As filed on March 20, 1998
File No. 70-_______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM U-1 APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
___________________________________
New Century Energies, Inc.
Public Service Company of Colorado
NC Enterprises, Inc.
1225 Seventeenth Street
Denver, Colorado 80202-5534
(Names of companies filing this statement
and address of principal executive offices)
____________________________________
New Century Energies, Inc.
(Name of top registered holding company parent)
____________________________________
Teresa S. Madden
Controller and Secretary
1225 Seventeenth Street
Denver, Colorado 80202-5534
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application/Declaration to:
William M. Dudley, Esq. William T. Baker, Esq.
New Century Services, Inc. Reid & Priest
1225 Seventeenth Street 40 West 57th Street
Denver, Colorado 80202-5534 New York, New York 10019-4097
<PAGE>
Item 1. Description of the Proposed Transaction
New Century Energies, Inc. ("NCE") is a registered holding company
under the Public Utility Holding Company Act of 1935, as amended (the
"Act"). It was formed through the combination of Public Service Company of
Colorado ("PSCo") and Southwestern Public Service Company ("SPS"). The
Commission approved this combination and various related transactions,
including the formation of an intermediate holding company, NC Enterprises,
Inc. ("NC Enterprises"), by order (HCAR No. 26748) issued in File No. 70-8787
on August 1, 1997 (the "Merger Order").
PSCo currently wholly-owns New Century International, Inc. ("NCI").
NCI in turn owns a 50% interest in Yorkshire Power Group Limited, which
through a wholly-owned subsidiary, Yorkshire Holdings plc, owns Yorkshire
Electricity Group plc, a regional electric company operating in the United
Kingdom. PSCo has obtained authorization from the Commission under Section
3(b) to acquire this indirect interest in Yorkshire Electricity Group plc.
See HCAR Release No. 35-26671 (February 19, 1997). NCI also owns a minority
interest in Independent Power Corporation plc ("IPC"), a British company that
is in the business of developing, owning, and operating foreign electric
generating plants. IPC will be qualified as a foreign utility company under
Section 33 of the Act.
In its Form U-1 Application/Declaration filed in File No. 70-8787
("Merger U-1"), NCE had indicated that PSCo's interest in NCI would be
transferred and held by NCE directly, or indirectly through NC Enterprises or
e prime, inc. (a subsidiary of NC Enterprises). The Merger U-1 contemplated
that this transfer would be effectuated through the declaration of a dividend
by PSCo to NCE, followed by a subsequent capital contribution of the
securities of NCI by NCE to NC Enterprises or to e prime.
NCE has since concluded that NC Enterprises should hold the NCE
system's interest in NCI. It has also concluded that it would be preferable
to effectuate the transfer through a mechanism that differs from what had
been described in the Merger U-1 - i.e., through the issuance of a note by NC
Enterprises as consideration for the securities of NCI. This mechanism is
similar to that approved by the Commission in the Merger Order with respect
to the transfer by SPS of its wholly-owned subsidiaries Quixx Corporation and
Utility Engineering Corporation to NC Enterprises.
To elaborate, in order to maintain the approximate current equity
capitalization of PSCo for reasons discussed below, NC Enterprises will issue
a note to PSCo as consideration for the securities of NCI. Such sale will be
made at NCI's book value. As of December 31, 1997, this value was
approximately $289.8 million. In contrast, transferring NCI by payment of a
dividend of its stock would cause a reduction of PSCo's equity by this same
amount. A transfer in that manner would likely by viewed negatively from a
regulatory and rating agency point of view. The sale approach proposed
herein eliminates this adverse impact on PSCo.
2
<PAGE>
The note issued by NC Enterprises in connection with its acquisition of
NCI will have a twenty-year maturity and bear interest at a fixed rate. The
interest rate for the note will be determined at the time of issuance based
on the then prevailing rate that would be charged by an unaffiliated third
party. The form of note to be used to evidence the debt of NC Enterprises to
PSCo is attached as Exhibit B-1. Interest only will be paid under the note
for the first three years, and thereafter interest and principal will be paid
annually with principal amortized over the remaining years of the note (17
years) payable in equal annual installments. NC Enterprises will have the
option to prepay the entire obligation, including accrued and unpaid
interest, at any time, without any prepayment premium.
NC Enterprises plans to prepay the note through capital contributions
made by NCE upon the anticipated sale of common stock in 1998 and 1999 as
authorized in File No. 70-9007. In the event that such plan changes, NCE
commits to file a post-effective amendment to this Application/Declaration to
inform the Commission of its new payment plan.
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 to be as
follows:
Legal fees and expenses . . . . . . . . . . . $12,500
Item 3. Applicable Statutory Provisions
Sections 6(a) and 7 of the Act may be applicable to NC Enterprises'
issuance of debt to PSCo.
