File No. 70-9073
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
------------------------------
CENTRAL POWER AND LIGHT COMPANY
539 North Carancahua Street
Corpus Christi, Texas 78401-2802
PUBLIC SERVICE COMPANY OF OKLAHOMA
212 East Sixth Street
Tulsa, Oklahoma 74119-1212
SOUTHWESTERN ELECTRIC POWER COMPANY
428 Travis Street
Shreveport, Louisiana 71156-0001
WEST TEXAS UTILITIES COMPANY
301 Cypress Street
Abilene, Texas 79601-5820
CENTRAL AND SOUTH WEST SERVICES, INC.
Williams Tower 2
2 West 2nd Street
Tulsa, Oklahoma 74103
(Names of companies filing this statement and addresses
of principal executive offices)
---------------------------
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
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005-1413
(Names and addresses of agents for service)
<PAGE>
Central Power and Light Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas Utilities Company
(the "Operating Companies"), wholly owned public utility subsidiaries of Central
and South West Corporation ("CSW"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"), and Central
and South West Services, Inc. (the "Service Company"), a wholly owned subsidiary
of CSW that is authorized to provide services to associate companies pursuant to
Section 13(b) of the Act and rules of the Securities and Exchange Commission
(the "Commission") promulgated thereunder, hereby submit for filing this
Amendment No. 3 to the Application-Declaration on Form U-1 in File No. 70-9073
to amend and restate the Application-Declaration in its entirety.
Item 1. Description of Proposed Transactions.
The Operating Companies, directly or through the Service
Company, propose to market to their customers a mortgage incentive program
provided by PHH Mortgage Services Corporation ("PHH Mortgage") and called the
Better Choices Home Mortgage Program (as the same may be renamed from time to
time, the "Better Choices Program").
The Better Choices Program is designed to promote efficiency
in the use of energy and environmental conservation. Under the Better Choices
Program, home buyers will be offered the opportunity to obtain mortgages with
enhanced benefits on homes that qualify either for a Good Cents Home
Certification or a Good Cents Environmental Home Certification. The Good Cents
Home Certification requires that the home to be purchased meet certain energy
efficiency standards (such as those relating to the quality of the insulation
installed, the energy efficiency of the heating, ventilating and air
conditioning equipment and other appliances installed and the presence of energy
management systems). The Good Cents Environmental Home Certification requires
<PAGE>
that the home to be purchased meet not only energy efficiency requirements
substantially similar to those required under the Good Cents Home Certification
but also have at least a minimum number of environmental conservation features
from a list of features (such as low-flow shower heads, recycling bins,
composting facilities and use of non-polluting materials). Even though the
programs share many of the same characteristics, the Good Cents Home
Certification and the Good Cents Environmental Home Certification are
independent certifications and are not mutually exclusive, i.e., a home, if it
satisfied all of the requirements, could receive either certification or both.
The Good Cents Home Certification is a branded home
certification program developed by The Southern Company and licensed to more
than 290 utilities in 25 states. It was developed in 1976 to encourage builders
to construct energy-efficient homes. As part of their Good Cents license, the
Operating Companies developed energy efficiency standards for new home
construction to improve the energy efficiency of homes in their respective
service territories as part of their respective DSM programs.
The Good Cents Environmental Home Certification standards have
been certified by the Edison Electric Institute as having met the standards of
its E-Seal Program, an industry-wide program to promote energy efficiency and
environmental conservation. The E-Seal program, launched in 1994, is a national
certification system for electric utility home construction programs,
establishing criteria for both energy and resource efficient home construction.
An electric utility home construction program that is certified by E-Seal
exceeds both the Council of American Building Officials' Model Energy Code and
the National Appliance Energy Conservation Act standards by 10-30 percent. The
E-Seal program is supported by several leading national organizations including
the U.S. Environmental Protection Agency, the U.S. Department of Energy, Habitat
for Humanity, Alliance to save Energy, Renew America and the National Wildlife
Federation.
<PAGE>
The Operating Companies will certify to PHH Mortgage that the
homes meet the standards for either a Good Cents Home Certification or a Good
Cents Environmental Home Certification and will list the features of the homes
that qualify them for such certification. Based on such certification, PHH
Mortgage will offer to customers of the Operating Companies various benefits
that may permit such customers to qualify for mortgages that are 15% to 20%
larger than conventional mortgages. The increased sizes of the mortgages are
made possible by a combination of features, such as granting mortgages for 100%
of the cost of qualifying energy efficiency and environmental conservation
features and calculating income available to service mortgages on the basis of
reduced utility bills. In addition, PHH Mortgage will offer to Operating Company
customers other inducements that will vary over time, such as reduced points,
closing costs and interest rates.
