File No. 70-9083
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO THE
FORM U-1 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 75202
CSW ENERGY, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660789
Dallas, Texas 75202
ENERSHOP, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
(Names of companies filing this statement and
addresses of principal executive offices)
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
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Wendy G. Hargus
Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Terry D. Dennis
President
CSW Energy, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660789
Dallas, Texas 75202
Joris M. Hogan
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005-1413
(Names and addresses of agents for service)
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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"), CSW Energy, Inc., a Texas
corporation ("Energy"), and EnerShop, Inc., a Delaware corporation ("EnerShop"
and, collectively with CSW and Energy, the "Applicants"), hereby file this
Amendment No. 3 to the Form U-1 Declaration in File No. 70-9083 (the
"Declaration") to amend and restate the Declaration in its entirety.
The Applicants intend to acquire the securities of or
interests in energy-related companies that engage in the brokering and marketing
of energy commodities and/or engage in other energy-related activities on an
exempt basis under Rule 58 under the Act. In connection with the activities of
such companies, the Applicants seek authority through December 31, 2002, to
issue guarantees, letters of credit, bid bonds and similar credit support
arrangements in an aggregate amount up to $250 million to support the debt and
other obligations of such companies.
Item 1. Description of Proposed Transaction.
As stated above, pursuant to the exemption provided by Rule 58
under the Act, the Applicants intend to acquire the securities of or interests
in one or more companies that will engage in all forms of brokering and
marketing transactions involving electricity and other energy commodities,
including natural gas, oil and coal, at wholesale and retail ("Marketing
Activities"), through one or more affiliated energy-related companies
(hereinafter referred to as "Marketing Affiliates"). In addition, the Applicants
from time to time may acquire the securities of or interests in the business of
one or more other companies, each of which will engage exclusively in
energy-related activities under Rule 58 (collectively with Marketing Affiliates,
"Energy-Related Companies"). Energy-Related Companies may be special purpose
domestic corporations, partnerships or limited liability companies, or
wholly-owned or owned jointly through joint ventures or other alliances with
nonassociates, or through investments in companies that will engage exclusively
in energy-related activities, as defined in Rule 58, at the time of such
investment.
Energy-Related Companies will take appropriate measures in the
normal course of their business to mitigate the risks associated with electric
power and fuel purchase or sale contracts.1 Such measures may include matches
between long-term firm or variable price electric power sales contracts and
long-term firm or variable price fuel purchase contracts. The Energy-Related
Companies may also hedge price risk through the purchase of fuel or fuel
reserves or options on fuel reserves. In addition, the Energy-Related Companies
may purchase or sell commodity-based derivative instruments, such as electricity
or gas futures contracts and options on electricity or gas futures, similar to
those traded on the New York Mercantile Exchange, and gas and oil price swap
agreements and other, primarily commodity-based, derivative instruments.2
Energy-Related Companies may also offset price risk exposure
under a purchase or sales contract through an opposite position to that purchase
or sale. Similarly, in a portfolio of purchase and sales contracts, risk also
could be limited through an appropriate mix of long-term and short-term
contracts, and diversification of the mix of customers and suppliers regionally
and across industry lines. Finally, Energy-Related Companies will endeavor to
limit risk exposure through contract provisions that would place a ceiling on
the amount of damages payable when performance failure occurs and/or exclude
consequential damages.
Energy-Related Companies will endeavor to manage a "book" of
various energy contracts involving purchases, sales and trades of electricity
and other energy commodities. Energy-Related Companies will seek to hedge the
risk associated with these contracts through a combination of physical assets,
balanced physical purchases and sales, purchases and sales on futures markets,
and other derivative risk management tools.
In order to compete in the marketplace and to engage in
Marketing Activities, each Marketing Affiliate will require the ability to bid
on power brokering or marketing projects or otherwise pursue multiple projects
on a simultaneous basis and to provide or arrange for letters of credit, bid
bonds or other credit support on projects at the time of bid or during
development. Similarly, in order to compete in their respective markets, the
other Energy-Related Companies may require various kinds of credit support.
