(As filed June 22, 1999)
File No. 70-9493
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Amendment No. 1
on
FORM U-1/A
APPLICATION/DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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New Century Energies, Inc.
NC Enterprises, Inc.
1225 17th Street
Denver, Colorado 80202-5533
(Names of companies filing this statement and
addresses of principal executive offices)
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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 agents 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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The Application/Declaration filed in this proceeding on May 3, 1999, is
hereby amended and restated in its entirety to read as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1. Background. New Century Energies, Inc. ("NCE") is a registered
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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, and Cheyenne Light, Fuel
and Power Company. These subsidiaries together serve approximately 1.6 million
electric customers in parts of Colorado, Texas, New Mexico, Wyoming, 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. NC Enterprises, Inc. ("Enterprises"), a wholly-owned
non-utility subsidiary of NCE, serves as the intermediate holding company for
most of NCE's non-utility subsidiaries and investments. These 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; e prime, inc., which directly and indirectly through other subsidiaries
sells energy-related products and services and engages in 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 regulations of the Federal Energy
Regulatory Commission implementing 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; 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.
1.2 General Description of Authority Sought. Enterprises, through a new
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wholly-owned subsidiary to be named New Century O&M Services, Inc. ("NCO&M"), or
one or more additional subsidiaries of either Enterprises or NCO&M, herein
requests authority to bid on and acquire facilities, systems and related
equipment, tools and inventories owned by the federal government on military
enclaves and that are used exclusively in connection with the delivery and
distribution of electricity, natural gas, water (including potable water and hot
and chilled water), steam and other energy products and to collect, treat,
process and dispose of solid and
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1 See New Century Energies, Inc., 65 SEC Docket 277 (August 1, 1997)
(the "Merger Order").
2
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liquid wastes (collectively, "Military Base Assets").2 NCO&M proposes to bid on
such assets when offered for sale by the federal government pursuant to the U.S.
Department of Defense's congressionally-mandated privatization efforts,3 and, if
successful in acquiring such Military Base Assets, to operate, maintain, and
make capital improvements to such assets.
NCO&M requests authorization to invest up to $150 million (the
"Investment Limitation") in Military Base Assets in one or more transactions
from time to time through December 31, 2003 (the "Authorization Period"). Such
Military Base Assets may be acquired for cash or pursuant to the terms of
long-term services agreements entered into with the Department of Defense (or a
military department thereof) under which NCO&M may agree to credit some or all
of the stated purchase price for any Military Base Assets against future
payments for essential services provided by NCO&M. Initially, NCO&M proposes to
bid on and, if successful, acquire certain facilities, as more particularly
described below, that are located at the U.S. Department of the Army's Fort
Carson Post, which is located near Colorado Springs, Colorado. The Applicants
request that the Commission reserve jurisdiction over the acquisition of any
additional Military Base Assets by NCO&M pending completion of the record in
this proceeding. The Applicants undertake to file a post-effective amendment in
this proceeding describing other Military Base Assets that NCO&M may seek to
acquire in the future.
1.3 Description of Fort Carson Post Proposal. NCO&M has submitted a bid
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in response to a request for proposals by the U.S. Department of the Army to
acquire the electrical and natural gas distribution facilities that are located
at the Fort Carson Post, located just outside Colorado Springs, about 60 miles
south of Denver.4 The Fort Carson Post covers an area of more than 137,000 acres
and includes approximately 1,860 buildings. The total daytime population of the
base (active duty military personnel, their dependents and civilian workers) is
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2 Because Enterprises cannot determine at this time whether legal or
business considerations would necessitate separating the ownership and/or
operation of different groups of Military Base Assets in different legal
entities, it seeks to have the flexibility to organize one or more additional
subsidiaries from time to time for the purpose of carrying out the transactions
described in this Application. Accordingly, references throughout this
Application to NCO&M should be construed to include such additional subsidiaries
as Enterprises or NCO&M may form specifically and solely for the purposes of
acquiring, owning, operating, improving and financing Military Base Assets.