The services offered by PHH Mortgage are integrated with the
relocation services offered by PHH Real Estate Services Corporation ("PHH Real
Estate" and, together with PHH Mortgage, the "PHH Entities"), which maintains a
network of residential realtors capable of assisting Operating Company customers
in selling their existing homes, buying new homes and, together with PHH
Mortgage, qualifying for new mortgages under the Better Choices Program. In
addition to receiving the benefits of the relocation services, Operating Company
customers would, where lawful, be paid portions of the referral fees received by
PHH Real Estate from the realtors upon closing. The Operating Companies would
not render any services to customers in respect of the relocation services of
PHH Real Estate and would not certify the homes of relocating customers as
qualifying for preferential mortgages if the customers move out of the service
territories of the Operating Companies. Nonetheless, the Operating Companies
believe that these ancillary services contribute to the primary objectives of
the Better Choices Program for the Operating Companies: (i) the promotion of
<PAGE>
energy efficiency and environmental conservation on the part of customers; and
(ii) the promotion of general customer good will in an era of anticipated
competition in retail electric service by making available financial services
products that offer significant benefits to customers. In the future the
Operating Companies might market similar services if offered by other providers
("Other Providers"). However, the Operating Companies will not market services
offered by Other Providers without receiving prior approval from the Commission
therefor.
The Operating Companies (directly or through the Service
Company) would market the Better Choices Program through direct mail programs,
articles, promotional literature, advertisements, customer kits, and mail
inserts. The mail inserts portion of the marketing activity would utilize the
excess bill space in the billing envelopes sent by the Operating Companies to
their utility customers such that the total envelope weight with the added piece
would not result in any additional postage. The Operating Companies would be
compensated for their marketing services by payment to them, where lawful, of a
portion of the referral fee received by PHH Real Estate (or Other Providers)
from the realtor upon closing. The Operating Companies would also be compensated
for their marketing services by the payment to them, where lawful, of fees based
on mortgages closed by PHH Mortgage. The Operating Companies propose to offer
the Better Choices Program for the customer relations reasons stated above,
rather than primarily to make profits, and estimate that such compensation might
only cover their costs. Currently, it is estimated that the aggregate costs of
the Better Choices Program in 1998 and 1999 would be $50,000 and $100,000,
respectively, and that aggregate revenues in those years would be $40,000 and
$100,000, respectively.
The activities of the Operating Companies with respect to the
mortgage services described herein will be limited to marketing such mortgage
services and providing home certifications only. The Operating Companies will
<PAGE>
not provide financing for such mortgages, nor will they be engaged in real
estate brokering, relocation services or other real estate related activities.
The Operating Companies' are participating in these programs solely for the
purposes of promoting and facilitating the use of energy efficiency and
environmental conservation features available in homes within each Operating
Company's service territory and developing customer loyalty in light of
anticipated competition. The PHH Entities are not affiliates of CSW or the
Operating Companies. The PHH Entities became subsidiaries of HFS Incorporated
pursuant to a merger between HFS Incorporated and the PHH Entities' parent
corporation. The PHH Entities are currently subsidiaries of Cendant Corporation,
a company created in December 1997 through the merger of HFS Incorporated and
CUC International Inc.
The Operating Companies will, within 60 days of the end of
each calendar quarter, provide to the Commission with respect to the
transactions described herein (i) a balance sheet as of the relevant quarterly
reporting date, (ii) income statements for the preceding twelve months, and
(iii) information on the transactions described herein including (a) the name of
each Operating Company providing services described herein and (b) the total
number of certifications made during the relevant period and the total dollar
amount of mortgages offered in connection therewith.
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 exempt wholesale generator
("EWG") or a foreign utility company ("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 Rule 53(a), (b) and (c) are satisfied. As set forth below, all
applicable conditions set forth in Rule 53(a) are, and, assuming the
<PAGE>
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.