Sections 9(a)(1) and 10 of the Act may be applicable to NC Enterprises'
acquisition of stock of NCI.
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 "exempt
wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), the
Commission shall not consider the effect of the capitalization or earnings of
any subsidiary that is an EWG or FUCO
3
<PAGE>
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, and Rule 53(c) is inapplicable.
Rule 53(a) requires that the aggregate investment in EWGs and FUCOs not
exceed 50% of the system's consolidated retained earnings. NCE's present
investments in EWGs and FUCOs, pro forma to include the investments in
Yorkshire Electricity Group plc and IPC, equals 52.7% (or 5.4% in excess of
50% of retained earnings) of NCE's consolidated retained earnings at
December 31, 1997. So long as NCE's aggregate investment in EWGs and FUCOs
exceeds the above Rule 53 50% limitation, NCE will not make any additional
investments in EWGs or FUCOs from the proceeds of securities (including any
guarantees) issued by NCE, as authorized hereby, except as contemplated or
authorized herein or in File No. 70-9007, or as may be otherwise authorized
by the Commission.
Moreover, it is clear that approval of the proposals contained herein
will not have an adverse impact on the financial integrity of the NCE system
or on any utility subsidiary of NCE or its customers or the ability of state
commissions to protect such subsidiaries or their customers. First, it
should be noted that the transactions proposed herein relate to the internal
transfer of NCI, and not to the financing of an acquisition of any new EWG or
FUCO. In this connection, the Commission in the Merger Order previously
approved the transfer of NCI (which indirectly holds NCE's interest in
Yorkshire Electricity Group and IPC) by PSCo to either NCE, NC Enterprises,
or e prime, albeit through a different mechanism than is contemplated herein
and for which approval is sought. Second (and for the same reason), the
transactions proposed herein will not have any impact on NCE's aggregate
investment in EWGs and FUCOs (pro forma taking into account the existing
investment in Yorkshire Electricity Group and IPC). Third, the transactions
proposed herein will not have an impact on the consolidated capitalization of
the NCE system, and due to the issues associated with transferring NCI in the
manner contemplated in the Merger U-1 as discussed above and further below,
will have, if anything, a positive effect on consolidated earnings. Fourth,
the transaction will have no adverse impact on PSCo. Indeed, the sale of
NCI's securities in exchange for NC Enterprises' note will preserve PSCo's
existing capital structure, whereas the dividend structure contemplated in
the Merger Order would adversely affect PSCo's capital structure and likely
would be viewed negatively from a regulatory and
4
<PAGE>
rating agency perspective. Finally, the transfer of NCI to NC Enterprises will
have the effect of insulating PSCo from risks associated with the future
operations of Yorkshire Electricity Group.
Accordingly, the capitalization and earnings attributable to NCE's
investments in EWGs and FUCOs has no bearing on the appropriateness of the
authorization that NCE is requesting herein.
Item 4. Regulatory Approvals
No state or federal regulatory commission, other than this Commission,
has jurisdiction over the proposed transaction.
Item 5. Procedure
NCE would like to reflect the transfer of NCI from PSCo to NC
Enterprises in its First Quarter 1998 financial statements (i.e., as of
March 31, 1998). To accommodate this reporting, NCE requests an order from
the Commission on this Application/Declaration no later than May 11, 1998.
