarantees shall be increased
to $850 million at such time as PSCCC becomes a direct subsidiary
of NCE. NCE will charge each Subsidiary a fee for each guarantee
provided on behalf of such Subsidiary that is determined by
multiplying the amount of the NCE guarantee provided by the cost
of obtaining the liquidity necessary to perform the guarantee
(for example, bank line commitment fees or letter of credit fees)
for the period of time the guarantee remains outstanding.
In addition, the Subsidiaries request authority to provide
to other Subsidiaries guarantees and other forms of credit
support ("Subsidiary Guarantees") in an aggregate principal
amount not to exceed $100 million outstanding at any one time,
exclusive of any guarantees and other forms of credit support
that are exempt pursuant to Rule 45(b).
The amount of NCE Guarantees and Subsidiary Guarantees
outstanding at any one time shall not be counted against the
aggregate respective limits applicable to external financings or
the limits on intrasystem financing requested elsewhere herein.
NCE, and to the extent not exempt pursuant to Rule 52, the
Subsidiaries, request authorization to enter into interest rate
hedging transactions with respect to Short-term Debt and the
Debentures ("Interest Rate Hedges"), subject to certain
limitations and restrictions, in order to reduce or manage
interest rate cost. Interest Rate Hedges would only be entered
into with counterparties ("Approved Counterparties") whose senior
debt ratings, or the senior debt ratings of the parent companies
of the counterparties, as published by Standard and Poor's
Ratings Group, are equal to or greater than BBB, or an equivalent
rating from Moody's Investors Service, Fitch Investor Service or
Duff and Phelps.
<PAGE>
Interest Rate Hedges will involve the use of financial
instruments commonly used in today s capital markets, such as
interest rate swaps, caps, collars, floors, and structured notes,
or transactions involving the purchase or sale, including short
sales, of U.S. Treasury Securities. The transactions would be
for fixed periods and stated notional amounts. Fees, commissions
and other amounts payable to the counterparty or exchange
(excluding, however, the swap or option payments) in connection
with an Interest Rate Hedge will not exceed those generally
obtainable in competitive markets for parties of comparable
credit quality.
In addition, the Applicants request authorization to enter
into interest rate hedging transactions with respect to
anticipated debt offerings (the "Anticipatory Hedges"), subject
to certain limitations and restrictions. Such Anticipatory
Hedges would only be entered into with Approved Counterparties,
and would be utilized to fix and/or limit the interest rate risk
associated with any new issuance through (i) a forward sale of
exchange-traded U.S. Treasury futures contracts, U.S. Treasury
Securities and/or a forward swap (each a "Forward Sale"), (ii)
the purchase of put options on U.S. Treasury Securities (a "Put
Options Purchase"), (iii) a Put Options Purchase in combination
with the sale of call options on U.S. Treasury Securities (a
"Zero Cost Collar"), (iv) transactions involving the purchase or
sale, including short sales, of U.S. Treasury Securities, or (v)
some combination of a Forward Sale, Put Options Purchase, Zero
Cost Collar and/or other derivative or cash transactions,
including, bit not limited to structured notes, caps and collars,
appropriate for the Anticipatory Hedges. All open positions
under Anticipatory Hedges will be closed on or prior to the date
of the new issuance and neither NCE nor any Subsidiary will, at
any time, take possession or make delivery of the underlying U.S.
Treasury Securities. Further, no Anticipatory Hedge position
will be outstanding (open) for more than 180 days.
The Applicants will comply with the then existing financial
disclosure requirements of the Financial Accounting Standards
Board associated with hedging transactions.
NCE and the Subsidiaries request authority to acquire,
directly or indirectly, the equity securities of one or more
corporations, trusts, partnerships or other entities created
specifically for the purpose of facilitating the financing of the
authorized and exempt activities (including exempt and authorized
acquisitions) of NCE and the Subsidiaries through the issuance of
debt or equity securities, including but not limited to monthly
income preferred securities, to third parties and the loaning of
the proceeds of such financings to NCE or such Subsidiaries.
Such Financing Subsidiaries would issue and sell securities to
third parties pursuant to Rule 52. NCE may, if required,
guarantee or enter into expense agreements in respect of the
obligations of any such Financing Subsidiaries, the amount of
which would be counted against the proposed NCE Guarantee limit.
Subsidiaries may also provide guarantees and enter into expense
agreements, if required, on behalf of such entities pursuant to
Rules 45(b)(7) and 52, as applicable.
NCE and Enterprises propose to acquire the securities of one
or more Intermediate Subsidiaries, which would be organized
exclusively for the purpose of acquiring, holding and/or
financing the acquisition of the securities of or other interest
in one or more EWGs or FUCOs, Rule 58 Subsidiaries, ETCs or other
non-exempt Non-Utility Subsidiaries, provided that Intermediate
Subsidiaries may also engage in development activities and
administrative activities relating to such subsidiaries. To the
extent such transactions are not exempt from the Act or otherwise
authorized or permitted by rule, regulation or order of the
Commission issued thereunder, NCE requests authority for
Intermediate Subsidiaries to provide management, administrative,
project development and operating services to such entities.
Enterprises also proposes, on behalf of itself and every
direct or indirect Rule 58 Subsidiary and Non-Utility Subsidiary,
that such companies be permitted to pay dividends with respect to
the securities of such companies, from time to time through the
Authorization Period, out of capital and unearned surplus
(including revaluation reserve), to the extent permitted under
applicable corporate law.
<PAGE>
The fees, commissions and expenses incurred or to be
incurred in connection with the transactions proposed herein are
estimated at $15,000. The above fees do not include underwriting
fees and all other expenses incurred in consummating financings
covered hereby. It is estimated that such fees and expenses will
not exceed 5% of the proceeds.
With respect to the requirements of Rules 53 and 54, NCE
states that it has complied or will comply with the record-
keeping requirements of Rule 53(a)(2), the limitation under Rule
53(a)(3) on the use of the NCE system's domestic public-utility
company personnel to render services to EWGs and FUCOs, and the
requirements of Rule 53(a)(4) concerning the submission of copies
of certain filings under the Act to retail regulatory
commissions. Further, none of the circumstances described in
Rule 53(b) has occurred or is continuing.
Rule 53(a)(1) limits a registered holding company's
financing of investments in EWGs if such holding company's
"aggregate investment" in EWGs and FUCOs exceeds 50% of its
"consolidated retained earnings." NCE's "aggregate investment"
(as defined in Rule 53(a)(1)(I)) in all EWGs and FUCOs, pro forma
to include NCE's indirect investment in Yorkshire Electricity
Group plc ("Yorkshire"), which will become a FUCO, and
Independent Power Corporation plc ("IPC"), which will become
either an EWG or a FUCO, is currently equal to 55% of NCE's
"consolidated retained earnings" (as defined in Rule
53(a)(1)(ii)) for the four quarters ended June 30, 1998. At the
present time, therefore, NCE does not satisfy all of the
requirements of Rule 53(a). However, in a separate proceeding
(Holding Company Act Rel. No. 26872), NCE is requesting authority
to use the proceeds of financing (including guarantees) to fund
investments in EWGs and FUCOs in an amount which, when added to
NCE's "aggregate investment" in such entities at any time, will
not exceed 100% of NCE's "consolidated retained earnings."
