<PAGE> 1
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 POWER AND LIGHT COMPANY
539 North Carancahua Street
Corpus Christi, Texas 78401
(Name of company filing this statement and address
of principal executive office)
_________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
_________________________
Shirley S. Briones, Treasurer
Central Power and Light Company
539 North Carancahua Street
Corpus Christi, Texas 78401
Stephen J. McDonnell, 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)
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Central Power and Light Company (the "Company"), a Texas corporation,
is a wholly-owned electric public utility subsidiary of 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 (the "Act").
Item 1. Description of Proposed Transaction.
The Company is seeking authority through December 31, 1997, to incur
obligations in connection with the proposed issuance by Matagorda County
Navigation District Number One (Texas) (the "District") in one or more series
of up to $475,000,000 aggregate principal amount of Pollution Control Revenue
Bonds of which (i) up to $325,000,000 aggregate principal amount may be
Pollution Control Revenue Refunding Bonds (Central Power and Light Company
Project) (the "Refunding Bonds"), and (ii) up to $150,000,000 aggregate
principal amount may be Pollution Control Revenue Bonds and/or Solid Waste
Revenue Bonds (Central Power and Light Company Project) (the "New Money Bonds"
and, together with the Refunding Bonds, the "New Bonds"). The issuance of New
Money Bonds may be combined with the issuance of Refunding Bonds.
The purpose of the issuance of the Refunding Bonds is to reacquire
all or a portion of the District's (i) $68,870,000 of outstanding 10-1/8%
Pollution Control Revenue Bonds (Central Power and Light Company Project)
Series 1984 (the "Series 1984 Bonds"), (ii) $111,700,000 of outstanding 7-1/2%
Collateralized Pollution Control Revenue Bonds (Central Power and Light
Company Project) Series 1984A (the "Series 1984A Bonds"), (iii) $31,765,000 of
outstanding 9-3/4% Collateralized Pollution Control Revenue Bonds (Central
Power and Light Company Project) Series 1985A (the "Series 1985A Bonds"),
(iv) $60,000,000 of outstanding 7-7/8% Pollution Control Revenue Bonds
(Central Power and Light Company Project) Series 1986 (the "Series 1986
Bonds") and (v) $50,000,000 of outstanding 7-1/2% Collateralized Pollution
<PAGE> 3
Control Revenue Bonds (Central Power and Light Company Project) Series 1990
(the "Series 1990 Bonds" and, together with the Series 1984, Series 1984A,
Series 1985A and Series 1986 Bonds, the "Old Bonds"). The purpose of the
issuance of the New Money Bonds is to reimburse the Company's treasury for any
expenditures made that qualify for tax-exempt financing or to provide for
current solid waste expenditures. See "Use of Proceeds" below.
As discussed below under the headings "Managing Interest Rates" and
"Forward Underwritings", the Company also seeks authorization to manage
interest rate risk or lower its interest rate costs through the use of forward
refinancing techniques, and through the use of interest rate swaps, including
forward swaps, caps and floors through the life of the corresponding Old Bonds
and/or New Bonds.
The Old Bonds
In October 1984, December 1984 and July 1985, the District issued the
Series 1984 Bonds, Series 1984A Bonds and the Series 1985A Bonds,
respectively, pursuant to Indentures of Trust between the District and
NationsBank of Texas, N.A., Dallas, Texas (successor to RepublicBank Dallas,
National Association), as Trustee. In December 1986, the District issued the
Series 1986 Bonds pursuant to the Indenture of Trust between the District and
The Bank of New York, as Trustee. In March 1990 the District issued the
Series 1990 Bonds pursuant to the Indenture of Trust between the District and
Texas Commerce Bank - Dallas, N.A., Dallas, Texas (successor to Ameritrust
Texas National Association), as Trustee. The Indentures of Trust for the Old
Bonds are referred to collectively herein as the "Indentures". NationsBank of
Texas, N.A., Dallas, Texas, The Bank of New York and Texas Commerce Bank -
Dallas, N.A. are referred to collectively herein as the "Trustees".
<PAGE> 4
Certain terms of the Indentures include the following:
Interest
Series Rate Maturity Date First Redemption Date (1)
(per annum)
1984 10-1/8% October 15, 2014 October 15, 1995
1984A 7-1/2% December 15, 2014 December 15, 1999
1985A 9-3/4% July 1, 2015 July 1, 1995
1986 7-7/8% December 1, 2016 December 1, 1996
1990 7-1/2% March 1, 2020 March 1, 2000
(1) The Indentures provide that the bonds of each series may not be redeemed
prior to its First Redemption Date and thereafter may be redeemed at the
then applicable redemption price plus accrued interest to the redemption
date.
The Company and the District entered into Installment Sale Agreements
(the "Sale Agreements") between the District and the Company to provide for
the issuance of the Old Bonds. In connection with the issuance of the New
Bonds, the Company will (i) amend the Sale Agreements, (ii) enter into
agreements with substantially the same terms as the Sale Agreements and/or
(iii) enter into new installment sale agreements (each, an "Amended Sale
Agreement").
The Old Bonds were originally issued to finance the cost of the
acquisition of certain pollution control and solid waste disposal facilities
(the "Facilities") at the South Texas Project Electric Generating Station (the
"Plant") between Bay City and Palacios, Texas. The Plant consists of two
nuclear generating units each with the capability of generating 1250 megawatts
of power. Unit 1 began commercial operation in August 1988 and Unit 2 began
commercial operation in June 1989. The Company owns a 25.2% undivided
interest in the Plant. Except where the context otherwise indicates, the term
"Facilities" herein refers to the Company's portion of the pollution control
and solid waste disposal facilities at the Plant.