Rule 54 under the Act is satisfied because Rules 53(a), (b)
and (c) are satisfied. As of April 30, 1998, CSW has invested approximately $909
million in EWGs and FUCOs or approximately 49.8% of CSW's average "consolidated
retained earnings" of $1,825 million at the end of its four fiscal quarters
ended March 31, 1998, thus satisfying Rule 53(a)(1). CSW maintains in conformity
with United States generally accepted accounting principles and makes available
the books and records required by Rule 53(a)(2). No more than 2% of the
employees of CSW's operating subsidiaries 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 CSW's
operating utility subsidiaries, satisfying 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 said Rule and making Rule 53(c) inapplicable.
Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees and expenses
payable in connection with the proposed transactions is as follows:
Counsel fees 10,000
Milbank, Tweed, Hadley & McCloy
Miscellaneous and incidental 500
expenses including travel,
telephone and postage
------
TOTAL $10,500
<PAGE>
Item 3. Applicable Statutory Provisions.
Sections 9(a), 10 and 11(b) of the Act are or may be
applicable to the proposed transactions. To the extent any other sections of the
Act may be applicable to the proposed transactions, the Operating Companies and
the Service Company hereby request appropriate orders thereunder. Section 9(a)
of the Act makes unlawful the acquisition by a subsidiary of a registered
holding company of "any . . . interest in any business" without the prior
approval of the Commission under Section 10 of the Act. Under Section 10(c)(1),
the Commission may not approve the acquisition of any interest in any business
if the proposed acquisition is "detrimental to the carrying out of the
provisions of Section 11" of the Act. Under Section 11(b)(1), the Commission
must limit the operations of a public utility holding company and its
subsidiaries to a single integrated public utility system, and 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 an integrated public utility system 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.
The Operating Companies believe that the marketing of the
Better Choices Program will provide substantial enhancement of efficiency of
energy use by residential customers and will promote customer good will, and
therefore satisfies the requirements of Sections 9(a)(1) and 10 in that it is
incidental, and economically necessary or appropriate to the Operating Companies
core business of generating, transmitting and distributing electric energy. The
Better Choices Program is also appropriate in the public interest, in that it
<PAGE>
will promote environmental conservation by residential customers, and is not
detrimental to the proper functioning of the Operating Companies and the Service
Company.
The Better Choices Program 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. The nature of the Better Choices Program and the objectives
of the Operating Companies in desiring to offer it to customers make it closely
related to the core business of the Operating Companies; therefore the marketing
of these programs to customers easily passes the "functional relationship" test.
Likewise, the Better Choices Program is fully consistent with Commission
precedent permitting subsidiaries of registered public utility companies to
promote energy management and efficiency in its customer base. New England
Electric System, Holding Co. Act Release No. 22719 (Nov. 19, 1982). In that
order, the Commission authorized New England Electric system to organize a
wholly-owned subsidiary to "perform a variety of conservation and load
management measures, including the installment of meters and controls on
equipment, the modification or replacement of inefficient equipment, an the
monitoring of energy consumption." The Better Choices Program would involve the
facilitation by the Operating Companies of third-party financing for upgraded
residential energy efficiency equipment and the certification by the Operating
Companies of the energy efficiency qualifications of the residences. Therefore,
<PAGE>
the result of these activities would be similar to the objectives sought to be
realized by New England Electric System in the order cited above, although the
activities themselves would be somewhat different.
Item 4. Regulatory Approval.
No state regulatory authority and no federal regulatory
authority, other than the Commission under the Act, have jurisdiction over the
proposed transactions.
Item 5. Procedure.
It is requested that the Commission issue and publish not
later than July 18, 1997 the requisite notice under Rule 23 with respect to the
filing of this Application, such notice to specify a date not later than August
8, 1997 as the date after which an order granting and permitting this
Application to become effective may be entered by the Commission and the
Commission enter not later than August 9, 1997 an appropriate order granting and
permitting this Application 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. 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.
Exhibits and Financial Statements.
Exhibit 1 - Preliminary opinion of Milbank, Tweed, Hadley & McCloy,
counsel to the Operating Companies and the Service
Company.
Exhibit 2 - Final or "Past Tense" opinion of Milbank, Tweed, Hadley
& McCloy, counsel to the Operating Companies and the
Service Company (to be filed with Certificate of
Notification).
Exhibit 3 - Financial Statements as of March 31, 1998.
Exhibit 4 - Proposed notice of proceeding.
Item 7. 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 program.
<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: August20, 1998.
