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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
________________________________
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
(Name of companies filing this statement and address
of principal executive office)
_________________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
_________________________________
Stephen J. McDonnell
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
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Item 1. Description of Proposed Transaction.
1. BACKGROUND AND SUMMARY
Central and South West Corporation ("CSW"), a Delaware
corporation, is a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"). Among its
subsidiaries are Central Power and Light Company, Public Service Company
of Oklahoma, Southwestern Electric Power Company and West Texas
Utilities Company, each an electric utility company (collectively, the
"Operating Companies" and, together with CSW and each other CSW
subsidiary, the "CSW System"). CSW proposes to establish and finance a
new, wholly owned, nonutility subsidiary company, tentatively to be
named EnerShop Inc. ("EnerShop"), for the purposes of providing turn-key
energy solutions for the customers of both associate and non-associate
companies. EnerShop's primary mission is to enhance and extend CSW's
core electric business by establishing an independent, credible source
for non-traditional energy and demand-side management ("DSM") solutions.
EnerShop will provide a wide range of services relating to
implementation of energy-related processes, products, equipment and
technologies. These services will cover every aspect of an energy-
related project, including consulting and energy analysis, project
management, design and construction, energy efficient equipment
installation and maintenance, equipment financing and leasing,
facilities management services, environmental services and compliance,
and fuel procurement (collectively, the "EnerShop Services"). EnerShop
plans to provide these energy and demand-side management related
services to selectively chosen commercial and industrial customers who
have expressed interest and need for broader energy solutions. CSW
proposes to invest in EnerShop from time to time up to an aggregate of
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$100 million outstanding at any one time. Such investments will be made
in equity and debt securities of EnerShop. The funds will be used
primarily for working capital requirements of the business, for customer
equipment purchase and leasing, for the development of a professional
energy and environmental consulting staff, and for the development of
energy- and information-related technologies.
2. PROPOSED BUSINESS ACTIVITIES
EnerShop Services will be provided initially through a
relatively small staff of management, professional, engineering, and
administrative personnel. EnerShop's ability to offer a wide range of
energy-related products and services to its customers will be
facilitated by its arrangements to obtain these capabilities from
others. EnerShop Services will be provided by a services network under
the control of, but not owned by, EnerShop. EnerShop will be
responsible for originating and maintaining customer relationships
(either directly or in conjunction with one or more of the companies in
the CSW System) and for the successful completion of projects for
customers. Other companies, pursuant to primary contracts or
subcontracts, will provide design and engineering, equipment
installation and maintenance, construction management, consulting,
equipment financing and information systems services. Some of these
services also may be provided by other companies in the CSW System and
by joint ventures and partnerships to which EnerShop is a party, but
only to the extent authorized by the Securities and Exchange Commission
(the "Commission") hereunder, or separately if required under the 1935
Act. EnerShop's reliance on third-party providers of services may
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decline substantially as its business matures, depending on its business
experiences in its initial stages.
EnerShop Services will be offered primarily to commercial
and industrial customers. Targeted commercial customer segments
initially include: commercial building owners, lodging and healthcare
facilities, restaurants and related establishments, and food stores.
Industrial customers initially will include: companies engaged in oil
and gas production, and processing and transportation; chemical and
other processing-related companies; and companies engaged in general
manufacturing. These customer segments have been selected for initial
focus based upon the consistent expressions of strong interest in energy
management, demand-side management and energy conservation by Operating
Company customers in these segments.
Commercial customers have expressed interest in the
following areas of energy management and conservation: audits and
analysis of energy sources and uses; management of energy use; indoor
and outdoor lighting; quality of electric power; electric motor
selection and use; air quality; systems for heating, ventilation and air
conditioning, including thermal energy storage systems;
electrotechnologies and back-up and primary generation of power.
Industrial customers have expressed interest in the
following areas of energy management and conservation: audits and
analysis of energy sources and uses; indoor and outdoor lighting;
electrotechnologies; electric motor selection and use; air quality;
systems for heating, ventilation and air conditioning, including thermal
energy storage systems; consultation with respect to environmental
quality requirements; and facility management services.
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EnerShop will address these energy management and
conservation needs by providing the following kinds of EnerShop
Services. Any given project may involve the provision of a variety of
EnerShop Services.