<PAGE> 5
Terms of the New Bonds
The New Bonds will bear interest at a fixed or floating rate, may
or may not be secured with First Mortgage Bonds and will mature in not less
than one nor more than forty years. The interest rate, redemption provisions
and other terms and conditions applicable to the New Bonds will be determined
by negotiations between the Company and one or more investment banking firms
that will purchase or underwrite the New Bonds (the "Purchasers"). It is
anticipated that (i) the New Bonds will be redeemable at any time in whole at
the option of the Company at the principal amount thereof plus accrued
interest, upon the occurrence of various extraordinary events specified in the
Amended Sale Agreements, as supplemented, or similar documents utilized in
connection with the issuance of the New Bonds, and the Indentures as amended
by one or more supplements (each a "Supplemental Indenture"), or in the case
of the New Money Bonds, a new indenture (the "New Indenture"), relating
generally to (a) destruction or condemnation of the Facilities or the Plant,
(b) conditions rendering operation of the Facilities or the Plant infeasible,
(c) the imposition on the Company or the District of unreasonable burdens or
excessive liabilities with respect to the Facilities or the Plant, or (d) if a
constitutional amendment or legislative, administrative or judicial action
causes the obligations of the Company under the Sale Agreements to become
unenforceable or impossible of performance in any material respect with the
expressed intention of the parties; (ii) the New Bonds will be subject to
optional redemption in whole or in part at times and with premiums to be
determined by negotiations between the Company and the Purchaser(s); and (iii)
the New Bonds will be subject to special mandatory redemption, in whole or in
part, at the principal amount thereof plus accrued interest, in the event the
interest on the New Bonds becomes subject to federal income tax.
<PAGE> 6
Pursuant to the Sale Agreements, the Company transferred the
Facilities to the District, which financed the acquisition and related costs
thereof with the proceeds of the Old Bonds. The Sale Agreements contain
commitments by the Company to pay to the District at specified times amounts
sufficient to enable the District to pay debt service on the Old Bonds,
including principal, interest and redemption premium, if any.
The Company may obtain credit enhancement for the New Bonds, which
could include bond insurance, a letter of credit or a liquidity facility. Due
to heightened credit sensitivity in the short-term tax-exempt market, the
Company anticipates it may be required to provide credit enhancement if it
were to issue floating rate bonds, whereas credit enhancement would be a
purely economic decision for the Company if it were to issue fixed rate bonds.
The Company anticipates that even though it would be required to pay a premium
or fee to obtain the credit enhancement, it would realize a net benefit
through a reduced interest rate on the New Bonds. The Company would obtain
credit enhancement only if it determines it would be economically beneficial
to do so.
If bond insurance is obtained, the Company may be required to enter
into an agreement with the insurer and an escrow agent pursuant to which the
Company would be obligated to make payments of certain amounts into an escrow
fund upon the Company's failure to maintain certain financial ratios and on
the occurrence of certain other events. Amounts held in such an escrow fund
would be payable to the insurer as an indemnity for any amounts paid by the
insurer with respect to principal or interest on the New Bonds. The New Bonds
may also contain other terms and conditions deemed necessary or desirable to
take maximum advantage of the then current market conditions.
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The Company also requests authority to issue First Mortgage Bonds
as security for the payment of the New Bonds, at its option, depending upon
market conditions at the time of issuance of the New Bonds. The Company will
issue First Mortgage Bonds, subject to applicable indenture restrictions upon
the issuance thereof, by executing a Supplemental Indenture to its Mortgage
Indenture dated November 1, 1943 to the First National Bank of Chicago and
A.H. Bohm (the "Mortgage Indenture"). Such First Mortgage Bonds will be
issued to the Trustee for the New Bonds pursuant to the Mortgage Indenture.
The First Mortgage Bonds will be held by the Trustee solely for the benefit of
the holders of the New Bonds and will not be transferable except to a
successor Trustee. The First Mortgage Bonds will be issued in the exact
amount and have substantially the same terms as the New Bonds. To the extent
payments in respect of the New Bonds are made in accordance with their terms,
corresponding payment obligations under the First Mortgage Bonds will be
deemed satisfied.
As applied to any First Mortgage Bonds that may be issued as
collateral for the New Bonds, the optional redemption provisions described
herein may deviate from the Securities and Exchange Commission's (the
"Commission") Statement of Policy Regarding First Mortgage Bonds Subject to
the Public Utility Holding Company Act of 1935, Release No. 35-13105, 21 Fed.
Reg. 1286 (1956), as supplemented by Commission Release No. 35-16369, 34 Fed.
Reg. 9553 (1969) (together, the "Statement of Policy"), in that the First
Mortgage Bonds may be subject to a redemption limitation of up to fifteen
years while the Statement of Policy requires that first mortgage bonds be
subject to redemption at any time upon reasonable notice and with reasonable
redemption premiums, if any. The Company has been advised by several
investment banks that purchasers of fixed-rate, tax-exempt bonds generally
<PAGE> 8
expect a ten year redemption limitation and that failure to include such a
limitation may cause the New Bonds to be unmarketable to a large pool of such
purchasers, and may result in an increase in the effective interest cost to
the Company. In consideration of current and future market expectations with
regard to redemption limitations, the Company hereby requests that the
Commission approve the above-described deviation from the Statement of Policy
so that the First Mortgage Bonds, and therefore the New Bonds, may contain up
to a 15 year optional redemption limitation. As applied to the First Mortgage
Bonds, the sinking fund provisions described herein may also deviate from the
Statement of Policy, in that the First Mortgage Bonds will not have sinking
fund provisions unless the New Bonds have sinking fund provisions. The
Statement of Policy requires the Company to deposit annually with the trustee
for the First Mortgage Bonds an amount of cash equal to not less than
one percent of the aggregate principal amount of Bonds of all series
authenticated under the First Mortgage Bond indenture. The Company has been
advised by several investment bankers that purchasers of private activity
bonds generally do not expect sinking fund provisions. In light of market
expectations, the Company hereby requests that the Commission approve the
above-described deviation from the Statement of Policy so that the First
Mortgage Bonds, and therefore the New Bonds, may omit sinking fund provisions.