CENTRAL POWER AND LIGHT COMPANY
By /s/ Wendy G. Hargus
Wendy G. Hargus
Treasurer
PUBLIC SERVICE COMPANY OF OKLAHOMA
By /s/ Wendy G. Hargus
Wendy G. Hargus
Treasurer
SOUTHWESTERN ELECTRIC POWER COMPANY
By /s/ Wendy G. Hargus
Wendy G. Hargus
Treasurer
WEST TEXAS UTILITIES COMPANY
By /s/ Wendy G. Hargus
Wendy G. Hargus
Treasurer
CENTRAL AND SOUTH WEST SERVICES, INC.
By /s/ Wendy G. Hargus
Wendy G. Hargus
Treasurer
<PAGE>
Exhibit Index
Exhibit Exhibit Transmission
Number _______ Method
------ -------------
1 Preliminary opinion of Milbank, Tweed,
Hadley & McCloy, counsel to the Operating
Companies and the Service Company. Previously filed
2 Final or "Past Tense" opinion of Milbank,
Tweed, Hadley & McCloy, counsel to the
Operating Companies and the Service
Company (to be filed with the Certificate
of Notification). ---
3 Financial Statements as of March 31, 1998. Electronic
4 Proposed notice of proceeding. Previously filed
INDEX EXHIBIT 3
TO
FINANCIAL STATEMENTS
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets - Per Books and Pro Forma
as of March 31, 1998
Consolidated Statement of Income for the Twelve Months Ended
March 31, 1998
Consolidated Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
CENTRAL POWER AND LIGHT COMPANY
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
PUBLIC SERVICE COMPANY OF OKLAHOMA
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
SOUTHWESTERN ELECTRIC POWER COMPANY
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
<PAGE>
INDEX
TO
FINANCIAL STATEMENTS
(CONTINUED)
WEST TEXAS UTILITIES COMPANY
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
CENTRAL AND SOUTH WEST SERVICES, INC.
Balance Sheets - Per Books and Pro Forma as of March 31, 1998
Statement of Income for the Twelve Months Ended March 31, 1998
Statement of Retained Earnings for the Twelve Months Ended
March 31, 1998
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS
STATEMENT OF CHANGES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $5,831 $5,831
Transmission 1,570 1,570
Distribution 4,566 4,566
General 1,402 1,402
Construction work in progress 179 179
Nuclear fuel 197 197
Other Diversified 264 264
-------------------------------
14,009 14,009
Less - Accumulated depreciation 5,399 5,399
-------------------------------
8,610 8,610
-------------------------------
CURRENT ASSETS
Cash and temporary cash investments 93 93
Accounts receivable 831 831
Materials and supplies, at average cost 167 167
Electric fuel inventory 70 70
Under-recovered fuel costs 32 32
Prepayments and other 75 75
-------------------------------
1,268 1,268
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 502 502
Mirror CWIP asset - net 282 282
Other non-utility investments 338 338
Securities available for sale 98 98
Income tax related regulatory assets, net 323 323
Goodwill 1,451 1,451
Other 516 516
-------------------------------
3,510 3,510
-------------------------------
$13,388 $0 $13,388
===============================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value,
authorized 350,000,000 shares;
issued and outstanding 212,300,000 shares $743 $743
Paid-in capital 1,040 1,040
Retained earnings 1,718 1,718
Accumulated other comprhensive income 35 35
-------------------------------
Total Common Stock Equity 3,536 3,536
-------------------------------
Preferred stock
Not subject to mandatory redemption 176 176
Subject to mandatory redemption 26 26
Certain Subsidiary-obligated, mandatorily
redeemable preferred securities of
subsidiary trusts holding solely
Junior Subordinated Debentures of such
Subsidiaries 335 335
Long-term debt 3,883 3,883
-------------------------------
Total Capitalization 7,956 7,956
-------------------------------
CURRENT LIABILITIES
Long-term debt/preferred stock
due within twelve months 29 29
Short-term debt 911 911
Short-term debt - CSW Credit 556 556
Loan Notes 58 58
Accounts payable 474 474
Accrued taxes 177 177
Accrued interest 106 106
Other 173 173
-------------------------------
2,484 2,484
-------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 2,434 2,434
Investment tax credits 275 275
Other 239 239
-------------------------------
2,948 2,948
-------------------------------
$13,388 $0 $13,388
===============================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
OPERATING REVENUES $5,248
----------
OPERATING EXPENSES AND TAXES
U.S. Electric fuel 1,152
U.S. Electric purchased power 84
United Kingdom Cost of Sales 1,308
Other operating 925
Maintenance 152
Depreciation and amortization 502
Taxes, other than income 193