3 The current military base privatization efforts by the Department of
Defense are in response to legislation, 10 U.S.C.A. ss.2688 (1998), in which
Congress granted the Secretary of a military department the authority to sell
electric, gas, water and other military base distribution systems to private
parties with a view to achieving cost reductions in essential services on
military bases and a significant improvement and upgrading of such systems by
qualified parties more experienced in the ownership, operation, and improvement
of such facilities.
4 The Department of the Army also invited proposals for the purchase of
the water system at the Fort Carson Post. NCO&M's bid does not cover the water
system.
3
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estimated at 25,000. The electrical distribution system on the base is served
through two substations with roughly 129 circuit miles of overhead primary
distribution, approximately 18 circuit miles of underground primary
distribution, and approximately 2300 street lights. The natural gas distribution
system serves approximately 1,300 buildings throughout the base. It consists of
approximately 306,214 feet of pipe ranging from 3/4" to 10" diameter, and
includes associated metering and pressure reduction facilities. A copy of
NCO&M's bid proposal is filed confidentially pursuant to Rule 104 as Exhibit B
hereto.
If successful in its bid, NCO&M will enter into a services agreement
with the federal government having a minimum term of ten years pursuant to which
NCO&M would provide natural gas and electric distribution services on the Fort
Carson Post. As a part of the agreement, NCO&M would agree to provide all
necessary labor, materials, tools and equipment necessary to operate, maintain,
repair, upgrade and improve the distribution systems. NCO&M would not be able to
sell the distribution systems without first offering the federal government the
option to repurchase them. NCO&M may not use the systems to serve customers
outside the Fort Carson Post without the permission of the federal government.
In addition, any service offered to customers outside the base may be subject to
regulation by the Public Utilities Commission of Colorado ("Colorado PUC").5
NCO&M represents that it will not offer electric or gas service to customers
outside the Fort Carson Post without first obtaining the further order of the
Commission in this proceeding.
NCO&M will hire and maintain a permanent on-site staff at the Fort
Carson Post of approximately nine individuals, consisting of a manager, five
linemen, two gas service specialists and one operations technician. NCO&M will
utilize subcontractors, as needed, including PSCo, to balance the workload and
workforce. As indicated, one of the objectives of the Department of Defense in
privatizing military base installations is to facilitate the improvement and
upgrading of existing facilities by private companies with considerable
experience in operating, maintaining and improving similar types of assets.
Thus, under the agreement that NCO&M will enter into with the U.S. government,
it is contemplated that NCO&M would be obligated to conduct a complete physical
inspection and survey of the acquired distribution systems within the first six
months of the term of the contract with a view to identifying those components
of the systems requiring repair, replacement or upgrade in order to ensure
safety and quality of service. Such inspections and surveys would thereafter be
conducted annually during the term of the agreement. As part of its bid
proposal, NCO&M has already identified certain components of the systems that
potentially require upgrade and/or replacement and has prepared a conceptual 5-
year capital improvement plan.
1.4 Source of Financing. By order dated April 7, 1999 in File No. 70-9397
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(Holding Company Act Release No. 27000) (the "Financing Order"), NCE is
currently authorized to issue
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5 NCO&M has received an opinion of counsel that it will not be subject
to regulation by the Colorado PUC as a public utility by reason of acquiring,
owning and operating the Fort Carson Post distribution facilities.
4
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common stock, short-term and long-term debt and guarantees in specified amounts
and, to the extent not exempt, to engage in intra-system financing, from time to
time through December 31, 2001. NCE proposes to use the proceeds of securities
issuances and guarantees as authorized under the Financing Order or in
subsequent orders for the purpose of financing the purchase and operation of
Military Base Assets, subject to the limitations and restrictions contained in
the Financing Order or subsequent orders.