The Company also requests a waiver from the requirement in the Statement of
Policy for a limitation on dividends. The Company believes that dividend
limitations, if any, are a matter best left to the financial marketplace and
the state regulatory commissions. The limitation on dividends provision in
the Statement of Policy was adopted when accounting standards and ratemaking
practices were very different from today. For example, ratemaking
disallowances on grounds of alleged lack of prudence or alleged excess
<PAGE> 9
capacity have become more prevalent today. Under today's accounting
requirements, disallowances might result in charges to the income statement
and current retained earnings, which could preclude the payment of dividends
on common stock.
All of the Company's bonds of Series AA and prior contain dividend
restrictions in the supplemental indentures which will continue to limit the
Company's dividend payments until all such bonds mature or are retired. In
light of these dividend restrictions and provisions in the Company's Articles
of Incorporation restricting the payment of dividends to a percentage of net
income available for dividends on common stock if the Company's common stock
equity is not maintained at a certain percentage of total capitalization, the
Company believes that the omission of the limitation on dividends as
contemplated by the Statement of Policy will not materially and adversely
affect the holders of the New Bonds. The terms and provisions of the First
Mortgage Bonds will not otherwise materially deviate from the Statement of
Policy.
Messrs. McCall, Parkhurst & Horton, who are anticipated to act as
Bond Counsel, have informed the Company that they will be prepared to give a
legal opinion that interest on the New Bonds will be excluded from gross
income for federal income tax purposes.
The Company anticipates that the New Bonds will be sold by the
District pursuant to a Bond Purchase Agreement (the "Purchase Agreement")
between the District and one or more Purchasers. The Company may or may not
be a party to the Purchase Agreement, but if it is not a party, the Purchase
Agreement will be subject to approval by the Company and the Company will
enter into a letter of representation with the Purchasers, containing various
warranties, representations and indemnities upon which the Purchasers will
rely in entering into the Purchase Agreement.
<PAGE> 10
The Company requests authority to enter into negotiations with
Purchasers with respect to the interest rate, redemption provisions and other
terms and conditions applicable to the New Bonds and to set the terms of the
New Bonds subject to the receipt of an order under the Act if an order has not
been issued when the Company enters into the Purchase Agreement.
Use of Proceeds
The proceeds of the offering of the New Bonds will be used to
(i) redeem the Old Bonds pursuant to the terms of the Indentures or reacquire
all or a portion of the Old Bonds through open market and negotiated
transactions or pursuant to one or more tender offers (the "Reacquisition")
and (ii) reimburse the Company's treasury for any expenditures made that
qualify for tax-exempt financing or to provide for current solid waste
expenditures. The proceeds of any offering may also be used to reimburse the
Company's treasury for Old Bonds previously acquired. The Company may be
required to deposit the proceeds of the New Bonds with the Trustee in
connection with the Reacquisition of the Old Bonds. Any additional funds
required to pay for the Reacquisition of Old Bonds and the costs of issuance
of the New Bonds will be provided by the Company from internally generated
funds and short-term borrowings pursuant to orders of the Commission dated
March 31, 1993 (HCAR No. 35-25777), September 28, 1993 (HCAR No. 35-25897),
March 18, 1994 (HCAR No. 35-26007) and June 15, 1994 (HCAR No. 35-26066), or
subsequent orders (the "Short-Term Borrowing Orders").
Since the Old Bonds were issued, there has been a reduction in
long-term interest rates. The Company believes that the Reacquisition of the
Old Bonds and the issuance of the Refunding Bonds would result in substantial
savings to the Company and benefit the Company's ratepayers. Based on current
market conditions, it is estimated that the District could issue the Refunding
<PAGE> 11
Bonds with up to a 40 year maturity at an interest rate of approximately
6.90%, depending on market conditions and maturity. As set forth in Exhibit
11 hereto, the acquisition of the Old Bonds and the issuance of the Refunding
Bonds would result in an estimated annual aggregate reduction in interest
costs to the Company of $3,805,000, if all of the Old Bonds were reacquired,
including the amortization of the premium to be paid on the Old Bonds over a
30 year life of the New Bonds. Total interest savings to the Company over the
remaining life of the Old Bonds would aggregate $75,532,000. The Company will
not permit the issuance of the Refunding Bonds unless the estimated net
present value savings (derived from the net difference between interest
payments on any Refunding Bonds and the Old Bonds) is, on an after-tax basis,
greater than the present value of all costs to acquire the Old Bonds and issue
the Refunding Bonds, assuming an appropriate discount rate. Such discount
rate would be based on the estimated after-tax interest rate on the Refunding
Bonds.