Income taxes 161
----------
4,477
----------
OPERATING INCOME 771
----------
OTHER INCOME AND DEDUCTIONS
Other 40
Non-operating income taxes 1
----------
41
----------
INCOME BEFORE INTEREST CHARGES 812
----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 331
Distributions on trust preferred securities 24
Interest on short-term debt and other 94
Preferred stock dividends 10
Gain on reacquired preferred stock (10)
----------
449
----------
INCOME BEFORE EXTRAORDINARY ITEM 363
----------
EXTRAORDINARY ITEM - UK Windfall Profits Tax (176)
----------
NET INCOME FOR COMMON STOCK $187
==========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
RETAINED EARNINGS AT MARCH 31, 1997 $1,896
Add: Net income for common stock 187
----------
2,083
----------
Deduct: Common stock dividends 369
Retained earnings adjustment (4)
----------
RETAINED EARNINGS AT MARCH 31, 1998 $1,718
==========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
General $1 $1
Less - Accumulated depreciation (1) (1)
-------------------------------
NET PLANT 0 0
INVESTMENTS IN COMMON STOCK
OF SUBSIDIARY COMPANIES (at equity) 3,862 3,862
-------------------------------
CURRENT ASSETS
Cash and temporary cash investments 355 355
Accounts and interest receivable - Affiliated 257 257
Prepayments and other 7 7
-------------------------------
619 619
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS 22 22
-------------------------------
$4,503 $0 $4,503
===============================
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value;
authorized 350,000,000 shares;
issued and outstanding 212,300,000 shares $743 $743
Paid-in capital 1,040 1,040
Retained earnings 1,718 1,718
Unrealized holding gains and losses (4) (4)
-------------------------------
Total Common Stock Equity 3,497 3,497
-------------------------------
Long-term debt 0 0
-------------------------------
Total Capitalization 3,497 3,497
-------------------------------
CURRENT LIABILITIES
Short-term debt 911 911
Accounts payable and other 34 34
-------------------------------
945 945
-------------------------------
DEFERRED CREDITS 61 61
-------------------------------
$4,503 $0 $4,503
===============================
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
INCOME
Equity in earnings of subsidiaries
Central Power and Light Company $140
Public Service Company of Oklahoma 48
Southwestern Electric Power Company 96
West Texas Utilities Company 24
SEEBOARD U.S.A. (58)
CSW Credit, Inc. 12
CSW Energy, Inc. 5
CSW Leasing, Inc. 1
CSW International, Inc. (7)
CSW Communications, Inc. (12)
Enershop Inc. (3)
CSW Energy Services, Inc. (2)
Other Income 20
----------
264
----------
EXPENSES AND TAXES
General and administrative expenses 44
Depreciation and amortization expense --
Interest expense 48
Taxes, other than income 2
Federal income taxes (17)
----------
77
----------
NET INCOME $187
==========
<PAGE>
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $3,110 $3,110
Transmission 521 521
Distribution 1,039 1,039
General 299 299
Construction work in progress 83 83
Nuclear fuel 197 197
-------------------------------
5,249 5,249
Less - Accumulated depreciation
and amortization 1,944 1,944
-------------------------------
3,305 3,305
-------------------------------
CURRENT ASSETS
Cash 1 1
Accounts receivable 52 52
Materials and supplies, at average cost 63 63
Fuel inventory 19 19
Under-recovered fuel costs 1 1
Prepayments (2) (2)
-------------------------------
134 134
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS
Deferred STP costs 484 484
Mirror CWIP asset 282 282
Income tax related regulatory assets, net 383 383
Nuclear decommissioning trust 56 56
Other 96 96
-------------------------------
1,301 1,301
-------------------------------
$4,740 $0 $4,740
===============================
<PAGE>
CENTRAL POWER AND LIGHT COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustment Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value;
authorized 12,000,000 shares;
issued and outstanding 6,755,535 shares $169 $169
Paid-in capital 405 405
Retained earnings 805 805
-------------------------------
Total common stock equity 1,379 1,379
Preferred stock
Not subject to mandatory redemption 163 163
CPL-obligated, mandatorily redeemable
preferred securities of subsidiary trusts
holding solely Junior Subordinated
Debentures of CPL 150 150
Long-term debt 1,304 1,304
-------------------------------
Total capitalization 2,996 2,996
-------------------------------
CURRENT LIABILITIES
Advances from affiliates 193 193
Accounts payable 89 89
