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
P.O. Box 660164
Dallas, Texas 75266
CENTRAL AND SOUTH WEST SERVICES, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266
(Name of company filing this statement and address
of principal executive office)
---------------------------------
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
---------------------------------
Wendy G. Hargus
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75266-0164
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for service)
<PAGE>
Central and South West Corporation ("CSW"), a Delaware
corporation and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended, and Central and South West Services, Inc.
("Services" and, collectively with CSW, the "Applicants"), a Texas corporation
and a wholly owned service company subsidiary of CSW, hereby file this Form U-1
Application-Declaration (this "Application") to request authority to engage in
the electric vehicle business ("EV Business"). Specifically, the Applicants
request authority: (a) to engage in the business of selling, leasing and renting
electric bicycles, tricycles, scooters, skateboards and similar vehicles, as
well as retrofit kits to convert existing bicycles to electric power ("EBikes")
to consumers, either directly by Services or indirectly by a newly formed
subsidiary of CSW ("NewCo"); (b) to engage in various activities regarding
equipment and facilities related to electric vehicles, including the ownership,
operation, sale, installation and servicing of recharging and conversion
equipment and facilities related to electric vehicles ("Equipment and Facilities
Activities" or "E&F Activities"); (c) to provide financing to customers in
connection with their purchase or lease of EBikes or their payment obligations
in respect of E&F Activities engaged in on their behalf ("Customer Financing");
(d) for CSW to finance the EV Business by acquiring common stock of NewCo,
making loans and providing guarantees and other credit support to NewCo and
Services which, together with securities acquisitions, capital contributions and
open account advances that are exempt from the requirement of Commission
approval under the Act, do not exceed an aggregate amount outstanding at any
time of $25 million ("Financing"); and (e) to engage in certain related
activities ("Related Activities"). Item 1. Description of Proposed Transaction.
As part of their effort to increase the demand for electricity
and to utilize their expertise in areas closely related to the CSW system's core
business of providing electricity service in preparation for competition, CSW
and Services propose to engage in the business of selling and leasing EBikes,
performing E&F Activities, and selling certain related products and providing
certain related services to nonassociate customers that are or may be necessary
or desirable to develop the market for EBikes and E&F Activities. In connection
with the EV Business, CSW proposes to provide Financing to Services or NewCo, as
the case may be, and Services and NewCo propose to provide Customer Financing to
facilitate the purchase of their products and services. Related Activities may
include without limitation: (i) the sale, lease and/or rental of batteries for
use with EBikes; (ii) the sale of spare parts and repair kits for EBikes; and
(iii) providing repair and maintenance services for EBikes and related
equipment. The Applicants believe that Related Activities are essential to the
acceptance of EBikes and other electric vehicles as a viable alternative to
traditional vehicles. Collectively, all of the foregoing activities are referred
to herein as the "Activities".
The Activities promote new electro-technologies and the use of
electricity as an alternative source of fuel for vehicles by increasing the
availability of EBikes and providing necessary infrastructure and related
services for electric vehicles so that customers will be more likely to consider
electric vehicles as an alternative to traditional vehicles. EBikes offer
consumers an affordable, functional method of using electricity as a fuel source
for vehicles. EBikes can be pedaled like a normal bike, or, with the flick of a
switch, powered by a battery. The battery can be recharged by using standard
electrical service. EBikes sold and leased by Services and NewCo will contain
the latest technological innovations, including advanced batteries with improved
performance and weight/energy densities and new solid state control circuits.
EBike manufacturers engage in intensive research and development and continue to
develop new technologies to improve the overall efficiency and performance of
EBikes.
The Applicants also anticipate that the marketing and sale of
this new technology will promote consumer awareness of the many possible uses of
electricity as a fuel source (for EBikes as well as for other electric
vehicles), and result in increased demand for electricity in the service areas
of CSW's operating company subsidiaries (the "Operating Companies") and
nationwide which will ease the transition to competition for the Operating
Companies and other electric utilities. By selling and leasing EBikes, the
Applicants intend to facilitate the creation of a "critical mass" of EBikes that
will lead to such widespread familiarity with EBikes that they become part of
the commercial mainstream (i.e., in this sense, the Applicants are endeavoring
to "commercialize" this new electro-technology). The Applicants believe that the
low cost and fun associated with EBikes has the potential to prime the market
for other electric vehicles. As such, the sale and lease of EBikes is the
Applicants' preferred method of sparking widespread demand for electric vehicles
and thus creating a new source of demand for electricity by, in effect, bringing
vehicles closer to an electric socket.