(a) Consulting and Professional Services. EnerShop will
devise solutions to customers' energy issues and problems through
consulting and professional services on a customer-specific basis. The
service will typically include a detailed energy and process audit and
analysis. Such services might include research and development
activities focused on the application of existing technologies to
customer situations. Such services might also address demand-side
management needs of customers and available means of addressing such
needs. EnerShop will bring industry experts and outside consultants to
assist as necessary.
The consulting and professional services will take an
integrated approach to customer needs. For example, where appropriate
they will include evaluation of the potential impact of energy
conservation measures on the use of other resources in a customer's
process or facility (e.g., water, labor, maintenance or materials).
Such an integrated approach to providing energy management services will
allow EnerShop to address all the resources used in a process or by a
facility. For example, in many instances a customer's process or
facility operations demand a trade-off between conservation of energy
and water. Since the costs of water and sewer services are rising
sharply in many areas, these costs must be taken into account in order
to minimize the customer's total costs and identify the most
economically efficient approach to a process or operation.
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(b) Equipment. EnerShop will develop and maintain,
directly and through other companies, a large but responsive information
base on the different types of equipment available for use in arriving
at solutions to customers' energy use needs. Its services in this area
will include analyzing customers' specific equipment needs, compiling
information as to possible equipment solutions to those needs and
recommending optimal equipment choices.
Design, equipment selection and procurement, and equipment
installation will also be provided directly by EnerShop or indirectly
through architectural/engineering firms, equipment vendors, construction
management companies, or other specialist companies. EnerShop will act
as the customer's representative, bringing total solutions that solve
energy-related business needs.
(c) Financing. Potential EnerShop customers have
expressed a desire that the energy management and conservation services
to be provided also cover the financing of the purchase of needed
equipment and the making of other required capital expenditures. Many
times the improvements to a building or manufacturing process pay for
themselves through the energy savings they create. EnerShop may provide
customer financing for the purchase of equipment from non-associate
vendors and suppliers. Customer financing may take the form of capital
leases, operating leases, tax exempt financings, promissory notes, or
performance guarantee contracts. The term and duration of these
arrangements may vary from one year to thirty years, priced at fair
market value for the particular transaction. EnerShop's services in
this area also will include analyzing customers' specific financing
needs, compiling information as to possible financing solutions, and
recommending optimal financing choices. The majority of customer
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financing needs are expected to be placed with third party lenders and
leasing companies.
(d) Information. Information services to be provided by
EnerShop initially will be concentrated in the areas of customized
energy billing systems and design and installation of specialized
computer software systems needed to implement solutions to customers'
energy use issues and problems. In general, such systems will be
obtained from third party contractors and vendors.
3. FORMATION OF ENERSHOP; REQUESTED FINANCING AUTHORITY
It is proposed that EnerShop be organized under the laws of
the State of Delaware with authorized capital stock of 1,000 shares of
common stock, par value $0.10 per share ("Common Stock"). CSW hereby
requests authority to commit up to an aggregate of $100,000,000
outstanding at any one time through any combination of purchases of
shares of Common Stock, capital contributions to EnerShop, loans to
EnerShop (as described below) and conversions of any such loans to
equity investments through forgiveness of such loans or otherwise. CSW
would initially purchase 100 shares of Common Stock for an aggregate
cash purchase price of $1,000. Loans to EnerShop would be made by CSW
and funded through CSW's external short-term borrowing program, as
previously authorized by order of the Commission dated March 21, 1995
(File No. 70-8557, Holding Company Act Release No. 26254).
Investments by CSW in Enershop would be utilized by
EnerShop in order to fund its authorized activities, including
principally the working capital needs of its consulting and other energy
management services and for payment of general and administrative costs.
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EnerShop will not undertake any acquisition of an exempt