Accordingly, the Applicants hereby request authority under
Sections 6(a), 7 and 12(b) of the Act for CSW, Energy and/or EnerShop to issue
or arrange various kinds of credit support (as set forth below) in an aggregate
amount that will not exceed $250 million,3 as required or appropriate for any
Energy-Related Company, directly or indirectly: (i) to secure debt financing;
(ii) to satisfy bid bond requirements; and/or (iii) to satisfy credit support
requirements in connection with exempt activities conducted by Energy-Related
Companies and/or financing documents and agreements to which any Energy-Related
Company (directly or indirectly) becomes a party ("Guarantees"). The Applicants
further request that no additional authority be required from the Commission
after December 31, 2002, in order to maintain existing Guarantees made pursuant
to authority granted in any order resulting from this Declaration, prior to such
date in accordance with the Act and all applicable rules, regulations and orders
of the Commission. The Applicants will request supplemental authority of the
Commission in order to make any new Guarantees subsequent to December 31, 2002.
The debt financing guaranteed by the Applicants will not: (i)
exceed a term of fifteen years; or (ii)(a) bear a rate equivalent to a floating
interest rate in excess of 2% over the prime rate, London Interbank Offered Rate
or other appropriate index, in effect from time to time, or (b) bear a fixed
rate in excess of 2.5% above the yield at the time of issuance of United States
Treasury obligations of a comparable maturity. Any commitment or other fees with
respect to the debt will not exceed one percent per annum of the total amount of
debt financing. CSW will not seek recovery through higher rates to customers of
its operating utility company subsidiaries to compensate CSW for any possible
losses that it may sustain in connection with Guarantees or its investment in
Energy-Related Companies.
The Applicants will disclose in quarterly Form U-9C-3 reports
filed pursuant to Rule 58 the amount and type of any security of any
Energy-Related Company acquired by the Applicants or any other Energy-Related
Company. The Applicants will also disclose in such Form U-9C-3 reports a
description of the terms and conditions of any Guarantee issued during the
quarter and will attach a copy of the documents evidencing such Guarantee.
CSW (on behalf of itself and its subsidiary companies) will
provide the Commission with a certificate of notification pursuant to Rule 24
under the Act (the "Certificate") within 60 days of the end of each calendar
quarter. Each Certificate will state the amount and type of each investment made
by CSW, Energy or Enershop, directly or indirectly, in any Energy-Related
Company in the previous quarter. Further, each Certificate will indicate the
aggregate outstanding amount, as of the reporting date, of all guarantees issued
by or for the account of CSW, Energy or Enershop under this
Application-Declaration, except to the extent such information is otherwise
required to be reported on Form U-9C-3. Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees and expenses
payable in connection with this Declaration is as follows:
Counsel fees
Milbank, Tweed, Hadley & McCloy.... 5,000.00
Miscellaneous and incidental expenses
including travel, telephone,
postage and copying................ 1,000.00
Total.......................................$ 6,000.00
Item 3. Applicable Statutory Provisions.
Sections 6(a), 7 and 12(b) of the Act and Rules 45 and 58
thereunder are or may be applicable to the proposed transactions as described in
this Declaration. To the extent any other sections of the Act or rules
thereunder are or may be applicable to the proposed transaction, the Applicants
request appropriate orders thereunder. Sections 6(a), 7 and 12(b) of the Act and
Rule 45 thereunder are or may be applicable to the issuance or arrangement of
any Guarantee or any third party financing or reimbursement obligations incurred
by the Applicants in respect of any Guarantee. The Applicants believe that the
Commission's order granted to American Electric Power Company, Inc., HCAR No.
26713 (May 2, 1997), is precedent for the authority requested herein and
demonstrates that the applicable requirements of the Act are satisfied with
respect to the proposed Guarantees.