Accrued taxes 12 12
Accumulated deferred income taxes 17 17
Accrued interest 30 30
Refund due customers 5 5
Other 14 14
-------------------------------
360 360
-------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 1,229 1,229
Investment tax credits 141 141
Other 14 14
-------------------------------
1,384 1,384
-------------------------------
$4,740 $0 $4,740
===============================
<PAGE>
CENTRAL POWER AND LIGHT COMPANY
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
ELECTRIC OPERATING REVENUE $1,336
----------
OPERATING EXPENSES AND TAXES
Fuel 391
Purchased power 47
Other operating 227
Maintenance 58
Depreciation and amortization 175
Taxes, other than income 81
Income taxes 89
----------
1,068
----------
OPERATING INCOME 268
----------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used during
construction 1
Other 6
Non-operating income taxes 4
----------
10
----------
INCOME BEFORE INTEREST CHARGES 278
----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 102
Distributions on trust preferred securities 11
Interest on short-term debt and other 22
Allowance for borrowed funds used during
construction (2)
----------
133
----------
NET INCOME 145
Less: preferred stock dividends 8
Gain on reacquired preferred stock 3
----------
NET INCOME FOR COMMON STOCK $140
==========
<PAGE>
CENTRAL POWER AND LIGHT COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
RETAINED EARNINGS AT MARCH 31, 1997 $839
Add: Net income (loss) for common stock 140
----------
979
Deduct: Common stock dividends 174
----------
RETAINED EARNINGS AT MARCH 31, 1998 $805
==========
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $909 $909
Transmission 376 376
Distribution 828 828
General 203 203
Construction work in progress 37 37
-------------------------------
2,353 2,353
Less - Accumulated depreciation 1,049 1,049
-------------------------------
1,304 1,304
-------------------------------
CURRENT ASSETS
Cash 3 3
Accounts receivable 40 40
Materials and supplies, at average cost 32 32
Fuel inventory 11 11
Accumulated deferred income taxes 1 1
Prepayments and other 4 4
-------------------------------
91 91
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS 54 54
-------------------------------
$1,449 $0 $1,449
===============================
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $15 par value;
authorized 11,000,000 shares;
issued 10,482,000 shares;
outstanding 9,013,000 shares $157 $157
Paid-in capital 180 180
Retained earnings 133 133
-------------------------------
Total common stock equity 470 470
Preferred stock 5 5
PSO-obligated, mandatorily redeemable
preferred securities of subsidiary trusts
holding solely Junior Subordinated
Debentures of PSO 75 75
Long-term debt 397 397
-------------------------------
Total capitalization 947 947
-------------------------------
CURRENT LIABILITIES
Long-term debt due within twelve months 25 25
Advances from affiliates 32 32
Payables to affilliates 18 18
Accounts payable 38 38
Payables to customers 19 19
Accrued taxes 4 4
Accrued interest 11 11
Other 7 7
-------------------------------
154 154
-------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 260 260
Investment tax credits 41 41
Income tax related regulatory
liabilities, net 41 41
Other 6 6
-------------------------------
348 348
-------------------------------
$1,449 $0 $1,449
===============================
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
ELECTRIC OPERATING REVENUE $709
----------
OPERATING EXPENSES AND TAXES
Fuel 278
Purchased power 53
Other operating 135
Maintenance 35
Depreciation and amortization 80
Taxes, other than income 28
Income taxes 20
----------
629
----------
OPERATING INCOME 80
----------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used during
construction 1
Other (1)
Non-operating income 2
----------
2
----------
INCOME BEFORE INTEREST CHARGES 82
----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 30
Distributions on trust preferred securities 5
Interest on short-term debt and other 5
Allowance for borrowed funds used during
construction (1)
----------
39
----------
NET INCOME 43
Less: preferred stock dividends --
Gain on reacquisition of preferred stock 4
----------
NET INCOME FOR COMMON STOCK $47
==========
<PAGE>
PUBLIC SERVICE COMPANY OF OKLAHOMA
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
RETAINED EARNINGS AT MARCH 31, 1997 $154
Add: Net income (loss) for common stock 47
----------
201
Deduct: Common stock dividends 68
----------
RETAINED EARNINGS AT MARCH 31, 1998 $133
==========