Neither CSW, CPL nor any subsidiary thereof has a direct or
indirect ownership interest in an "exempt wholesale generator" ("EWG") or
"foreign utility company" ("FUCO") as defined in Sections 32 and 33 of the Act
and none of the proceeds from the sale of New Bonds will be used by CSW or any
subsidiary thereof for the direct or indirect acquisition of an interest in an
EWG or FUCO. Further, neither CSW, CPL nor any subsidiary thereof, now or as
a consequence of the transactions proposed herein, is or will be a party to,
or has or will have any rights under a service, sales or construction
agreement with an EWG or a FUCO. Therefore, Rule 54 does not apply.
Repurchase of Old Bonds
The Company is also seeking authority to acquire any or all of one or
more series of the Old Bonds from time to time through December 31, 1997 in
open market and negotiated transactions. Any such acquisitions will be made
<PAGE> 12
with internally generated funds or short-term borrowings pursuant to the
Short-Term Borrowing Orders. Acquisitions would only be made if the Company
determined that it would be in the best interest of the Company to do so based
on, among other things, the interest rate of the securities, the Company's
financing plans and capital structure and the Company's then current cash
position. The Company is seeking authority to make purchases of Old Bonds in
light of opportunities which arise to make such purchases at a time when the
Company is not engaged in a refinancing or to purchase Old Bonds which are not
redeemable pursuant to terms of its Indenture. The Company will not acquire
Old Bonds unless it believes that net present value savings, on an after-tax
basis, greater than the present value of all costs to acquire such securities,
assuming an appropriate discount rate, could be generated based on then
current interest rates if the Company were to finance the purchase of the Old
Bonds.
Tender Offer
If the Company determines to acquire the Old Bonds, it may do so
through a tender offer (the "Tender Offer") to the holders of the Old Bonds
("the "Old Bondholders") to purchase all or a portion of one or more series of
the Old Bonds for cash. The Tender Offer may be conditioned upon receipt of a
certain percentage of the outstanding Old Bonds. The Tender Offer price would
be based on a number of factors, including the coupon rate of the Old Bonds,
the date of expiration of the refunding protection of the Old Bonds (on which
date the Company, depending on the prevailing interest rates, may be presumed
to redeem the Old Bonds), the redemption price on such expiration date and the
then current market rates for similar bonds, all of which are relevant to the
decision of an informed Old Bondholder as to whether to hold or sell the Old
Bonds. Old Bondholders may be offered a fixed price for their Old Bonds, or
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the Tender Offer may be a "fixed spread" offer pursuant to which the Company
will offer a price based upon a fixed spread over comparable treasuries. The
Tender Offer will be conducted in accordance with standard market practice,
i.e., the length of time the offer will be held open, the method of
solicitation, etc., at the time of the Tender Offer. The Company requests
authority to commence a Tender Offer to Old Bondholders prior to receipt of an
order under the Act, provided that completion of the Tender Offer is subject
to receipt of an order.
The Company proposes to retain an investment banking firm (to be
chosen) experienced in such matters to act as the Company's tender agent and
dealer-manager for any Tender Offer. The dealer-manager will act as the
Company's agent in disseminating the Tender Offer and receiving responses
thereto. As a dealer-manager, the investment banking firm will not itself
become obligated to purchase or sell any of the Old Bonds. The dealer-
manager's fee will be determined following negotiation and investigation of
fees in similar transactions and will include reasonable out-of-pocket
expenses and attorneys' fees. It is anticipated that the Company will be
required, as is customary, to indemnify the dealer-manager for certain
liabilities. The Company may also retain a depositary to hold the tendered
Old Bonds pending the purchase thereof and/or an information agent to assist
in the Tender Offer. In the event that an agreement with any of the
aforementioned parties is negotiated, the Company will file by amendment
drafts of the dealer-manager agreement, depositary agreement and/or
information agent agreement.
Managing Interest Rates
The Company proposes to manage interest rate risk, as appropriate,
through the use of hedging products, including interest rate swaps, forward
swaps, caps, collars and floors, and through forward transactions as described
<PAGE> 14
under the heading "Forward Underwritings" below. The Company may also use
interest rate swaps for the purpose of effectively lowering its interest costs
on one of more series of Old Bonds and/or New Bonds. The Company requests
authority to enter into the foregoing types of transactions from time to time
either in connection with the issuance of New Bonds or otherwise.
The Company could use the interest rate swap market to hedge against
changes in the interest rates of variable rate securities by entering into a
fixed-for-floating swap arrangement (the Company pays a fixed rate to a
counterparty and receives, in return, a floating rate). In addition, the
Company may be able to realize a lower all-in rate in the synthetic fixed
market than in the natural cash fixed market. A synthetic fixed rate issuance
is achieved by issuing variable rate securities and simultaneously entering
into a fixed-for-floating interest rate swap. The variable rate amounts
received by the Company on the swap are used to pay the variable rate interest
on the bonds, thereby leaving the Company with a net fixed rate payment. A
notional cash fixed rate issuance is achieved by simply issuing fixed rate
securities. Currently, a synthetic fixed rate for a 30 year maturity is
approximately 50 basis points less than the natural cash fixed market. This
spread between synthetic and natural fixed will vary with conditions in the
municipal, treasury, and interest rate swap markets.
The Company may also issue fixed rate New Bonds and then seek to
effectively lower its interest costs on such New Bonds by entering into a
floating-for-fixed interest rate swap arrangement (the Company pays a floating
rate to a counterparty and receives, in return, a fixed rate). In this
manner, the Company would hope to take advantage of interest cost savings
associated with short-term interest rates. The floating rate payable by the
Company would be based upon a market index, such as LIBOR (London Interbank
<PAGE> 15
Deposit Offered Rate), Federal Funds, reserve-adjusted certificate of deposit
or commercial paper rates or the J.J. Kenny or PSA tax-exempt indices. The
Company may be required to pay a margin in addition to such floating rate,
which margin shall not be greater than 5%. In such event, the fixed interest
rate payable by the counterparty would include the amount of such margin.