Accordingly, NCE requests that the Commission publish a notice under Rule 23
with respect to the filing of this Application/Declaration no later than
April 9, 1998, specifying a return date of May 4, 1998. The
Applicants/Declarants request 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/Declarants 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
Exhibit B-1 Form of NC Enterprises note
Exhibit F-1 Opinion of counsel (to be filed by
amendment)
Exhibit I-1 Form of notice
Exhibit 27 Financial Data Schedule Per-Book NCE
Exhibit 27 Financial Data Schedule Pro-Forma NCE
(Confidential Treatment Requested)
B. Financial Statements
1.1 Balance Sheet of NCE and subsidiaries, consolidated, as of
December 31, 1997 (incorporated by reference to the Annual
Report on Form 10-K of NCE for the fiscal year ended
December 31, 1997 (File No. 1-12927))
1.2 Statement of Income of NCE and subsidiaries, consolidated,
for the year ended December 31, 1997 (incorporated by
reference to the Annual Report on
5
<PAGE>
Form 10-K of NCE for the fiscal year ended December 31, 1997
(File No. 1-12927))
1.3 Pro Forma Capitalization (based on the Balance Sheet) of
NCE and subsidiaries, consolidated, after giving effect to,
among other things, the transaction contemplated herein
(Confidential Treatment Requested)
1.4 Pro Forma Income Statement of NCE and subsidiaries,
consolidated, after giving effect to, among other things,
the transactions contemplated herein (Confidential
Treatment Requested)
2.1 Balance Sheet of PSCo and subsidiaries, consolidated, as of
December 31, 1997 (incorporated by reference to the Annual
Report on Form 10-K of PSCo for the fiscal year ended
December 31, 1997 (File No. 1-3280))
2.2 Statement of Income of PSCo and subsidiaries, consolidated,
for the year ended December 31, 1997 (incorporated by
reference to the Annual Report on Form 10-K of PSCo for the
fiscal year ended December 31, 1997 (File No. 1-3280))
2.3 Pro Forma Capitalization (based on the Balance Sheet) of
Public Service Company of Colorado and subsidiaries,
consolidated, to show effect of transaction (Confidential
Treatment Requested)
2.4 Pro Forma Statement of Income of Public Service Company of
Colorado and subsidiaries, consolidated, to show the effect
of transaction (Confidential Treatment Requested)
3.1 Balance Sheet of NC Enterprises, Inc. and subsidiaries,
consolidated, as of December 31, 1997
3.2 Statement of Income of NC Enterprises, Inc., consolidated,
for the period August 1, 1997 through December 31, 1997
3.3 Pro Forma Capitalization (based on the Balance Sheet) of NC
Enterprises, Inc. and subsidiaries, consolidated, to show
the effect of transaction (Confidential Treatment Requested)
3.4 Pro Forma Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, to show the effect of
transaction (Confidential Treatment Requested)
Item 7. Information as to Environmental Effects
None of the matters that are the subject of the Application/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/Declaration will not result in changes in the
operation of
7
<PAGE>
the Applicants/Declarants that will have an impact on the environment. The
Applicants/Declarants 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/Declaration.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this
Application/Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
PUBLIC SERVICE COMPANY OF COLORADO
NC ENTERPRISES, INC.
/s/ Richard C. Kelly
By:___________________________________
Name: Richard C. Kelly
Title: Executive Vice President and
Chief Financial Officer of
New Century Energies, Inc.;
Executive Vice President of
Public Service Company of
Colorado;
Executive Vice President of
NC Enterprises
Date: March 20, 1998
<PAGE>
Exhibit B-1
FORM OF PROMISSORY NOTE
FOR VALUE RECEIVED, NC ENTERPRISES, INC., a Delaware corporation ("NC
Enterprises"), hereby promises to pay to the order of PUBLIC SERVICE COMPANY
OF COLORADO, a Colorado corporation ("PSCo"), in lawful money of the United
States of America in immediately available funds, the principal amount of
[book value - approximately $289.8 million as of December 31, 1997] U.S.
Dollars ($___________________) as set forth below.
The term of the Note shall be 20 years from execution of the Note.
NC Enterprises also promises to pay interest in like money on the
unpaid principal amount hereof from the date hereof until paid at a rate to
be established at the time of execution, which will be equivalent to the
20-year Treasury plus 100 basis points.
Interest payments shall be made on the annual anniversary date of the
Note of each year during which the Note is outstanding, commencing on the
first anniversary date.
Principal payments shall be made on the annual anniversary date of the
Note of each year during which the Note is outstanding commencing on the
fourth anniversary date. Principal payments will be in the amount that
ratably amortizes the principal over 17 years.
NC Enterprises may prepay all or any part of the principal amount of
this Note (together with interest accrued through the date of such payment on
the principal amount prepaid) from time to time and at any time without
penalty or premium.
PSCo may, at its option, declare the unpaid balance of this Note,
together with interest accrued thereon, to be immediately due and payable,
whereupon this Note shall become immediately due and payable, upon the
failure of NC Enterprises to make any payments hereunder when due.
NC Enterprises hereby waives presentment, protest or notice of any kind
in connection with this Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF COLORADO.
NC ENTERPRISES, INC.
By:_______________________________________
<PAGE>
Exhibit I-1
Proposed Form of Federal Register Notice
New Century Energies, Inc., et al. (70-_________)
New Century Energies, Inc. ("NCE"), 1225 Seventeenth Street, Denver,
Colorado 80202-5534, a registered holding company, and Public Service Company
of Colorado ("PSCo") and NC Enterprises ("NC Enterprises"), both of which are
direct subsidiary companies of NCE, have filed an Application/Declaration on
Form U-1 pursuant to sections 6(a), 7, 9(a)(1), 10, and 32 of the Act and
rule 54 under the Act.
By order dated August 1, 1997 (HCAR No. 26748) (the "Merger Order"),
the Commission authorized various transactions necessary to effectuate the
combination of PSCo and Southwestern Public Service Company ("SPS"), each of
which is now a direct wholly-owned subsidiary of NCE. In the Merger Order,
the Commission also approved various transactions relating to the transfer of
certain non-utility subsidiaries of PSCo and SPS to NCE or NC Enterprises.
