UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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Consolidated Papers, Inc. Stora Enso Acquisition, Inc.
510 High Street Two Landmark Square, 3rd Floor
Wisconsin Rapids, WI 54495-8050 Stamford, CT 06901-2792
(Name of company filing this statement and address
of principal executive offices)
--------------------------------------------------------------------------------
None
(Name of top registered holding company
parent of each applicant or declarant)
--------------------------------------------------------------------------------
Carl H. Wartman
Consolidated Papers, Inc.
Secretary and General Counsel
510 High Street
P.O. Box 8050
Wisconsin Rapids, WI 54495-8050
(Name and address of agent for service)
--------------------------------------------------------------------------------
The Commission is also requested to send copies
of any communications in connection with this matter to:
Sara D. Schotland Michael S. Nolan
Cleary, Gottlieb, Steen & Hamilton Foley & Lardner
2000 Pennsylvania Avenue, N.W. 777 East Wisconsin Avenue
Washington, D.C. 20006-1801 Milwaukee, WI 53202-5367
(Counsel for Stora Enso Acquisition, Inc.) (Counsel for Consolidated
Papers, Inc.)
<PAGE>
APPLICATION FOR EXEMPTION FROM THE PROVISIONS OF THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 PURSUANT TO
SECTION 3(a)(3)
Consolidated Papers, Inc., a Wisconsin corporation
("Consolidated Papers"), and Stora Enso Acquisition, Inc., a Wisconsin
corporation (the "Surviving Corporation" following the transaction described
below and, together with Consolidated Papers, the "Applicants"), hereby apply
for an order declaring them and their respective subsidiary companies as such to
be exempt from the provisions of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act" or the "Act"), other than Section 9(a)(2), pursuant
to Section 3(a)(3), upon completion of the transaction described below. Stora
Enso Oyj ("Stora Enso"), a Finnish corporation and the parent of the Surviving
Corporation, will rely on the exemption provided by Rule 10 under the Act.
DESCRIPTION OF THE ACQUISITION
------------------------------
Pursuant to an Agreement and Plan of Merger, dated February
22, 2000 (the "Merger Agreement"), by and among Consolidated Papers, Stora Enso
and the Surviving Corporation, Stora Enso will acquire Consolidated Papers,
through a merger of Consolidated Papers with and into the Surviving Corporation,
for aggregate consideration of approximately $4.8 billion, including assumed net
debt of approximately $0.9 billion (the "Acquisition").
A. Description of the Parties to the Acquisition
---------------------------------------------
1. Stora Enso
----------
Stora Enso is one of the world's leading forest industry
companies. Stora Enso was formed through the combination of Finland's Enso Oyj
and Sweden's Stora Kopparbergs Bergslags Aktiebolag (publ) at the end of 1998.
To date this combination has been extremely successful, with synergies more than
<PAGE>
double targeted levels. Stora Enso is an integrated forest products group that
manufactures magazine paper, newsprint, fine paper and packaging boards,
supported by 2.1 million hectares of productive forestland. Stora Enso holds
strong global positions in all of the aforementioned product areas. Stora Enso
employs approximately 40,000 people and maintains operations in Europe, Asia and
North America. Additionally, Stora Enso has sales and marketing organizations
throughout the world.
Stora Enso is engaged in the ownership and/or operation of
electric utility assets in connection with its primary forest industry business,
both directly and through various foreign subsidiaries (the "Foreign Subs").
Although Stora Enso is technically a holding company within the meaning of the
Act, it is currently exempt from all provisions of the Act pursuant to Rule 5.
Stora Enso and its subsidiaries have no electricity generation, transmission or
distribution operations, or any other electricity operations, in the United
States. Stora Enso's current activities in the United States, including the
activities of its subsidiary Stora Enso North America Corporation, relate solely
to the marketing and sale of paper and board products.
In connection with the Acquisition, Stora Enso will qualify
the Foreign Subs as exempt "foreign utility companies" or "FUCOs" within the
meaning of Section 33 of the Act.