None of the interest rate swaps would be "leveraged." This means
that changes in interest payments or receipts under any interest rate swap due
to changes in the floating rate index used in the swap will not exceed the
product of the change in such index and the notional amount of that swap. In
no event would the aggregate notional amount of the interest rate swaps, at
any one time, exceed $475,000,000.
The interest rate swaps mentioned above may also be forward swaps,
whereby a swap agreement is entered into but the exchange of fixed and
floating payments does not begin until a future date, which is generally the
call date on outstanding bonds.
It is anticipated that any interest rate swap agreement entered into
would provide that redemption, reacquisition or maturation of the
corresponding Old Bonds and/or New Bonds would terminate the Company's
obligations to the counterparty under the swap agreement for a corresponding
notional amount. If an interest rate swap with automatic termination is not
available or economically appropriate, the Company will enter into a swap
permitting termination at the option of the Company and the Company would
exercise such option for a corresponding notional amount upon the redemption,
reacquisition or maturation of the corresponding Old Bonds and/or New Bonds
The Company's termination of its obligations under the interest rate swap
agreement may require the Company to pay an additional amount under the terms
of the swap agreement, which may be substantial depending upon market
conditions at the time of the termination.
<PAGE> 16
In order to obtain flexibility in the event that market conditions
with respect to interest rates change after the Company has entered into an
interest rate swap agreement as described herein, the Company also requests
authorization to enter into reverse (or offsetting) interest rate swap
agreements, or other contractual arrangements, in order to limit the impact of
anticipated movements in interest rates or offset the effect of existing
interest rate swap agreements.
If the Company issues variable rate New Bonds, it may elect to
purchase an interest rate cap to limit its exposure to rising interest rates.
The Company may additionally sell an interest rate floor to either lower the
cost of variable rate debt, or in conjunction with an interest rate cap, to
reduce the cost of the cap.
Forward Underwritings
Under a forward underwriting, the Company would price the New Bonds
based upon then current rates. The settlement date, however, would not occur
until 90 days or less prior to the date at which the Old Bonds become
refundable pursuant to terms of the Indenture. A forward underwriting locks
in refunding savings with no incremental market risk to the Company until such
Old Bonds become refundable. The Company would eliminate all exposure to
future movements in its tax-exempt refunding rates. Although the Company may
elect a different term, historical forward commitment underwriting premiums
indicate the Company will have to pay up to approximately 25, 35, or 60 basis
points on a 6, 12, or 18 month forward transaction, respectively, subject to
changes in market conditions. The Company would only enter into a forward
transaction if it appears attractive rates will not be available once the Old
Bonds become refundable pursuant to their terms.
<PAGE> 17
Conclusion
The Company believes that the consummation of the transactions
proposed herein will be in the best interests of its consumers and investors
and consistent with sound and prudent financial policy.
Item 2. Fees, Commissions and Expenses.
An estimate of the appropriate amount of the fees and expenses, other
than underwriting commissions or discounts, to be paid or incurred by the
Company in connection with the proposed transaction is as follows:
Approximate
Amount
-----------
Holding Company Act filing fee ........... $ 2,000*
Printing of Official Statement
and Bonds .............................. 20,000
Fees of Public Accountant ................ 7,500
Fee of Trustee ........................... 20,000
Fee of District .......................... 775,000
Fees of Rating Agencies .................. 75,000
Expenses of Central and South West
Services, Inc. ......................... 3,500
Counsel fees:
Milbank, Tweed, Hadley & McCloy,
New York, New York ..................... 65,000
Vinson & Elkins,
Dallas, Texas .......................... 50,000
McCall, Parkhurst & Horton
Dallas, Texas (Bond Counsel) ........... 200,000
Counsel for the District ................. 50,000
Blue Sky and investment fees
and expenses ........................... 4,000
<PAGE> 18
Miscellaneous expenses, including
travel, telephone, copying,
postage ................................ 3,000
----------
TOTAL $1,275,000
==========
_______________
* Actual Amount.
The fees and expenses include those charges incurred for the services
of Central and South West Services, Inc. ("CSWS"), an affiliated service
company of CSW operating pursuant to Section 13 of the Act and the rules
thereunder. The services of CSWS will consist principally of services
performed by the Treasury Department and the Controller's Department.
Item 3. Applicable Statutory Provisions.
Sections 6(a) and 7 of the Act are or may be applicable with respect
to the Company's obligations under the Sale Agreements to make debt service
payments with respect to the New Bonds.
Section 9(a)(1) and 10 of the Act are applicable with respect to the
repurchase by the Company of the Company's portion of the Facilities. Section
12(d) and Rule 44 thereunder of the Act are applicable to the sale of any
completed portions of the Facilities, but such sale would be excepted from
Section 12(d) and from Rule 44 under subsection (b)(3) of said rule.
Section 9(a), 10 and 12(c) of the Act are applicable to the purchase
of Old Bonds and the Tender Offer. The provisions of Rule 51 are not
applicable to the proposed acquisition pursuant to the Tender Offer. If,
however, the Company does enter into a Preliminary Agreement, as defined in
Rule 51, such Agreement will satisfy the conditions set forth in paragraphs
(a) through (e) of said Rule. Sections 6(a), 7, 9(a) and 10 of the Act are or
may be applicable to the proposed entering into of interest rate swap
agreements.