wholesale generator ("EWG") or a foreign utility company ("FUCO") as
defined in Sections 32 and 33 of the 1935 Act. Neither CSW nor any
subsidiary thereof has a direct or indirect ownership interest in an EWG
or FUCO and EnerShop will not, without obtaining the prior approval of
the Commission in a separate proceeding, render services to any
associate company that is an "exempt wholesale generator" or "foreign
utility company" within the meaning of Sections 32 and 33 of the 1935
Act, respectively. As a result, no compliance with Rule 54 under the
1935 Act is required.
4. INDEMNIFICATIONS AND GUARANTEES
CSW proposes, from time to time, to guarantee or to act as
surety on bonds, indebtedness and performance and other obligations
issued or undertaken by EnerShop in connection with its business. The
aggregate amount of such guarantees or similar arrangements outstanding
from time to time will be treated as loans to EnerShop by CSW for
purposes of the limitation on authorized financing set forth in Section
3 above. In the ordinary course of its business, it is anticipated that
EnerShop will be required to furnish various types of bonds including
bid bonds, performance bonds, and material and payment bonds, and to
provide commercial sureties for its obligations under certain of such
bonds. The proposed indemnification by CSW of such sureties will
facilitate EnerShop in obtaining such bonds when needed and at more
favorable rates than if such obligations were not guaranteed. CSW
believes that it will be necessary to provide guarantees of EnerShop's
performance and other obligations under contracts and bids with third
parties in order to facilitate EnerShop in obtaining such contracts.
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CSW also believes that the absence of such parent guarantees of
EnerShop's performance and other obligations would prevent EnerShop in
many cases from participating in projects, or would make its
participation more costly, thereby diminishing EnerShop's
competitiveness in the marketplace.
5. AUTHORIZATION OF TRANSACTIONS WITH ASSOCIATES
EnerShop will maintain a staff of employees who will deal
primarily with management, professional, engineering and administrative
functions of EnerShop. In addition, utilizing a work order procedure,
this staff may request the Operating Companies and Central and South
West Services, Inc. ("CSW Services") to provide such personnel and other
resources as may be needed, from time to time, to consult and assist in
accounting, procurement, marketing, engineering and other required
functions in connection with EnerShop's authorized business activities.
Additional required personnel and resources not then obtainable from
within the CSW System will be obtained or hired from external sources.
Selection of the CSW System personnel to be utilized in connection with
EnerShop's activities will be based upon projected personnel
availability for the duration of an activity, expertise in the type of
work involved and access to resources within the CSW System needed to
perform the work. However, any CSW System company, in its absolute
discretion, may elect not to participate, as to the provision of either
personnel or other resources, in any of EnerShop's projects.
CSW Services will provide assistance in connection with
financial, accounting, and internal auditing functions for EnerShop.
The accounts of EnerShop will be subject to audit by the independent
accountants of CSW.
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The use of available expertise and personnel of the
CSW System to support EnerShop's authorized business activities will
enable CSW to optimize the efficient and economic utilization of
existing human resources and other capabilities. It will also enable
associates to have the benefit of knowledge and experience gained by
EnerShop from its outside activities. This allocation of resources will
enable CSW and EnerShop to earn a profit on, and minimize for the
Operating Companies the cost of maintaining, those resources.
CSW System companies providing services to EnerShop will be
reimbursed promptly for their costs incurred in connection therewith.
For its part, each CSW System company providing services for or
materials to EnerShop 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 such CSW
System company personnel, material or other assets. CSW Services will
account for, allocate and charge its costs to EnerShop, using procedures
permitted under Rules 90 and 91 of the 1935 Act and currently applicable
methods of allocation. All transactions between EnerShop and any other
CSW System company will be at cost in compliance with Section 13 of the
1935 Act and Rules 90, 91 and 92 thereunder.
6. ACCOUNTING FOR TRANSACTIONS WITH NON-ASSOCIATES
Revenues from EnerShop customers which are not associated
with CSW will be calculated to reimburse all applicable costs, including
overheads, plus produce a profit for EnerShop. All of EnerShop's costs
will be identified and booked promptly. EnerShop will continue to use
portions of systems also employed by CSW Services to account for those
costs and segregate them by project and by CSW System company performing
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services. EnerShop will retain such of its earnings as may remain after
reimbursement to the CSW System companies of these costs and after the
payment or funding of other costs and liabilities of EnerShop. Some
portion or all of the retained earnings of EnerShop may be paid as
dividends to CSW.
7. OTHER MATTERS
The consolidated federal income tax liability of the CSW
System is allocated among the members of the consolidated group in
accordance with the provisions of subparagraph (a)(1) of Section 1552 of
the Internal Revenue Code of 1986, as amended, and the applicable
requirements of Rule 45(c) of the 1935 Act, as modified by certain
orders of the Commission. EnerShop will be allocated a portion of the
consolidated federal income tax liability of the CSW System based upon
those provisions.