Stora Enso is, and will remain, an electric utility company
within the meaning of the Act because it directly owns and/or operates
generation facilities located at mill sites, as well as the Huruskoski
hydroelectric plant, all in Finland.<F1>
--------
[FN]
<F1> Stora Enso recently sold the major part of the power assets outside
Stora Enso's mills in Sweden and Finland to unrelated third parties.
The assets sold included a total of 1,511 megawatts ("MW") of
electricity generation capacity, of which 1,096 MW is hydro power, 301
MW is nuclear power and the remaining 114 MW is oil and coal power. The
transaction also involved the transfer of regional distribution
networks and power sales contracts in Sweden.
</FN>
2
<PAGE>
2. Consolidated Papers
-------------------
Consolidated Papers, which is headquartered in Wisconsin
Rapids, Wisconsin, is North America's largest producer of coated paper and
supercalendered printing papers, as well as the leading manufacturer of
specialty papers. Consolidated Papers employs about 6,800 people and operates
manufacturing facilities in Biron, Kimberly, Niagara, Stevens Point, Whiting and
Wisconsin Rapids, Wisconsin, as well as in Duluth, Minnesota. Consolidated
Papers owns and manages nearly 700,000 acres of forestland in the States of
Wisconsin, Michigan, and Minnesota and in Ontario, Canada. Consolidated Papers,
which is currently exempt from registration under Section 3(a)(1) of the Act, is
a holding company by reason of its ownership of Consolidated Water Power Company
("CWPCo").
The properties of CWPCo are used primarily for the generation
and local distribution of electric energy sold to Consolidated Papers and
consumed at Consolidated Papers' plants but are also used for the generation and
local transmission and distribution of electric energy as follows:
a. Distributed by it at retail directly to
approximately one thousand residential, commercial, industrial, and rural
consumers in the City of Wisconsin Rapids, Village of Biron, and Town of Grand
Rapids, Wood County, Wisconsin, and the Towns of Plover and Grant, Portage
County, Wisconsin.
b. Infrequent sales of excess power to Wisconsin
Public Service Corporation ("WPSC") under a service agreement pursuant to WPSC's
W3 FERC tariff.
In addition, CWPCo has powerhouses and dams for the generation of electric
energy at the Cities of Wisconsin Rapids and Stevens Point, Wisconsin; Villages
of Biron and Whiting, Wisconsin; and Town of Eau Pleine, Portage County,
3
<PAGE>
Wisconsin. It has electric distribution lines connecting its system with the
plants of Consolidated Papers and the electric transmission system of WPSC.
CWPCo also owns an electric transmission line connecting it to the hydroelectric
facilities of Wisconsin River Power Company ("WRPCo") and the electric
transmission system of Wisconsin Power and Light Company ("WPL"). CWPCo owns all
necessary land and flowage rights in connection with said dams and necessary for
the operation of its hydroelectric plants.
None of the properties of CWPCo used for the generation,
transmission, or distribution of electric energy for sale is located outside of
the Counties of Wood, Portage, Marathon, and Adams, Wisconsin. No electric
energy is sold or delivered by it outside of the State of Wisconsin.
Occasionally, electric energy is received by it at the borders of the State of
Wisconsin.<F2>
3. The Surviving Corporation
-------------------------
The Surviving Corporation is a newly formed wholly owned
subsidiary of Stora Enso with no operating history. Upon consummation of the
Acquisition, the Surviving Corporation will, as a matter of law, assume
possession of all the assets and liabilities of Consolidated Papers.
B. The Acquisition
---------------
The Acquisition will provide the opportunity to maximize
returns on investment for the shareholders of Consolidated Papers and Stora Enso
and an excellent match between the two companies given Consolidated Papers'
strengths in Stora Enso's core product areas. The combined enterprise will be
--------
[FN]
<F2> CWPCo owns a 33.8% interest in WRPCo. WRPCo engages in wholesale sales of
electricity to its three corporate owners. At the time of the Acquisition, CWPCo
will be the only "public utility" within the meaning of Section 2(a)(5) of the
Act owned by Consolidated Papers.
</FN>
4
<PAGE>
the second largest producer of paper and board by capacity worldwide, with total
1999 sales of approximately $13.2 billion<F3> and total paper capacity of
15,000,000 metric tons.