Through the E&F Activities, which include the ownership,
operation, sale, lease, rental, installation and servicing of recharging and
conversion equipment and facilities related to electric vehicles, the Applicants
intend to make electricity supply readily available for convenient consumption
by electric vehicles. Just as the use of gasoline vehicles is facilitated by gas
stations, the convenience of large electric vehicles, such as electric cars and
trucks, and thus their consumer acceptance, requires a critical mass of charging
stations. By facilitating the convenient supply of electricity for electric
vehicles, the Applicants believe they will increase consumer acceptance of
electric vehicles, thereby accelerating the growth of electricity demand from
this source. Much as the Operating Companies might install new substations in
geographic areas within their service areas where development is occurring, the
Applicants view charging stations and conversion equipment as bringing an
electric socket closer to vehicles.
The Applicants propose to engage in the Activities either
directly through Services or indirectly through NewCo, which would be a
newly-formed first tier subsidiary of CSW. During the initial phases of CSW's EV
Business, the expense of creating and maintaining a separate subsidiary may not
be warranted. However, as the business grows and develops, the Applicants may
decide to conduct the business through NewCo. In either case, the Applicants
will treat its EV Business as a separate cost and revenue center for accounting
purposes. The Applicants request authority for Services to transfer or assign
the EV Business to NewCo whenever they deem such action appropriate in light of
prevailing regulatory and business conditions.
CSW proposes to provide Financing for the Activities in an
aggregate amount outstanding at any time of up to $25 million. If Financing is
provided to Services, the funds shall be designated for the Activities. Upon the
organization of NewCo, CSW proposes to make an initial purchase of 100 shares of
NewCo common stock for an aggregate purchase price of $1,000. CSW also proposes
to make loans to NewCo and Services from time to time prior to December 31,
2002, with maturities no later than December 31, 2003. Each such loan will bear
an interest rate that will not exceed the prime rate in effect on the date of
the loan at a bank designated by CSW, and will be evidenced by a note payable to
CSW by NewCo or Services. CSW further proposes to guarantee or to act as surety
on bonds, indebtedness and performance and other obligations undertaken by
Services or NewCo in connection with their EV Business. Such guarantees or
arrangements will be made from time to time through December 31, 2002, and will
expire or terminate no later than December 31, 2004. The total amount of all
common stock purchases, loans and guarantees for which authorization is sought
(together with all purchases by CSW of NewCo securities and capital
contributions and open account advances that are exempt from the requirement of
Commission approval) will not exceed $25 million at any time outstanding.
Customer Financing provided by Services or NewCo may take the
form of capital leases, operating leases or promissory notes with terms of one
to thirty years, priced at fair market value. The Applicants expect that a
majority of this financing will be placed by Services or NewCo with third party
lenders and leasing companies.
Although the Applicants expect that Services or NewCo
initially would engage in the Activities in the states in which the Operating
Companies currently provide electric service (Texas, Oklahoma, Arkansas and
Louisiana) and in states contiguous to the service areas of the Operating
Companies, including Colorado, Kansas, Missouri and New Mexico, CSW requests
authority herein to engage in such activities anywhere in the United States. The
Applicants have provided copies of this Application to the state regulatory
commissions having jurisdiction over the Operating Companies and invited their
comments.
The Applicants will file certificates pursuant to Rule 24
under the Act within 60 days after the end of each calendar quarter setting
forth the following information: (1) the dollar amount of revenue from each of
EBike sales and leases, E&F Activities, Related Activities and Customer
Financing during the quarter; (2) the type and dollar amount of any Financing by
CSW in support of the EV Business during the quarter; (3) the aggregate
outstanding amount of Customer Financing as of the end of the quarter; and (4)
an unaudited profit and loss statement for the quarter and a statement of
accounts as of the end of the quarter for the EV Business, if the business is
being conducted by Services, or an unaudited balance sheet as of the end of the
quarter and an unaudited income statement for the quarter, if the EV Business is
being conducted by NewCo.