<PAGE> 19
To the extent any other provisions of the Act or the rules
promulgated thereunder may be applicable to the proposed transactions, the
Company hereby requests appropriate orders to such effect.
Item 4. Regulatory Approval.
No state regulatory authority and no federal regulatory authority,
other than the Commission under the Act, has jurisdiction over the proposed
transaction.
Item 5. Procedure.
The Company requests that the Commission issue and publish no later
than March 31, 1995, the requisite notice under Rule 23 with respect to the
filing of this Application-Declaration, such notice to specify a date not
later than April 24, 1995, as the date after which an order granting and
permitting this Application-Declaration to become effective may be entered by
the Commission and the Commission enter not later than April 25, 1995, an
appropriate order granting and permitting this Application-Declaration to
become effective with respect to the proposed transactions.
The Company respectfully requests that appropriate and timely action
be taken by the Commission in this matter in order to permit consummation of
the proposed transactions in accordance with the schedule outlined above.
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.
<PAGE> 20
Item 6. Exhibits and Financial Statements.
Exhibit 1 - Form of Installment Sale Agreement between the Company
and the District (to be filed by amendment).
Exhibit 2 - Form of Indenture of Trust between the District and the
Trustee (to be filed by amendment).
Exhibit 3 - Form of Bond Purchase Agreement between the District and
the Purchasers (to be filed by amendment).
Exhibit 4 - Form of Letter of Representation from the Company to the
Purchasers (to be filed by amendment).
Exhibit 5 - Preliminary Official Statement relating to the Bonds (to
be filed by amendment).
Exhibit 6 - Preliminary opinion of Milbank, Tweed, Hadley & McCloy,
counsel for the Company (to be filed by amendment).
Exhibit 7 - Final or "past tense" opinion of counsel for the Company
(to be filed with Certificate of Notification).
Exhibit 8 - Financial Statements per books and pro forma as of
December 31, 1994 (to be filed by amendment).
Exhibit 9 - Proposed Notice of Proceeding.
Exhibit 10 - Form of Proposed Supplemental Indenture to First
Mortgage Indenture (to be filed by amendment, if
applicable).
Exhibit 11 - Illustration of hypothetical interest savings.
Exhibit 12 - Form of Dealer Managers Agreement between the Company
and the Dealer Managers, if applicable (to be filed by
amendment).
Exhibit 13 - Form of Depositary Agreement between the Company and the
Depositary, if applicable (to be filed by amendment).
Exhibit 14 - Form of Information Agent Agreement between the Company
and the Information Agent, if applicable (to be filed
by amendment).
Item 7. Information as to Environmental Effects.
The proposed transaction does not involve major federal action having
a significant effect on the human environment. To the best of the Company's
knowledge, no federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
<PAGE> 21
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: March 20, 1995
CENTRAL POWER AND LIGHT COMPANY
By: /s/ SHIRLEY S. BRIONES
Shirley S. Briones
Treasurer
<PAGE> 1
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBITS METHOD
- ------- -------- ------------
1 Form of Installment Sale Agreement ---
between the Company and the District
(to be filed by amendment).
2 Form of Indenture of Trust between the ---
District and the Trustee (to be filed
by amendment).
3 Form of Bond Purchase Agreement between ---
the District and the Underwriters (to
be filed by amendment).
4 Form of Letter of Representation from ---
the Company to the Purchasers (to be
filed by amendment).
5 Preliminary Official Statement relating ---
to the Bonds (to be filed by amendment).
6 Preliminary opinion of Milbank, Tweed, ---
Hadley & McCloy, counsel for the Company
(to be filed by amendment).
7 Final or "past tense" opinion of counsel ---
for the Company (to be filed with
Certificate of Notification).
8 Financial Statements per books and pro ---
forma as of December 31, 1994 (to be
filed by amendment).
9 Proposed Notice of Proceeding. Electronic
10 Form of Proposed Supplemental Indenture ---
to First Mortgage Indenture (to be
filed by amendment).
11 Illustration of hypothetical interest Electronic
savings.
12 Form of Dealer Managers Agreement ---
between the Company and the Dealer
Managers, if applicable (to be filed
by amendment).
13 Form of Depositary Agreement between ---
the Company and the Depositary, if
applicable (to be filed by amendment).
14 Form of Information Agent Agreement ---
between the Company and the Information
Agent, if applicable (to be filed by
amendment).
<PAGE> 1
EXHIBIT 9
---------
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - __________)
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
______________, 1995
Notice is hereby given that the following filings(s) has/have been
made with the Commission pursuant to 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
transactions(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
_________________, 1995 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in the manner. After said date, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or permitted to
become effective.
<PAGE> 2
Central Power and Light Company (File No. 70-____)
Central Power and Light Company (the "Company"), 539 North
Carancahua Street, Corpus Christi, Texas 78401, a wholly-owned electric
utility subsidiary of Central and South West Corporation, a registered holding
company, has filed an application-declaration pursuant to Sections 6(a), 7,
9(a), 10 and 12(c) and (d) of the Act and Rule 44 promulgated thereunder.
The Company proposes to incur obligations, through December 31,
1997, in connection with the proposed issuance of up to $475,000,000 aggregate
principal amount of Pollution Control Revenue Bonds of which (i) up to
$325,000,000 aggregate principal amount may be Pollution Control Revenue
Refunding Bonds (Central Power and Light Company Project) (the "Refunding
Bonds"), and (ii) up to $150,000,000 aggregate principal amount may be
Pollution Control Revenue Bonds and/or Solid Waste Revenue Bonds (Central
Power and Light Company Project) (the "New Money Bonds" and, together with the
Refunding Bonds, the "New Bonds"). The issuance of New Money Bonds may be
combined with the issuance of Refunding Bonds.