In turn, Enterprises and NCO&M may issue debt or equity securities of
any type, including guarantees, as appropriate, from time to time during the
Authorization Period to finance the acquisition and operation of Military Base
Assets. Guarantees may be issued by Enterprises or NCO&M or by any existing or
new, direct or indirect, subsidiary of NCO&M. Such guarantees could be in
respect of securities issued by any existing or new, direct or indirect, special
purpose subsidiary of NCO&M organized specifically for the purpose of acquiring,
owning and operating Military Base Assets. The terms and conditions of any
securities (including guarantees) issued by Enterprises and NCO&M or any
subsidiary of NCO&M, to the extent not exempt under Rule 52 and/or Rule 45(b),
shall comply with the limitations set forth in the Financing Order.
1.5 Provision of Support Services by PSCo. As indicated, it is
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contemplated that NCO&M will utilize subcontractors to the extent necessary to
assist its permanent workforce at the Fort Carson Post. NCO&M will also purchase
administrative and management services from New Century Services, Inc. ("NC
Services") pursuant to the standard NCE system Services Agreement which the
Commission has previously approved as a part of the Merger Order. All services
provided by NC Services will be billed at cost, in accordance with Rules 90 and
91. NCO&M also intends to enter into a support services agreement with PSCo
pursuant to which NCO&M may request PSCo to provide personnel and other
resources as are needed, from time to time, to assist in such areas as making
the physical inspections and surveys of the distribution systems that are
described above, and maintenance, repair and improvement activities. NCO&M will
utilize a standard work order procedure to request support services from PSCo.
An important consideration in the Department of the Army's evaluation
of bids received for the Fort Carson Post facilities will be the experience and
resources of the bidder and its affiliates in the areas of electric and gas
system operation, maintenance and repair. Clearly, as a combination gas and
electric company that has operated in Colorado for over one hundred years, PSCo
has the requisite competencies. Further, PSCo provides utility service in close
proximity to the Fort Carson Post. Hence, it would not be a significant burden
to PSCo, in terms of the availability or personnel and other resources, to
support NCO&M's operations.
PSCo will be reimbursed promptly for its costs incurred in connection
with rendering any services to NCO&M or its subsidiaries. PSCo will utilize cost
accounting procedures designed to identify promptly all direct and indirect
costs, including overheads, which are applicable to the work being performed by
or with PSCo personnel, material or other assets. All transactions between NCO&M
and PSCo will be performed at cost in compliance with Section 13 and Rules
5
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90 and 91. Finally, NCO&M will indemnify and hold PSCo harmless against all
claims or liabilities that may be incurred in connection with providing any
services to NCO&M.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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The fees, commissions and expenses incurred or to be incurred in
connection with the transactions proposed herein are estimated at $10,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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3.1 General. Sections 9(a) and 10 of the Act are applicable to the
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acquisition by Enterprises of the securities of NCO&M and by NCO&M of Military
Base Assets.
The provision of support services by PSCo to NCO&M is subject to
Section 13(b) of the Act, but may be exempt pursuant to Rules 87(a)(3), 87(b)(1)
or 87(b)(2), as applicable. All such services will be performed at cost,
determined in accordance with Rules 90 and 91.
3.2 Standards of Approval under Section 10. The transactions proposed
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herein involve an acquisition of an interest in an other (i.e., non-utility)
business, and are therefore subject to the approval of this Commission under
Section 10. The relevant standards for approval under Section 10 are set forth
in subsections (b), (c), and (f). In this case, the requirements of Section
10(c) are met and there is no basis for the Commission to make any negative
findings under Section 10(b).