Item 2. Fees, Commissions and Expenses.
An estimate of the fees and expenses to be paid or incurred by
the Company in connection with the proposed transactions set forth in the
Application is set forth below:
Amount
--------
Counsel fees:
Milbank, Tweed, Hadley & McCloy
New York, New York....................... $ 3,000
Miscellaneous and incidental expenses
including travel, telephone and
postage.................................. 1,000
--------
Total $ 4,000
========
Item 3. Applicable Statutory Provisions.
Sections 6(a), 7, 9(a), 10, 11 and 12(b) of the Act, and Rule
54 promulgated thereunder, are or may be applicable to the transactions proposed
herein. Section 9(a) of the Act makes unlawful the acquisition by a subsidiary
of a registered holding company of "any securities . . . or any other interest
in any business" without the prior approval of the Commission under Section 10.
Under Section 10(c)(1), the Commission may not approve an acquisition of
securities or any other interest in any business if the proposed acquisition is
"detrimental to the carrying out of the provisions of Section 11". Under Section
11(b)(1), the Commission must limit the operations of public utility holding
companies and their subsidiaries to such other businesses as are reasonably
incidental, or economically necessary or appropriate, to the operations of such
integrated public-utility system. The Commission may permit as reasonably
incidental, or economically necessary or appropriate, to the operations of one
or more integrated public-utility systems the retention of an interest in any
business (other than the business of a public-utility company as such) which the
Commission shall find necessary or appropriate in the public interest or for the
protection of investors or consumers and not detrimental to the proper
functioning of such system or systems.
The proposed establishment of an EV Business satisfies the
requirements of Sections 9(a)(1) and 10 in that it is incidental, and
economically necessary or appropriate, to the CSW system's core business of
generating, transmitting and distributing electricity. The proposed
establishment of an EV Business is also appropriate in the public interest and
is not detrimental to the proper functioning of the CSW system.
The proposed establishment of an EV Business satisfies the
two-pronged "functional relationship" test established by the United States
Court of Appeals for the District of Columbia Circuit in Michigan Consolidated
Gas Co. v. SEC, 444 F.2d 913 (D.C. Cir. 1971), which traditionally has been used
by the Commission in applying Section 11(b)(1) of the Act. Under the "functional
relationship" test, an integrated public-utility system may retain an interest
in another business if (i) the additional business is "reasonably incidental or
economically necessary or appropriate" to the integrated system, and (ii) the
retention of the additional business is in the public interest. Michigan
Consolidated at 916. As discussed in the preceding paragraphs, the proposed
establishment of an EV Business satisfies the first prong of the "functional
relationship" test in that it is reasonably incidental and economically
necessary and appropriate to CSW's core business. The proposed investment also
satisfies the second prong of the "functional relationship" test in that it
serves the public interest by (i) promoting the use of electricity as an
alternative to conventional vehicle fuel sources, which are often both harmful
to the environment and of finite supply, and (ii) easing the path to competition
for electric utilities by creating an additional market for electricity.
The sale and lease of EBikes is functionally related to CSW's
core business and is appropriate in the public interest. The Applicants'
establishment of an EV Business is an integrated effort to open a new,
potentially large market for electricity consumption -- transportation -- from
which electricity has traditionally been excluded in favor of fossil fuels. The
EV Business will promote electro-technologies that make electricity a more
viable alternative power source for transportation. EBikes sold and leased by
Services and NewCo will contain the latest technological innovations, including
advanced batteries with improved performance and weight/energy densities and new
solid state control circuits. EBike manufacturers engage in intensive research
and development and continue to develop new technologies to improve the overall
efficiency and performance of EBikes. Services and NewCo will help commercialize
these cutting edge EBike technologies by making them readily available to
consumers. The Applicants are well suited to promote electric vehicles and
charging technologies based upon expertise gained in their core electric utility
business. Significant advantages that the Applicants hope to gain from their EV
Business are (i) greater demand for electricity and (ii) increased brand
identification and loyalty for CSW and the Operating Companies, as retail
competition nears.