The scope of energy commodity marketing and brokering
activities, and related risk management activities, that Energy-Related
Companies propose to engage in on an exempt basis under Rule 58 comports with
those approved in the Commission's order granted to SEI Holdings, Inc., HCAR No.
26581 (Sept. 26, 1996), which is recited in the Commission's release adopting
Rule 58, HCAR No. 26667 (Feb. 14, 1997).
Rule 54
The Applicants are not seeking authority in this Declaration
with respect to the financing of an exempt wholesale generator, as defined in
Section 32(a) of the Act (each, an "EWG") or a foreign utility company, as
defined in Section 33(e) of the Act (each, a "FUCO").
Rule 54 under the Act is satisfied because Rules 53(a), (b)
and (c) are satisfied. As of June 30, 1997, CSW has invested approximately $910
million in the aggregate in EWGs and FUCOs or approximately 47% of $1,939
million, the average of CSW's "consolidated retained earnings" (as defined in
Rule 53(a) under the Act) for the four consecutive quarters ended March 31,
1997, thus satisfying Rule 53(a)(1). CSW maintains in conformity with United
States generally accepted accounting principles and makes available the books
and records and financial statements required by Rule 53(a)(2). No more than 2%
of the employees of the domestic utility company subsidiaries of CSW presently
render services to any EWG or FUCO in which CSW owns an interest, thereby
satisfying Rule 53(a)(3). CSW submitted the documents required by Rule 53(a)(4).
None of the conditions described in Rule 53(b) exist with respect to CSW or any
of its subsidiaries, thereby satisfying such rule and making Rule 53(c)
inapplicable. Item 4. Regulatory Approval.
No federal or state regulatory authority, other than the
Commission under the Act, has any jurisdiction over the proposed transactions.
Item 5. Procedure.
It is requested that the Commission issue and publish no later
than July 11, 1997, the requisite notice under Rule 23 with respect to the
filing of this Declaration, such notice to specify a date not later than August
8, 1997, as the date after which an order granting and permitting this
Declaration to become effective may be entered by the Commission and the
Commission enter not later than August 11, 1997, an appropriate order granting
and permitting this Declaration to become effective.
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, unless such Division
opposes the matters covered hereby. 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 such order be
made effective immediately upon the entry thereof. Item 6. Exhibits and
Financial Statements.
Exhibit 1 - Preliminary Opinion of Counsel.
Exhibit 2 - Financial Statements of CSW and
subsidiaries per books and pro forma as of
March 31, 1997.
Exhibit 3 - Proposed Notice of Proceeding.
Item 7. Information as to Environmental Effects.
The proposed transactions do not involve major federal action
having a significant effect on the human environment. No federal agency has
prepared or is preparing an environmental impact statement with respect to the
proposed transaction.
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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.
Date: October 2, 1997
CENTRAL AND SOUTH WEST CORPORATION
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
CSW ENERGY, INC.
By:/s/ TERRY D. DENNIS
Terry D. Dennis
President and Chief Executive
Officer
ENERSHOP, INC.
By:/s/ WENDY G. HARGUS
Wendy G. Hargus
Treasurer
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EXHIBIT INDEX
Exhibit Transmission
Number Exhibit Method
1 Preliminary Opinion of Counsel ---
(previously filed).
2 Financial Statements of CSW and ---
subsidiaries per books and pro forma
as of March 31, 1997 (previously
filed).
3 Proposed Notice of Proceeding ---
(previously filed).
_______________________
1 Marketers of energy commodities, unlike brokers, bear the risks associated
with market price fluctuations of the commodity ("market risk") and the ability
to enforce performance by the other party to the contract ("counterparty credit
risk").
2 One of the attractive features of using exchange-traded commodities futures
contracts, such as exist for electricity, gas and oil, is, in addition to
liquidity, the virtual elimination of counterparty credit risk, due to the fact
that the exchange itself acts as the counterparty.
3 Any Guarantee issued by the Applicants on behalf of any Energy-Related Company
will be included in the determination of aggregate investment for purposes of
Rule 58.