The Refunding Bonds will be issued by Matagorda County Navigation
District Number One (Texas) (the "District") to reacquire all or a portion of
the District's (i) $68,870,000 of outstanding 10-1/8% Pollution Control
Revenue Bonds (Central Power and Light Company Project) Series 1984 (the
"Series 1984 Bonds"), (ii) $111,700,000 of outstanding 7-1/2% Collateralized
Pollution Control Revenue Bonds (Central Power and Light Company Project)
Series 1984A (the "Series 1984A Bonds"), (iii) $31,765,000 of outstanding 9-
3/4% Collateralized Pollution Control Revenue Bonds (Central Power and Light
Company Project) Series 1985A (the "Series 1985A Bonds"), (iv) $60,000,000 of
outstanding 7-7/8% Pollution Control Revenue Bonds (Central Power and Light
Company Project) Series 1986 (the "Series 1986 Bonds") and (v) $50,000,000 of
<PAGE> 3
outstanding 7-1/2% Collateralized Pollution Control Revenue Bonds (Central
Power and Light Company Project) Series 1990 (the "Series 1990 Bonds" and,
together with the Series 1984, Series 1984A, Series 1985A and Series 1986
Bonds, the "Old Bonds").
The Series 1984 Bonds, Series 1984A Bonds and the Series 1985A
Bonds, respectively, were issued pursuant to Indentures of Trust between the
District and NationsBank of Texas, N.A., Dallas, Texas (successor to
RepublicBank Dallas, National Association), as Trustee. The Series 1986 Bonds
were issued pursuant to the Indenture of Trust between the District and The
Bank of New York, as Trustee. The Series 1990 Bonds were issued pursuant to
the Indenture of Trust between the District and Texas Commerce Bank - Dallas,
N.A., Dallas, Texas (successor to Ameritrust Texas National Association), as
Trustee. The Indentures of Trust for the Old Bonds are referred to
collectively as the "Indentures". NationsBank of Texas, N.A., Dallas, Texas,
The Bank of New York and Texas Commerce Bank - Dallas, N.A., are referred to
collectively as the "Trustees". The Company and the District entered into
Installment Sale Agreements (the "Sale Agreements") between the District and
the Company to provide for the issuance of the Old Bonds. In connection with
the issuance of the New Bonds, the Company will (i) amend the Sale Agreements,
(ii) enter into agreements with substantially the same terms as the Sale
Agreements and/or (iii) enter into new installment sale agreements (each, an
"Amended Sale Agreement"). The Old Bonds were originally issued to finance
the cost of the acquisition of certain pollution control and solid waste
disposal facilities at the South Texas Project Electric Generating Station
between Bay City and Palacios, Texas.
<PAGE> 4
The New Bonds will bear interest at a fixed or floating rate, may
or may not be secured with First Mortgage Bonds and will mature in not less
than one nor more than 40 years. The interest rate, redemption provisions
and other terms and conditions applicable to the New Bonds will be determined
by negotiations between the Company and one or more investment banking firms
that will purchase or underwrite the New Bonds (the "Purchasers"). It is
anticipated that the New Bonds will be: (i) redeemable at any time in whole
at the option of the Company at the principal amount thereof plus accrued
interest, upon the occurrence of various extraordinary events; (ii) subject to
optional redemption in whole or in part at times and with premiums to be
determined by negotiations between the Company and the Purchaser(s); and (iii)
subject to special mandatory redemption, in whole or in part, at the principal
amount thereof plus accrued interest, in the event the interest on the New
Bonds becomes subject to federal income tax.
The Company may obtain credit enhancement for the New Bonds, which
could include bond insurance, a letter of credit or a liquidity facility.
Alternatively, the Company also requests authority to issue First Mortgage
Bonds as security for the payment of the New Bonds, at its option, depending
upon market conditions at the time of issuance of the New Bonds. The Company
will issue First Mortgage Bonds, subject to applicable indenture restrictions
upon the issuance thereof, by executing a Supplemental Indenture to its
Mortgage Indenture dated November 1, 1943 to the First National Bank of
Chicago and A.H. Bohm (the "Mortgage Indenture"). Such First Mortgage Bonds
will be issued to the Trustee for the New Bonds pursuant to the Mortgage
Indenture. The First Mortgage Bonds will be held by the Trustee solely for
the benefit of the holders of the New Bonds and will not be transferable
except to a successor Trustee. The First Mortgage Bonds will be issued in the
<PAGE> 5
exact amount and have substantially the same terms as the New Bonds. To the
extent payments in respect of the New Bonds are made in accordance with their
terms, corresponding payment obligations under the First Mortgage Bonds will
be deemed satisfied.
The Company seeks authority to deviate from the Securities and
Exchange Commission's (the "Commission") Statement of Policy Regarding First
Mortgage Bonds Subject to the Public Utility Holding Company Act of 1935,
Release No. 35-13105, 21 Fed. Reg. 1286 (1956), as supplemented by Commission
Release No. 35-16369, 34 Fed. Reg. 9553 (1969) (together, the "Statement of
Policy"), with respect to the issuance of such First Mortgage Bonds. The
Company proposes that such First Mortgage Bonds may be subject to a redemption
limitation of up to fifteen years while the Statement of Policy requires that
First Mortgage Bonds be subject to redemption at any time upon reasonable
notice and with reasonable redemption premiums, if any. The Statement of
Policy further requires the Company to deposit annually with the trustee for
the First Mortgage Bonds an amount of cash equal to not less than one percent
of the aggregate principal amount of Bonds of all series authenticated under
the First Mortgage Bond indenture. The Company requests authority to issue
such First Mortgage Bonds without sinking fund provisions unless the New Bonds
have sinking fund provisions. The Company also requests a waiver from the
requirement in the Statement of Policy for a limitation on dividends.