The Applicants believe that they need to be able to sell and
lease EBikes directly because no current participant in the transportation
market has a strong incentive to vigorously promote this electro-technology.
EBike manufacturers have identified electric utilities as natural partners for
the selling and leasing of EBikes because traditional sellers of vehicles, such
as automobile dealerships and bicycle stores, have no great incentive to promote
this new technology, which might disrupt or displace their primary business.
Only electric utilities, such as CSW, have the appropriate ancillary incentives
(higher long-term electricity demand and enhanced brand identification and
awareness) to vigorously promote the commercialization of EBikes.
As originally proposed, paragraph (b)(1)(iii) of Rule 58 would
have exempted the sale of EBikes, but the Commission chose to exclude the sale
of electric vehicles from the Rule 58 exemption because it had not yet approved
such activities by order. However, the Commission's initial inclusion of the
sale of electric vehicles suggests that it views the activities as logically
connected to the core business of a registered holding company system, even
though such activities were ultimately excluded from the rule for procedural
reasons related to the statutory provision under which the rule was promulgated.
In addition, the Applicants' proposal to sell and lease EBikes
is similar to the proposal by Consolidated Natural Gas Company ("CNG") to
finance its customers' purchases of equipment to promote new technologies that
use natural gas or enables the use of natural gas as an alternative fuel, which
proposal the Commission approved by the order in HCAR No. 26234 (Feb. 23, 1995)
(File No. 70-7508). CNG argued that such activities satisfied the requirements
of Section 11(b)(1) of the Act because: (1) they encourage the sale of energy
through the development, promotion and financing of gas or electric appliances
or equipment that have not yet received widespread public acceptance; and (2)
they promote competition of electricity or gas with other types of fuel.
CNG also cited as support for its proposal an order granted to
General Public Utilities Corporation ("GPU") in HCAR No. 15184 (Feb. 9, 1965)
(File No. 70-4239). That order authorized GPU to make an investment in a company
that promoted and marketed electric equipment using vortex fans and tangential
blowers. GPU stated in its application to the Commission that its primary reason
for the proposed investment was its belief that the use of tangential blowers in
products consuming electricity, particularly in space heating and air
conditioning, would significantly increase the consumption of electricity in the
service area of the GPU system as well as in other areas, and that the
encouragement of the use of electricity is functionally related to the core
business of the GPU system. The rationale behind these orders applies directly
to the Applicants' proposed EV Business and supports favorable action by the
Commission.
The Applicants proposal to engage in E&F Activities as part of
their EV Business is also appropriate under the Act. The Commission, by
including E&F Activities in Rule 58, implicitly concluded that E&F Activities
satisfy the functional relationship test. Paragraph (b)(1)(iii) of Rule 58
explicitly exempts activities with respect to recharging equipment and
facilities for electric vehicles if these activities are exclusively engaged in
through a separate subsidiary, namely:
The ownership, operation, sale, installation and servicing of
refueling, recharging and conversion equipment and facilities
relating to electric and compressed natural gas powered
vehicles.
The inclusion of such activities in the Rule 58 exemption establishes that they
satisfy the functional relationship test.
The Commission also has approved such activities by order. For example, in
its order in favor of Consolidated Natural Gas Co. in HCAR No. 25615 (Aug. 27,
1992) (File No. 70-7845) (the "CNG Order"), the Commission authorized a
subsidiary of CNG to engage in a variety of activities relating to natural gas
powered vehicles under the Act. In relevant part, the CNG Order authorizes a
subsidiary of CNG to:
(1) buy from suppliers and resell or lease to customers,
equipment necessary to transform vehicles from gasoline to
natural gas and/or combined natural gas and gasoline operation
("Conversion Equipment"); [and]
(2) install and/or maintain Conversion Equipment on customer
vehicles and provide training in the use, installation and
maintenance thereof[.]
As such, E&F Activities are appropriate under the Act and the Applicants should
be permitted to engage in such activities as part of their unitary EV Business.
Customer Financing for the selling and leasing of EBikes and
E&F Activities is similar to the activities of CNG which the Commission approved
by the order in HCAR No. 26234 (Feb. 23, 1995) (File No. 70-7508). In that
order, CNG was authorized to finance its customers' purchases of equipment to
promote new technologies that use natural gas or enables the use of natural gas
as an alternative fuel.