As applied to interests in non-utility businesses, Section 10(c)(1) of
the Act provides that the Commission shall not approve an acquisition that is
"detrimental to the carrying out of the provisions of section 11." Section
11(b)(1), in turn, directs the Commission to limit the operations of a holding
company system to a single integrated public-utility system, provided that,
subject to making certain specified findings, the Commission may permit a
registered holding company to control one or more additional public-utility
systems.6 Further, the Commission may permit the retention by a registered
holding company of an interest in any non-utility business that is "reasonably
incidental, or economically necessary or appropriate to the operations" of its
integrated system or systems. The Commission has interpreted Sections
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6 As part of the Merger Order, the Commission made findings under
Section 11(b)(1) permitting the retention of PSCo's gas utility business as an
additional integrated system.
6
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10(c)(1) and 11(b)(1), read together, as expressing a Congressional policy
against non-utility acquisitions that bear no functional relation to a holding
company's utility operations.7
The Fort Carson Post assets to be acquired by NCO&M (assuming its bid
is accepted) consist of electric and natural gas distribution facilities and
associated equipment that is currently dedicated to providing distribution
services exclusively within the boundaries of a military base and will be so
dedicated even after completion of the transaction.8 The Fort Carson Post
facilities are also physically proximate to PSCo's service area and may be
operated and maintained with some assistance provided by PSCo. However, it is
submitted that the proximity of any Military Base Assets to the electric or gas
service territory of NCE's operating subsidiaries is irrelevant in determining
whether the standards of Section 11(b)(1) will be met. In this regard, it is
important to note that, in promulgating Rule 58, which, subject to certain
limitations, allows a registered holding company to acquire the securities of
specified categories of "energy-related companies" operating within the United
States, the Commission declined to limit the permitted energy-related activities
to a registered holding company's service territory or impose limits on
transactions with non-associate companies, as it had done in earlier orders.
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7 See Michigan Consolidated Gas Co., 44 S.E.C. 361, 363-65
(1970), aff'd 444 F.2d 913 (D.C. Cir. 1971).
8 The Applicants believe that NCO&M will not be an "electric utility
company" or "gas utility company" within the meaning of Sections 2(a)(3) and
2(a)(4) of the Act, respectively, inasmuch as the acquired assets will continue
to be dedicated to serving the federal government, which is exempt from all
provisions of the Act pursuant to Section 2(c) thereof, which provides that:
No provision in this title shall apply to, or be deemed to include, the
United States, a State, or any political subdivision of a State, or any
agency, authority, or instrumentality of any one or more of the
foregoing, or any corporation which is wholly-owned, directly or
indirectly by any one or more of the foregoing, or any officer, agent,
or employee of any of the foregoing acting as such in the course of his
official duty, unless such provision makes specific reference thereto.
In this regard, the Applicants note that the Division of Investment
Management has agreed not to recommend any enforcement action under the Act,
including Section 2(a)(3) and Section 2(a)(4), against a subsidiary of an exempt
holding company which is proposing to bid on and acquire similar assets at a
different United States military base installation. See Enron Federal Solutions,
Inc., SEC No-Action Letter dated April 8, 1999, 1999 SEC No-Act. LEXIS 414. The
facts and circumstances of the present case, including the description and uses
of the Fort Carson Post distribution facilities and the contractual undertakings
between NCO&M and the Department of the Army, are legally and factually
indistinguishable from those described in the Enron Federal Solutions letter.
7
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Instead, the Commission focused only on whether the permitted activities under
Rule 58 are themselves so closely-related to the core operations of the
registered holding company system that they may be deemed to be "in the ordinary
course of business" of a registered holding company or otherwise appropriate for
participation by registered holding companies.9 For the same reason, there
should be no geographic limitation on NCO&M's ownership or operation of Military
Base Assets.
3.3 Rule 54 Analysis. The transactions proposed herein are also subject
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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(c) is inapplicable by its terms because the proposals
contained herein do not involve the issue and sale of securities (including any
guarantees) to finance an acquisition of an EWG or FUCO.