The proceeds of the offering of the New Bonds will be used to (i)
redeem the Old Bonds pursuant to the terms of the Indentures or reacquire all
or a portion of the Old Bonds through open market and negotiated transactions
or pursuant to one or more tender offers and (ii) reimburse the Company's
treasury for any expenditures made that qualify for tax-exempt financing or to
provide for current solid waste expenditures. The proceeds of any offering
<PAGE> 6
may also be used to reimburse the Company's treasury for Old Bonds previously
acquired. The Company may be required to deposit the proceeds of the New
Bonds with the Trustee in connection with the Reacquisition of the Old Bonds.
The Company further proposes to acquire any or all of one or more
series of the Old Bonds from time to time through December 31, 1997 in open
market and negotiated transactions.
The Company further proposes to manage interest rate risk, as
appropriate, through the use of hedging products, including interest rate
swaps, forward swaps, caps, collars and floors, and through forward
transactions. The Company may also use interest rate swaps for the purpose of
effectively lowering its interest costs on one or more series of Old Bonds
and/or New Bonds. The Company requests authority to enter into the foregoing
types of transactions from time to time either in connection with the issuance
of New Bonds or otherwise.
It is anticipated that any interest rate swap agreement entered
into would provide that redemption, reacquisition or maturation of the
corresponding Old Bonds and/or New Bonds would terminate the Company's
obligations to the counterparty under the swap agreement for a corresponding
notional amount. If an interest rate swap with automatic termination is not
available or economically appropriate, the Company will enter into a swap
permitting termination at the option of the Company and the Company would
exercise such option for a corresponding notional amount upon the redemption,
reacquisition or maturation of the corresponding Old Bonds and/or New Bonds.
The Company also requests authorization to enter into reverse (or
offsetting) interest rate swap agreements, or other contractual arrangements,
in order to limit the impact of anticipated movements in interest rates or
offset the effect of an existing interest rate swap agreement.
<PAGE> 7
The Company requests authority to enter into negotiations with
Purchasers with respect to the interest rate, redemption provisions and other
terms and conditions applicable to the New Bonds and to set the terms of the
New Bonds subject to the receipt of an order under the Act if an order has not
been issued when the Company enters into a Bond Purchase Agreement.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
<PAGE> 1
<TABLE>
EXHIBIT 11
----------
<CAPTION>
CENTRAL POWER AND LIGHT COMPANY
ESTIMATED INTEREST SAVINGS
SERIES 1984 SERIES 1985A SERIES 1986
EXISTING SECURITIES BONDS BONDS BONDS
- ------------------- --------------- --------------- ---------------
<S> <C> <C> <C>
Amount Outstanding $ 68,870,000 $ 31,765,000 $ 60,000,000
Coupon Rate 10.125% 9.750% 7.875%
--------------- --------------- ---------------
Annual Interest Expense $ 6,973,088 $ 3,097,088 $ 4,725,000
=============== =============== ===============
NEW SECURITIES
- --------------
Amount Redeemed 68,870,000 31,765,000 60,000,000
Redemption Price 103.00 103.00 102.00
--------------- --------------- ---------------
Aggregate Redemption Price 70,936,100 32,717,950 61,200,000
Coupon Rate 6.90% 6.90% 6.90%
--------------- --------------- ---------------
Annual Interest 4,894,591 2,257,539 4,222,800
Amortization of Redemption
Premium* 68,870 31,765 40,000
--------------- --------------- ---------------
Annual Interest Cost $ 4,963,461 $ 2,289,304 $ 4,262,800
=============== =============== ===============
Annual Interest Savings by
Refunding 2,009,627 807,784 462,200
Aggregate Annual Interest Savings $ 3,804,559
===============
Total Interest Savings over
the remaining life of the
Old Bonds $ 38,182,913 $ 16,155,680 $ 9,706,200
=============== =============== ===============
Aggregate Total Interest Savings
over the remaining life of the
old bonds. $ 75,532.088
===============
* Amortized over an assumed 30-year life of New Bonds
(continued)....
</TABLE>
<PAGE> 2
...(continued)
CENTRAL POWER AND LIGHT COMPANY
ESTIMATED INTEREST SAVINGS
SERIES 1984A SERIES 1990
EXISTING SECURITIES BONDS BONDS
- ------------------- --------------- ---------------
Amount Outstanding $ 111,700,000 $ 50,000,000
Coupon Rate 7.50% 7.50%
--------------- ---------------
Annual Interest Expense $ 8,377,500 $ 3,750,000
=============== ===============
NEW SECURITIES
- --------------
Amount Redeemed 111,700,000 50,000,000
Redemption Price 103.00 102.00
--------------- ---------------
Aggregate Redemption Price 115,051,000 51,000,000
Coupon Rate 6.90% 6.90%
--------------- ---------------
Annual Interest 7,938,519 3,519,000
Amortization of Redemption
Premium* 111,700 33,000
--------------- ---------------
Annual Interest Cost $ 8,050,219 $ 3,552,333
=============== ===============
Annual Interest Savings by
Refunding 327,281 197,667
Total Interest Savings over
the remaining life of the
Old Bonds $ 6,545,620 $ 4,941,675
=============== ==============
* Amortized over an assumed 30-year life of New Bonds