8. REPORTING OBLIGATIONS
CSW proposes that EnerShop be subject to the reporting
requirements set forth below:
a. EnerShop will file annually a report under Rule 24 of the
1935 Act setting forth the following information:
(i) A narrative report of activities undertaken in
connection with the EnerShop Services;
(ii) A description of any services received by EnerShop
from CSW Services and from each of the Operating
Companies. This description will include the
aggregate dollar value of the services by company; and
(iii) A description of any services rendered by EnerShop to
any associate company within the CSW System and a
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statement as to whether the services rendered were at
cost.
b. EnerShop will file the following within 45 days of the end of
each calendar quarter for the previous quarter ended --
(i) A statement of income;
(ii) A balance sheet;
(iii) A cash flow statement; and
(iv) Amounts and forms of currently effective CSW
guarantees of and similar arrangements concerning the
performance and undertaking of obligations by
EnerShop.
Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees, commissions
and expenses payable in connection with the transactions is as follows:
Holding Company filing fee . . . . . . . . . $ 2,000*
Counsel fees: Milbank, Tweed, Hadley &
McCloy, New York, New York . . . . . . . . $12,000
Miscellaneous and incidental expenses
including travel, telephone, postage,
copying, etc. . . . . . . . . . . . . . . . $ 1,000
Total . . . . . . . . . . . . . . . . $15,000
_________________
*Actual Amount
Item 3. Applicable Statutory Provisions.
The issuance and sale by EnerShop of the Common Stock and of
securities evidencing loans to be made to EnerShop is subject to
Sections 6 and 7 of the 1935 Act, and the acquisition thereof by CSW is
subject to Sections 9(a) and 10. The making of cash capital
contributions by CSW to EnerShop and the proposed guaranty by CSW of
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liabilities to third parties are subject to Section 12(b) and Rule 45
thereunder. The possible conversion of loans from CSW to capital
contributions is also considered subject Section 12(b) and Rule 45
thereunder. The proposals to engage in the various different lines of
business summarized in this filing are subject to Sections 9(a) and 10
of the 1935 Act. The rendering of services and other contemplated
transactions between EnerShop and any other CSW company is subject to
Sections 13(b) of the 1935 Act and Rules 81, 87, 90, 91 and 92
thereunder. The proposed transactions will be carried out in accordance
with the procedures specified in Rule 24 of the 1935 Act and pursuant to
an order of the Commission with respect thereto.
In February 1995, the Commission in EAU Cogenex Corporation
(Holding Company Act Release No. 35-26232, February 15, 1995) recognized
that the provision of energy management services is closely related to
the core business of electric utility companies. As in the case of
Cogenex, EnerShop will offer energy management services in order to
increase the efficient use of energy, thereby reducing the need to
construct new generating and transmission facilities, and in order to
promote compliance with environmental regulations.
Item 4. Regulatory Approval.
The proposed transactions are not subject to the
jurisdiction of any state commission or of any federal commission other
than the Commission.
Item 5. Procedure.
CSW respectfully requests that the Commission issue notice
of this Application-Declaration not later than June 20, 1995 and issue
an order approving the same, and permitting this Application-Declaration
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to become effective promptly following the expiration of the period set
forth in such notice.
No recommended decision by a hearing officer or other
responsible officer of the Commission is necessary or required in this
matter. The Division of Investment Management of the Commission may
assist in the preparation of the Commission's decision in this matter.
There should be no thirty-day waiting period between the issuance and
the effective date of any order issued by the Commission in this matter;
and it is respectfully requested that any such order be made effective
immediately upon the entry thereof.
Item 6. Exhibits.
Exhibit 1 - Preliminary Opinion of Milbank, Tweed, Hadley &
McCloy, counsel to the Company (to be filed by
amendment).
Exhibit 2 - Final or "Past Tense" opinion of Milbank, Tweed,
Hadley & McCloy, counsel to the Company
(to be filed with Certificate of
Notification).
Exhibit 3 - Proposed Notice of Proceeding.
Exhibit 4 - Financial Statements of Central and South West
Corporation and its subsidiaries per books
and pro forma as of March 31, 1995 (to be
filed by amendment).
Item 7. Information as to Environmental Effects.
The proposed transactions do not involve major federal
action having a significant effect on the human environment. To the
best of the CSW's knowledge, no federal agency has prepared or is
preparing an environmental impact statement with regard to the proposed
transactions.