Rule 53(a)(1) limits a registered holding company's financing of
investments in EWGs if such holding company's "aggregate investment" (as defined
in Rule 53(a)(1)) in EWGs and FUCOs exceeds 50% of its "consolidated retained
earnings" (also as defined in Rule 53(a)(1)). However, by order dated February
26, 1999, the Commission has authorized NCE to finance investments in EWGs and
FUCOs in an amount up to 100% of NCE's "consolidated retained earnings."10 NCE's
"aggregate investment" in all EWGs and FUCOs, pro forma to include NCE's
indirect investment in Yorkshire Electricity Group plc ("Yorkshire") and
Independent Power Corporation plc ("IPC"), is currently equal to 52.0% of NCE's
"consolidated retained earnings" for the four quarters ended March 31, 1999
($721.8 million). At the present time,
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9 See Release Adopting Final Rule (Rule 58), 63 SEC Docket 2211
(February 14, 1997), pp. 2213 - 2216. Although the ownership of electric and gas
distribution facilities, as such, is not permitted under Rule 58, the
acquisition and operation of many of the types of facilities (e.g., steam, hot
water, cold water, and wastewater treatment facilities) at military base sites
that are the subject of privatization efforts by the federal government would be
covered by Rule 58. The Commission has also previously authorized registered
holding companies to acquire, own and operate such facilities, without
geographic limitation. See e.g., Cinergy Corp., et al., 63 SEC Docket 2022
(February 7, 1997).
10 See New Century Energies, Inc., 69 SEC Docket 646.
8
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therefore, NCE satisfies all of the requirements of Rule 53(a), as modified by
the Commission's order of February 26, 1999.
However, even if the Commission were to take into account, on a pro
forma basis, 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 solely to an investment, through Enterprises
or its subsidiaries in assets that will be incidental and appropriate to the
conduct of businesses in the United States that are closely related to the core
operations of NCE's existing utility and non-utility subsidiaries, and, in
addition, will provide a material benefit to the federal government.
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. Additionally, NCE believes that its capitalization
ratios and income levels are within acceptable industry limits. At March 31,
1999, common equity (including mandatorily redeemable preferred securities and
common and preferred equity) and debt represented 51.0% and 49.0%, respectively,
of NCE's total consolidated capitalization. The proposed transactions would not
have a material impact on NCE's consolidated capitalization. On a pro forma
basis, taking into account the impact of the proposed transactions, common
equity would constitute 49.7% of NCE's consolidated capitalization and debt
50.3%.11 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.
ITEM 4. REGULATORY APPROVALS.
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No state commission and no federal commission, other than this
Commission, has jurisdiction over the proposed transactions.
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11 In order to show the pro forma impact on consolidated
capitalization, it is assumed that NCE would finance 100% of its investment in
Military Base Assets (i.e., $150 million) with the proceeds of debt.
9
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ITEM 5. PROCEDURE.
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The Commission has issued a notice of filing of this Application,12 and
no hearing has been requested. The Applicants request that the Commission's
order approving this Application be issued as soon as the rules allow, 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.
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A None.
B Copy of Technical Proposal of New Century O&M
Services, Inc. for Privatization of the Natural Gas
and Electric Distribution Systems at Fort Carson
Post, Colorado. (Confidential treatment requested
pursuant to Rule 104) (Paper format filing).
C None.
D None.
E None.
F Opinion of Counsel.
G Financial Data Schedule Per-Book NCE. (Incorporated
by reference to Exhibit 27 to the Quarterly Report on
Form 10-Q of NCE for the period ended March 31, 1999)
(File No. 1-12927).
H Proposed Form of Federal Register Notice. (Previously
filed).
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12 Holding Company Act Release No. 27018 (May 10, 1999).
10
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B. FINANCIAL STATEMENTS.
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1.1 Balance Sheet of NCE and consolidated subsidiaries,
as of March 31, 1999 (incorporated by reference to
the Quarterly Report on Form 10-Q of NCE for the
period ended March 31, 1999) (File No. 1-12927).