NC Enterprises is a wholly-owned non-utility subsidiary of NCE that was
formed to hold certain of NCE's non-utility subsidiaries. Among other
things, PSCo was authorized under the Merger Order to transfer all of the
common stock of its wholly-owned subsidiary, New Century International, Inc.
("NCI") to NCE, NC Enterprises, or another subsidiary of NCE by means of the
declaration of a dividend in kind of the stock of NCI to NCE, and, if NCE was
not to hold NCI directly, the subsequent contribution by NCE of such shares
to NC Enterprises or another subsidiary. NCI indirectly holds NCE's 50%
interest in Yorkshire Electricity Group plc, a regional electricity company
operating in England, and Independent Power Corporation plc, a British
company that is in the business of developing, owning, and operating foreign
generating plants. PSCo acquired its interest in both companies prior to the
effective date of the merger.
The applicants now seek to modify the Merger Order in order to
restructure the transfer of the stock of NCI to NC Enterprises as a sale.
Specifically, PSCo proposes to sell the stock of NCI to NC Enterprises in
exchange for a promissory note from NC Enterprises in an aggregate principal
amount equal to the net book value of NCI which, at December 31, 1997, was
approximately $289.8 million. NC Enterprises' note will have a maturity of
20 years, bear interest at a rate, to be determined at the time of issuance,
that will be based on the prevailing rate which would be charged by an
unaffiliated third party, and be prepayable at any time without premium.
Interest only will be paid on the note during the first three years;
thereafter, principal will be paid in 17 equal annual installments, together
with interest on the unpaid principal balance.
The applicants state that restructuring the transfer of NCI's stock to
NC Enterprises as a sale will help to preserve PSCo's capital structure and
therefore avoid the adverse impact on PSCo that would likely occur if, as
originally proposed, PSCo were to declare a dividend in kind of the shares of
NCI. It is noted that a similar intra-system debt-financed sale structure
was authorized by the Commission in the Merger Order in connection with NC
Enterprises' acquisition of two non-utility subsidiaries of SPS.
<PAGE>
Financial Statement 3.1
File No. _______
NC Enterprises, Inc.
Unaudited Consolidated Balance Sheet
(Thousands of Dollars)
December 31, 1997
Assets
Property, plant and equipment at cost $47,379
Less: accumulated depreciation 18,949
-------------
Net plant 28,430
Construction work in progress 354
-------------
-------------
Total property, plant and equipment 28,784
-------------
Total investments 30,871
Cash and temporary cash investments 27,449
Accounts receivable 63,512
Notes receivable from associated companies 37,116
Materials and supplies 3,260
Prepaid expenses and other 6,987
-------------
Total current assets 138,324
-------------
Total deferred debits 19,461
=============
Total assets $217,440
=============
Captial and liabilities
Common stock $31,366
Retained earnings (deficit) (6,824)
-------------
Total common equity 24,542
Long-term debt 219
-------------
Total capital 24,761
-------------
Noncurrent liabilities 146
Notes payable to associated companies 130,536
Long term debt due within one year 136
Accounts payable 47,855
Customer deposits 362
Accrued taxes (1,439)
Other 6,032
-------------
Total current liabilities 183,482
-------------
Accumulated deferred income taxes 8,591
Other 460
-------------
Total deferred credits 9,051
-------------
=============
Total capital and liabilities $217,440
=============
<PAGE>
Financial Statement 3.2
File No. _______
NC Enterprises, Inc.
Unaudited Consolidated Statements of Income
(Thousands of Dollars)
For the Period August 1, 1997 Through December 31, 1997
Operating Revenues
Electric $12,413
Gas 77,704
Other 43,263
-------------
133,380
Operating Expenses
Purchased power 11,773
Cost of gas sold 72,107
Other operating and maintenance expenses 52,971
Depreciation and amortization 3,268
Taxes other than income taxes 605
-------------
140,724
-------------
Operating income (7,344)
Other income and deductions
Equity in earnings of unconsolidated
subsidiaries (1,388)
Miscellaneous income and deductions - net 1,572
-------------
184
-------------
Interest charges and preferred dividends 3,898
-------------
Income (loss) before income taxes (11,058)
Income tax expense (benefit) (4,234)
=============
Net income (loss) ($6,824)
=============
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW CENTURY
ENERGIES, INC. CONSOLIDTED BALANCE SHEET AS OF DECEMBER 31, 1997 AND
CONSOLIDATED STATEMENTS OF INCOME AND CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<NAME> New Century Energies, Inc.
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