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S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned company has duly caused
this document to be signed on its behalf by the undersigned thereunto
duly authorized.
Dated: June 5, 1995
CENTRAL AND SOUTH WEST
CORPORATION
By: /s/STEPHEN J. MCDONNELL
Stephen J. McDonnell
Treasurer
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INDEX OF EXHIBITS
EXHIBIT
NUMBER<PAGE>
EXHIBIT<PAGE>
TRANSMISSION
METHOD
Exhibit 1 Preliminary Opinion of Milbank, --
Tweed, Hadley & McCloy, counsel
to the Company (to be filed
by amendment).
Exhibit 2 Final or "Past Tense" opinion --
of Milbank, Tweed, Hadley & McCloy,
counsel to the Company (to be filed
with Certificate of Notification).
Exhibit 3 Proposed Notice of Proceeding. Electronic
Exhibit 4 Financial Statements of Central and --
South West Corporation and its
subsidiaries per books and pro forma
as of March 31, 1995 (to be filed
by amendment).
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EXHIBIT 3
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - _________)
Filings Under the Public Utility Holding Company of 1935 ("Act")
________, 1995
Notice is hereby given that the following filing(s) has/have
been made with the Commission pursuant to provisions of the Public
Utility Holding Company Act of 1935 and rules promulgated thereunder.
All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s)
and any amendment(s) thereto is/are available for public inspection
through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing
on the application(s) and/or declaration(s) should submit their views in
writing by _________, 1995 to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the relevant
applicant(s) and/or declarant(s) at the address(es) specified below.
Proof of service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. Any request for hearing
shall identify specifically the issues of fact or law that are disputed.
A person who so requests will be notified of any hearing, if ordered,
and will receive a copy of any notice or order issued in the manner.
After said date, the application(s) and/or declaration(s), as filed or
as amended, may be granted and/or permitted to become effective.
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Central and South West Corporation (File No. 70-______)
Central and South West Corporation, a Delaware corporation
("CSW") and a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act"), located at 1616
Woodall Rodgers Freeway, Dallas, Texas 75202, has filed an application-
declaration pursuant to Sections 9(a), 10, 12(b) and 13(b) of the Act
and Rules 23 and 24 thereunder.
CSW is seeking authority to establish and finance a new,
wholly owned, nonutility subsidiary company, tentatively to be named
EnerShop Inc. ("EnerShop"), for the purposes of providing turn-key
energy solutions primarily for commercial and industrial customers of
both associate and non-associate companies. Such services would
include: consulting and professional services, including energy and
process audits and analyses, research and development focused on the
application of existing energy technologies to customer situations and
activities related to the demand side management needs of customers;
assistance to customers in the design, engineering, selection,
procurement and installation of equipment; assistance to customers in
their financing of equipment acquisitions; and information services for
customers, initially in the areas of customized energy billing systems
and specialized computer software systems. It is contemplated that
customer demand for such services will be in the following areas of
energy management and conservation: audits and analysis of energy
sources and uses; management of energy use; indoor and outdoor lighting,
quality of electric power; electric motor selection and use; air
quality; systems for heating, ventilation and air conditioning,
including thermal storage systems; electrotechnologies; back-up and
primary generation of power; environmental quality requirements; and
facilities management services.
Initially, EnerShop will provide services primarily through
a network of independent contractors and subcontractors to be
established by a relatively small staff of EnerShop management,
professional, engineering, and administrative personnel. The majority
of customer financing needs are expected to be placed with
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third party lenders and leasing companies. CSW companies will be
reimbursed for the full cost of all services, personnel and facilities
provided to EnerShop for its business, determined in accordance with
Section 13 and Rules 90, 91 and 92 of the Act as well as other
applicable rules and regulations. CSW is requesting authority to make
investments in EnerShop of up to an aggregate of $100 million
outstanding at any one time through any combination of purchases of
shares of common stock, capital contributions, loans, conversions of
loans to equity investments and guarantees of performance and similar
bonds issued or undertaken by EnerShop in connection with its business.
Loans to EnerShop would be funded through CSW's external short-term
borrowing program, previously authorized by order of the Commission
dated March 21, 1995 (File No. 70-8557, Holding Company Act Release No.
26254).
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