1.2 Statement of Income of NCE and consolidated
subsidiaries for the period ended March 31, 1999
(incorporated by reference to the Quarterly Report on
Form 10-Q of NCE for the period ended March 31, 1999)
(File No. 1- 12927).
2.1 Balance Sheet of NC Enterprises, Inc. and
subsidiaries, consolidated, as of March 31, 1999.
2.2 Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, for the period ended
March 31, 1999.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
---------------------------------------
None of the matters that are the subject of this Application involves 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 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.
11
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalf by the undersigned thereunto duly authorized.
NEW CENTURY ENERGIES, INC.
NC ENTERPRISES, INC.
By: s/s Richard C. Kelly
___________________________________
Name: Richard C. Kelly
Title: Executive Vice President,
Chief Financial
Officer of New
Century Energies,
Inc.; Executive
Vice President of
NC Enterprises,
Inc.
Date: June 22, 1999
12
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EXHIBIT INDEX
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Exhibit Description
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F Opinion of Counsel.
2.1 Balance Sheet of NC Enterprises, Inc. and
subsidiaries, consolidated, as of March 31, 1999.
2.2 Statement of Income of NC Enterprises, Inc. and
subsidiaries, consolidated, for the period ended
March 31, 1999.
EXHIBIT F
New Century Energies, Inc.
1225 Seventeenth Street
Denver, Colorado 80202
June 22, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: New Century Energies, Inc., et al.
Form U-1 Application/Declaration
(File No. 70-9493)
Dear Sirs:
I refer to the Form U-1 Application/Declaration, as amended (the
"Application"), under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), filed with the Securities and Exchange Commission (the
"Commission") by New Century Energies, Inc. ("NCE"), a Delaware corporation, and
NC Enterprises, Inc. ("NC Enterprises"), a Delaware corporation and a
wholly-owned non-utility subsidiary of NCE. Capitalized terms used in this
letter without definition have the meanings ascribed to such terms in the
Application.
The Application seeks authorization and approval for New Century O&M
Services, Inc. ("NCO&M"), a new subsidiary of NC Enterprises, to acquire, own
and operate electric, gas, water, steam and other essential service facilities
that are located within and dedicated to the use of one or more United States
military installations, including the facilities located at the Fort Carson,
Colorado army base. The Applicants seek to invest up to $150 million in such
facilities in one or more transactions from time to time through December 31,
2003. The Applicnts also seek approval, to the extent needed, for certain
proposed intercompany service arrangements between NCO&M and Public Service
Company of Colorado, a wholly-owned public-utility subsidiary of NCE.
I have acted as counsel for NCE and NC Enterprises in connection with
the Application and, as such counsel, I am familiar with the corporate
proceedings taken by NCE and NC Enterprises in connection with the proposed
transactions.
I am familiar with or have reviewed those corporate records of NCE and
NC Enterprises, and such other documents as I have deemed necessary to review as
a basis for the opinions
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Securities and Exchange Commission
June 22, 1999
Page 2
hereinafter expressed. In such review, I have assumed the genuineness of all
signatures and the authenticity of all documents submitted to me as originals
and the conformity with the originals of all documents submitted to me as
copies.
The opinions expressed below with respect to the proposed transactions
described in the Application are subject to the following further assumptions
and conditions:
(a) The transactions shall have been duly authorized and approved,
to the extent required by the governing corporate documents
and applicable state laws, by the Boards of Directors of NCE
and NC Enterprises.
(b) The Commission shall have duly entered an appropriate order or
orders with respect to the proposed transactions as described
in the Application granting and permitting the Application to
become effective under the Act and the rules and regulations
thereunder.
(c) The parties shall have obtained all consents, waivers and
releases, if any, required for the proposed transactions under
all applicable governing corporate documents, contracts, and
agreements, debt instruments, indentures, franchises, licenses
and permits.