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $1,394 $1,394
Transmission 463 463
Distribution 889 889
General 312 312
Construction work in progress 41 41
-------------------------------
3,099 3,099
Less - Accumulated depreciation 1,250 1,250
-------------------------------
1,849 1,849
-------------------------------
CURRENT ASSETS
Cash and temporary cash investments 8 8
Accounts receivable 70 70
Materials and supplies, at average costs 25 25
Fuel inventory 27 27
Under-recovered fuel costs 12 12
Prepayments and other 15 15
-------------------------------
157 157
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS 75 75
-------------------------------
$2,081 $0 $2,081
===============================
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $18 par value;
authorized 7,600,000 shares;
issued and outstanding 7,536,640 shares $136 $136
Paid-in capital 245 245
Retained earnings 326 326
-------------------------------
Total common stock equity 707 707
Preferred stock
Not subject to mandatory redemption 5 5
Subject to mandatory redemption 26 26
SWEPCO-obligated, mandatorily redeemable
preferred securities of subsidiary trusts
holding solely Junior Subordinated
Debentures of SWEPCO 110 110
Long-term debt 547 547
-------------------------------
Total capitalization 1,395 1,395
-------------------------------
CURRENT LIABILITIES
Long-term debt and preferred stock due
within twelve months 4 4
Advances from affiliates 26 26
Accounts payable 51 51
Payable to affiliates 57 57
Customer deposits 15 15
Accrued taxes 26 26
Accumulated deferred income taxes 4 4
Accrued interest 12 12
Other 11 11
-------------------------------
206 206
-------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 395 395
Investment tax credits 66 66
Income tax related regulatory liabilities, net 9 9
Other 10 10
-------------------------------
480 480
-------------------------------
$2,081 $0 $2,081
===============================
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
ELECTRIC OPERATING REVENUE $934
----------
OPERATING EXPENSES AND TAXES
Fuel 371
Purchased power 27
Other Operating 156
Maintenance 45
Depreciation and amortization 97
Taxes, other than income 56
Income taxes 40
----------
792
----------
OPERATING INCOME 142
----------
OTHER INCOME AND DEDUCTIONS
Allowance for equity funds used during
construction 2
Other 2
Non-operating income taxes 2
----------
6
----------
INCOME BEFORE INTEREST CHARGES 148
----------
INTEREST AND OTHER CHARGES
Interest on long-term debt 40
Distributions on trust preferred securities 8
Interest on short-term debt and other 5
Allowance for borrowed funds used during
construction (1)
----------
52
----------
NET INCOME 96
Less: preferred stock dividends 2
Gain on reacquired preferred stock 2
----------
NET INCOME FOR COMMON STOCK $96
==========
<PAGE>
SOUTHWESTERN ELECTRIC POWER COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
RETAINED EARNINGS AT MARCH 31, 1997 $320
Add: Net income (loss) for common stock 96
----------
416
Deduct: Common stock dividends 90
----------
RETAINED EARNINGS AT MARCH 31, 1998 $326
==========
<PAGE>
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
FIXED ASSETS
Electric utility plant
Production $418 $418
Transmission 210 210
Distribution 367 367
General 105 105
Construction work in progress 19 19
-------------------------------
1,119 1,119
Less - Accumulated depreciation 451 451
-------------------------------
668 668
-------------------------------
CURRENT ASSETS
Cash 3 3
Accounts receivable 22 22
Materials and supplies, at average cost 14 14
Fuel inventory 12 12
Under-recovered fuel costs 12 12
Prepayments and other 7 7
-------------------------------
70 70
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS
Deferred Oklaunion costs 18 18
Restructuring costs 8 8
Other 33 33
-------------------------------
59 59
-------------------------------
$797 $0 $797
===============================
<PAGE>
WEST TEXAS UTILITIES COMPANY
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $25 par value;
authorized 7,800,000 shares;
issued and outstanding 5,488,560 shares $137 $137
Paid-in capital 2 2
Retained earnings 119 119
-------------------------------
Total common stock equity 258 258
Preferred stock
Not subject to mandatory redemption 2 2
Long-term debt 280 280
-------------------------------
Total capitalization 540 540
-------------------------------
CURRENT LIABILITIES
Advances from affiliates 6 6
Payables to affiliates 14 14
Accounts payable 26 26
Accrued taxes 9 9
Accrued interest 8 8
Other 4 4