In sum, the Applicants believe that the Activities that
comprise their EV Business are functionally related to the core business of the
CSW system and are appropriate in the public interest.
Rule 54
No proceeds from the proposed transactions will be used by CSW
or any subsidiary thereof for the direct or indirect acquisition of an interest
in an exempt wholesale generator, as defined in Section 32 of the Act, or a
foreign utility company, as defined in Section 33 of the Act. Rule 54
promulgated under the Act states that in determining whether to approve the
issue or sale of a security by a registered holding company for purposes other
than the acquisition of an EWG or a FUCO, or other transactions by such
registered holding company or its subsidiaries other than with respect to EWGs
or FUCOs, the Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or a FUCO upon the registered holding
company system if Rules 53(a), (b) and (c) are satisfied. As set forth below,
all applicable conditions set forth in Rule 53(a) are, and, assuming the
consummation of the transactions proposed herein, will be, satisfied and none of
the conditions set forth in Rule 53(b) exist or will exist as a result of the
transactions proposed herein, thereby satisfying such provision and making Rule
53(c) inapplicable.
CSW's "aggregate investment" (as defined under Rule 53(a) of
the Act) in EWGs and FUCOs as of September 11, 1997 was approximately $923
million, or about 47% of $1,970 million, CSW's average consolidated retained
earnings for the four quarterly periods ended June 30, 1997. CSW thus satisfies
Rule 53(a)(1). CSW will maintain and make available the books and records
required by Rule 53(a)(2). No more than 2% of the employees of the Operating
Companies will, at any one time, directly or indirectly, render services to an
EWG or FUCO in which CSW directly or indirectly owns an interest, satisfying
Rule 53(a)(3). And lastly, CSW will submit a copy of Item 9 and Exhibits G and H
of CSW's Form U5S to each of the public service commissions having jurisdiction
over the retail rates of the Operating Companies, satisfying Rule 53(a)(4).
To the extent that any other sections of the Act may be
applicable to the proposed transactions, the Company hereby requests appropriate
authority thereunder.
Item 4. Regulatory Approval.
No federal or state regulatory authority, other than the
Commission under the 1935 Act, has any jurisdiction over the proposed
transactions.
Item 5. Procedure.
The Company respectfully requests that the Commission issue no
later than October 17, 1997 the requisite notice under Rule 23 with respect to
the filing of this Amendment, such notice to specify a date not later than
November 7, 1997, as the date after which an order granting and permitting this
Amendment to become effective may be entered by the Commission and the
Commission enter not later than November 10, 1997, an appropriate order granting
and permitting this Amendment to become effective.
No recommended decision by a hearing officer or any 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
30-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 and Financial Statements.
Exhibit 1 - Preliminary Opinion of Milbank, Tweed, Hadley & McCloy,
counsel to the Company.
Exhibit 2 - Financial Statements per books and pro forma as of June
30, 1997 of the Company (to be filed by Amendment).
Exhibit 3 - Proposed Notice of Proceeding.
<PAGE>
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: October 10, 1997
CENTRAL AND SOUTH WEST CORPORATION
CENTRAL AND SOUTH WEST SERVICES, INC.
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
<PAGE>
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER REVISED EXHIBITS METHOD
- ------- ---------------- ------------
1 Preliminary Opinion of Milbank, Tweed, Electronic
Hadley & McCloy, counsel to the Company.
2 Financial Statements per books and pro ___
forma as of June 30, 1997 of the Company
(to be filed by Amendment).
3 Proposed Notice of Proceeding. Electronic
EXHIBIT 1
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
October 9, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Central and South West Services, Inc.
Form U-1 Application-Declaration in File No. 70-____
Dear Sirs:
We refer to the Form U-1 Application-Declaration in File No.
70-____ (the "Application") under the Public Utility Holding Company Act of
1935, as amended (the "1935 Act"), filed Central and South West Corporation
("CSW"), a Delaware corporation and a registered holding company, and Central
and South West Services, Inc. ("CSWS" and, collectively with CSW, the
"Applicants"), a Texas corporation and a service company subsidiary of CSW,
seeking authority to sell and lease electric bicycles to consumers and to engage
in related activities either directly through CSWS or indirectly through a
newly-formed subsidiary ("NewCo") of CSW (the "Transactions"), as more fully
described in the Application. We have acted as counsel for the Applicants in
connection with the filing of the Application.