(d) No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change the
opinions expressed above.
(e) The consummation of the proposed transactions shall be
conducted under my supervision and all legal matters incident
thereto shall be satisfactory to me, including the receipt in
satisfactory form of such opinions of other counsel qualified
to practice in jurisdictions pertaining to the proposed
transactions in which I am not admitted to practice, as I may
deem appropriate.
Based upon the foregoing, and subject to the assumptions and conditions
set forth herein, and having regard to legal considerations which I deem
relevant, I am of the opinion that, in the event that the proposed transactions
are consummated in accordance with the Application:
(a) The laws of the states of Colorado and Delaware applicable to
the proposed transactions will have been complied with.
(b) NCO&M is validly formed and duly existing under the laws of
the State of Colorado.
(c) NCO&M will have legally acquired, and may legally own and
operate, the military base assets..
<PAGE>
Securities and Exchange Commission
June 22, 1999
Page 3
(d) The consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by
NCE or NC Enterprises.
I have acted as counsel for NCE and NC Enterprises in connection with
the Application and, accordingly, this opinion is limited to actions taken by
NCE and NC Enterprises in connection with the proposed transactions.
The opinions given herein are intended solely for the use of the
Commission and may not be relied upon by any third party. I hereby consent to
the use of this opinion as an exhibit to the Application.
Sincerely,
/s/ William M. Dudley
---------------------
William M. Dudley
Exhibit FS 2.1
NC ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
MARCH 31, 1999
ASSETS
Property, plant and equipment, at cost $ 50,350
Less: accumulated depreciation (18,724)
-------------
Total property, plant and equipment 31,626
-------------
Investments, at cost:
Investments in unconsolidated subsidiaries 347,911
Other 48,124
-------------
Total investments 396,035
-------------
Current assets:
Cash and temporary cash investments 35,515
Accounts receivable 114,538
Notes receivable from associated companies 9,000
Accrued taxes receivable 12,948
Materials and supplies 4,146
Prepaid expenses and other 9,757
-------------
Total current assets 185,904
-------------
Deferred charges 52,431
-------------
Total assets $ 665,996
=============
CAPITAL AND LIABILITIES
Common stock $ 164,586
Retained earnings 33,090
Accumulated other comprehensive income (2,856)
-------------
Total common equity 194,820
Long-term debt - noncurrent 7,563
Notes payable to associated companies 356,086
-------------
Total capital 558,469
-------------
Noncurrent liabilities 105
-------------
Current liabilities:
Long-term debt due within one year 844
Accounts payable 45,350
Accounts payable - associated companies 15,065
Customers' deposits 683
Other 19,806
-------------
Total current liabilities 81,748
-------------
Deferred credits:
Accumulated deferred income taxes 22,649
Other 3,025
-------------
Total deferred credits 25,674
-------------
Total capital & liabilities $ 665,996
=============
Exhibit FS 2.2
NC ENTERPRISES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF
INCOME AND RETAINED EARNINGS
(THOUSANDS OF DOLLARS)
FOR THE THREE MONTHS ENDED MARCH 31, 1999
Operating revenues:
Electric $ 14,011
Gas 88,509
Other 25,417
-----------------
127,937
Operating expenses:
Purchased power 13,627
Cost of gas sold 85,454
Other operating and maintenance expense 31,808
Depreciation and amortization 1,761
Taxes (other than income taxes) 376
-----------------
133,026
-----------------
Operating loss (5,089)
Other income and deductions:
Equity in earnings of Yorkshire Power and
other unconsolidated subsidiaries 15,811
Miscellaneous income and deductions - net 1,050
-----------------
16,861
Interest charges 6,028
-----------------
Income before income taxes 5,744
Income tax (benefit) expense (5,310)
-----------------
Net income 11,054
Retained earnings at beginning of period 22,036
-----------------
Retained earnings at end of period $ 33,090
=================