-------------------------------
67 67
-------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes 146 146
Investment tax credits 28 28
Investment tax related regulatory liabilities,
net 1 11
Other 5 5
-------------------------------
190 190
-------------------------------
$797 $0 $797
===============================
<PAGE>
WEST TEXAS UTILITIES COMPANY
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
ELECTRIC OPERATING REVENUE $389
----------
OPERATING EXPENSES AND TAXES
Fuel 112
Purchased power 47
Other Operating 95
Maintenance 14
Depreciation and amortization 42
Taxes, other than income 24
Income taxes 10
----------
344
----------
OPERATING INCOME 45
----------
OTHER INCOME AND DEDUCTIONS
Other 2
----------
INCOME BEFORE INTEREST CHARGES 47
----------
INTEREST CHARGES
Interest on long-term debt 20
Interest on short-term debt and other 5
Allowance for borrowed funds used during
construction (1)
----------
24
----------
NET INCOME 23
Less: preferred stock dividends --
Gain on reacquisition of preferred stock 1
----------
NET INCOME FOR COMMON STOCK $24
==========
<PAGE>
WEST TEXAS UTILITIES COMPANY
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
RETAINED EARNINGS AT MARCH 31, 1997 $121
Add: Net income (loss) for common stock 24
----------
145
Deduct: Common stock dividends 26
----------
RETAINED EARNINGS AT MARCH 31, 1998 $119
==========
<PAGE>
CENTRAL AND SOUTH WEST SERVICES, INC.
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
ASSETS
General plant $120 $120
Less - Accumulated depreciation 36 36
-------------------------------
84 84
-------------------------------
CURRENT ASSETS
Cash and temporary investments 1 1
Accounts receivable affiliated 20 20
Accounts receivable non-affiliated 2 2
-------------------------------
23 23
-------------------------------
DEFERRED CHARGES AND OTHER ASSETS 19 19
-------------------------------
$126 $0 $126
===============================
<PAGE>
CENTRAL AND SOUTH WEST SERVICES, INC.
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF MARCH 31, 1998
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------------------------------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Long-term debt $30 $30
-------------------------------
Total capitalization 30 30
-------------------------------
CURRENT LIABILITIES
Accounts payable non-affiliated 8 8
Advances from affiliates and other 65 65
-------------------------------
73 73
-------------------------------
DEFERRED CREDITS 23 23
-------------------------------
$126 $0 $126
===============================
<PAGE>
CENTRAL AND SOUTH WEST SERVICES, INC.
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(Millions)
OPERATING REVENUE $0
----------
OPERATING EXPENSES AND TAXES
Fuel Expense 2
Other Operating 185
Maintenance 9
Depreciation and amortization 9
Taxes, other than income taxes 6
Income taxes 1
----------
212
----------
OPERATING INCOME (212)
----------
OTHER INCOME AND DEDUCTIONS 218
----------
INCOME BEFORE INTEREST CHARGES 6
----------
INTEREST CHARGES 6
----------
NET INCOME FOR COMMON STOCK $0
==========
<PAGE>
CENTRAL AND SOUTH WEST SERVICES, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1998
UNAUDITED
(millions)
RETAINED EARNINGS AT MARCH 31, 1997 $0
Add: Net income (loss) for common stock 0
----------
RETAINED EARNINGS AT MARCH 31, 1998 $0
==========
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS
MARCH 31, 1998
UNAUDITED
(Millions)
DR CR
---------------------
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
None
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
None
CENTRAL POWER AND LIGHT COMPANY
None
PUBLIC SERVICE COMPANY OF OKLAHOMA
None
SOUTHWESTERN ELECTRIC POWER COMPANY
None
WEST TEXAS UTILITIES COMPANY
None
CENTRAL AND SOUTH WEST SERVICES, INC.
None
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES
There have been no significant changes in the financial statements of
Central and South West Corporation and subsidiary companies subsequent to
March 31, 1998, other than in the ordinary course of business. However, on
May 28, 1998 CSW's shareholders voted on and approved the proposed merger with
American Electric Power Company, Inc.
<PAGE>
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes to consolidated financial statements included in Central and
South West Corporation's 1997 Combined Annual Report on Form 10-K are hereby
incorporated by reference and made a part of this report.
Page
Reference
1997 Combined Annual Report on Form 10-K pages 2-40 through 2-75
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