We have examined originals, or copies certified to our
satisfaction, of such corporate records of the Applicants, certificates of
public officials, certificates of officers and representatives of the Applicants
and other documents as we have deemed it necessary to require as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity with the originals of all documents submitted
to us as copies. As to various questions of fact material to such opinions we
have, when relevant facts were not independently established, relied upon
certificates by officers of the Applicants and other appropriate persons and
statements contained in the Amendment.
Based upon the foregoing, and having regard to legal
considerations which we deem relevant, we are of the opinion that, in the event
that the proposed Transactions are consummated in accordance with the
Application, as it may be amended, and subject to the assumptions and conditions
set forth below:
1. All state laws applicable to the proposed Transactions as
described in the Application will have been complied with.
2. CSWS is, and NewCo will be, validly incorporated and duly
existing under the laws of their respective States of incorporation.
3. Any equity securities issued in accordance with an order
permitting the Application to become effective, when properly issued,
delivered and paid for, will be legally issued, fully paid and
non-assessable, and the holders thereof will be entitled to the rights
and privileges appertaining thereto as set forth in NewCo's certificate
of incorporation.
4. Any debt securities Guaranteed by CSW in accordance with an
order permitting the Application to become effective will be valid and
binding obligations of NewCo or CSWS in accordance with their terms,
except to the extent such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally or by
applicable principles of equity (regardless of whether such
enforceability is sought in a proceeding at law or in equity).
5. The consummation of the proposed Transactions as described
in the Application will not violate the legal rights of the lawful
holders of any securities issued by the Applicants or any associate
company of the Applicants.
The opinions expressed above in respect of the proposed
Transactions as described in the Application are subject to the following
assumptions or conditions:
a. The Transactions shall have been duly authorized and
approved to the extent required by state law by the
Board of Directors of the Companies.
b. The Securities and Exchange Commission shall have
duly entered an appropriate order or orders granting
and permitting the Application to become effective
with respect to the Transactions described therein.
c. The Transactions shall have been accomplished in
accordance with required approvals, authorizations,
consents, certificates and orders of any state
commission or regulatory authority with respect
thereto and all such required approvals,
authorizations, consents, certificates and orders
shall have been obtained and remain in effect at the
closing thereof.
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.
We hereby consent to the use of this opinion as an exhibit to
the Application.
Very truly yours,
MILBANK, TWEED, HADLEY & McCLOY
EXHIBIT 3
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - _______________)
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
________________, 1997
Notice is hereby given that the following filing(s) has/have
been made with the Commission pursuant to the provisions of the Act 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) summarized below. The application(s) and/or declaration(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
__________, 1997 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 the 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 matter. After said date, the application(s) and/or declaration(s), as filed
or as amended, may be granted and/or permitted to become effective.
Central and South West Corporation (70-____)
Central and South West Corporation ("CSW"), a registered
holding company, and Central and South West Services, Inc. ("Services" and,
collectively with CSW, the "Applicants"), a service company subsidiary of CSW,
have filed a Form U-1 Application-Declaration in this file under Sections 6(a),
7, 9(a), 10, 11 and 12(b) of the Act, and Rule 54 thereunder.
Specifically, the Applicants request authority to: (a) to
engage in the business of selling, leasing and renting electric bicycles,
tricycles, scooters, skateboards and similar vehicles, as well as retrofit kits
to convert existing bicycles to electric power ("EBikes") to consumers, either
directly by Services or indirectly by a newly formed subsidiary of CSW
("NewCo"); (b) to engage in various activities regarding equipment and
facilities related to electric vehicles, including the ownership, operation,
sale, installation and servicing of recharging and conversion equipment and
facilities related to electric vehicles ("Equipment and Facilities Activities"
or "E&F Activities"); (c) to provide financing to customers in connection with
their purchase or lease of EBikes or their payment obligations in respect of E&F
Activities engaged in on their behalf ("Customer Financing"); (d) for CSW to
finance the EV Business by acquiring common stock of NewCo, making loans and
providing guarantees and other credit support to NewCo and Services which,
together with securities acquisitions, capital contributions and open account
advances that are exempt from the requirement of Commission approval under the
Act, do not exceed an aggregate amount outstanding at any time of $25 million
("Financing"); and (e) to engage in certain related activities ("Related
Activities"). Related Activities may include without limitation: (i) the sale,
lease and/or rental of batteries for use with EBikes; (ii) the sale of spare
parts and repair kits for EBikes; and (iii) providing repair and maintenance
services for EBikes and related equipment. Collectively, all of the foregoing
activities are referred to herein as the "Activities".
The Applicant state that the Activities promote new
electro-technologies and the use of electricity as an alternative source of fuel
for vehicles by increasing the availability of EBikes and providing necessary
infrastructure and related services for electric vehicles so that customers will
be more likely to consider electric vehicles as an alternative to traditional
vehicles.
The Applicants propose to engage in the Activities either
directly through Services or indirectly through NewCo, which would be a
newly-formed first tier subsidiary of CSW. During the initial phases of CSW's EV
Business, the expense of creating and maintaining a separate subsidiary may not
be warranted. However, as the business grows and develops, the Applicants may
decide to conduct the business through NewCo. In either case, the Applicants
will treat its EV Business as a separate cost and revenue center for accounting
purposes. The Applicants request authority for Services to transfer or assign
the EV Business to NewCo whenever they deem such action appropriate in light of
prevailing regulatory and business conditions.
CSW proposes to provide Financing for the Activities in an
aggregate amount outstanding at any time of up to $25 million. If Financing is
provided to Services, the funds shall be designated for the Activities. Upon the
organization of NewCo, CSW proposes to make an initial purchase of 100 shares of
NewCo common stock for an aggregate purchase price of $1,000. CSW also proposes
to make loans to NewCo and Services from time to time prior to December 31,
2002, with maturities no later than December 31, 2003. Each such loan will bear
an interest rate that will not exceed the prime rate in effect on the date of
the loan at a bank designated by CSW, and will be evidenced by a note payable to
CSW by NewCo or Services. CSW further proposes to guarantee or to act as surety
on bonds, indebtedness and performance and other obligations undertaken by
Services or NewCo in connection with their EV Business. Such guarantees or
arrangements will be made from time to time through December 31, 2002, and will
expire or terminate no later than December 31, 2004. The total amount of all
common stock purchases, loans and guarantees for which authorization is sought
(together with all purchases by CSW of NewCo securities and capital
contributions and open account advances that are exempt from the requirement of
Commission approval) will not exceed $25 million at any time outstanding.
Customer Financing provided by Services or NewCo may take the
form of capital leases, operating leases or promissory notes with terms of one
to thirty years, priced at fair market value. The Applicants expect that a
majority of this financing will be placed by Services or NewCo with third party
lenders and leasing companies.
Although the Applicants expect that Services or NewCo
initially would engage in the Activities in the states in which the Operating
Companies currently provide electric service (Texas, Oklahoma, Arkansas and
Louisiana) and in states contiguous to the service areas of the Operating
Companies, including Colorado, Kansas, Missouri and New Mexico, CSW requests
authority herein to engage in such activities anywhere in the United States. The
Applicants have provided copies of this Application to the state regulatory
commissions having jurisdiction over the Operating Companies and invited their
comments.
The Applicants will file certificates pursuant to Rule 24
under the Act within 60 days after the end of each calendar quarter setting
forth the following information: (1) the dollar amount of revenue from each of
EBike sales and leases, E&F Activities, Related Activities and Customer
Financing during the quarter; (2) the type and dollar amount of any Financing by
CSW in support of the EV Business during the quarter; (3) the aggregate
outstanding amount of Customer Financing as of the end of the quarter; and (4)
an unaudited profit and loss statement for the quarter and a statement of
accounts as of the end of the quarter for the EV Business, if the business is
being conducted by Services, or an unaudited balance sheet as of the end of the
quarter and an unaudited income statement for the quarter, if the EV Business is
being conducted by NewCo.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