Under the terms of the Merger Agreement, Consolidated Papers
will merge with and into the Surviving Corporation and all of the issued and
outstanding shares of common stock of Consolidated Papers will be converted, at
the election of the holder, into cash or Stora Enso ADSs (American Depositary
Shares representing an interest in underlying Series R shares of Stora Enso to
facilitate trading in the United States), or a combination of cash and ADSs,
with a value of $44.00 per Consolidated Papers share. Each ADS will represent
one Series R share of Stora Enso. Consolidated Papers shareholders' elections of
cash or ADSs will be pro-rated, to the extent necessary, so as to maintain a 50%
cash and 50% ADS aggregate consideration mix.<F4> The transaction has been
unanimously approved by the boards of directors of both companies. Assuming 140
million Stora Enso Series R shares are issued, Consolidated Papers shareholders
would receive approximately a 15.5% economic interest and 5.0% of the vote in
Stora Enso.
The Applicants expect that the ADSs will be registered with
the SEC and listed on the New York Stock Exchange, Inc. ("NYSE"). In the event
that the ADSs have not been approved for listing on NYSE (or, failing that,
approved for quotation on NASDAQ) by October 31, 2000, Stora Enso will complete
the transaction on a 100% cash basis for $44.00 per Consolidated Papers share.
The Acquisition is expected to result in the establishment of a liquid market
--------
[FN]
<F3> See table entitled "CWPCo Contributions to Consolidated Papers and to Stora
Enso/Consolidated Papers Combined Company" below.
<F4> The exchange ratio for Consolidated Papers shares converted into ADSs will
be between 2.678 and 3.621 ADSs per Consolidated Papers share, based on the
average trading value of Stora Enso Series R shares over a period just prior to
the closing, as necessary to provide $44.00 in value per share. However, the
exchange ratio will be fixed at 2.678 ADSs for each Consolidated Papers share if
Stora Enso Series R shares are then trading at an average EUR trading price
higher than a $16.43 equivalent and will be fixed at 3.621 ADSs if the Series R
shares are then trading at an average below a $12.15 equivalent.
</FN>
5
<PAGE>
for the Stora Enso ADSs with an estimated initial float of approximately $2
billion. The Applicants currently expect the transaction to close by early
September 2000.
The Surviving Corporation will survive the transaction as a
direct first-tier Wisconsin subsidiary of Stora Enso under a new name "Stora
Enso Consolidated Papers, Inc." Consolidated Papers' existing subsidiaries will
maintain their current status as direct or indirect subsidiaries, as the case
may be, of the Surviving Corporation. The Surviving Corporation will remain a
Wisconsin corporation with its principal executive offices in Wisconsin Rapids,
Wisconsin. Stora Enso will remain a Finnish corporation. The Merger Agreement
provides that the current officers of Consolidated Papers will remain the
officers of the Surviving Corporation and that George W. Mead, the current
chairman of Consolidated Papers, will, subject to the approval of Stora Enso's
shareholders, join the board of directors of Stora Enso upon completion of the
transaction.
Consummation of the transaction is subject to approval by the
shareholders of both companies. The Acquisition is subject to the approval by
the holders of at least two-thirds of the outstanding Consolidated Papers common
stock and the issuance of ADSs in the Acquisition is subject to approval by the
holders of two-thirds by number and voting power of the Stora Enso Series A
shares and the Stora Enso Series R shares present and voting as a single class
at a meeting called for the purpose of voting on such matter. The meetings of
the Stora Enso and Consolidated Papers shareholders will be held in August for
the purpose of approving the Acquisition and related matters.
6
<PAGE>
The Acquisition also has been subject to certain regulatory
approvals. An application for approval was filed with the Federal Energy
Regulatory Commission ("FERC") on March 23, 2000 and FERC granted approval on
June 15, 2000. See Exhibits D-1 and D-2. The Acquisition does not require the
approval of the Public Service Commission of Wisconsin ("PSCW"), as Consolidated
Papers is exempt from the Wisconsin Public Utilities Holding Company Act
("WPUHCA"). A petition for a declaratory ruling confirming that no such
approvals are required and that the Surviving Corporation will remain exempt
from WPUHCA was filed with PSCW on March 22, 2000. See Exhibit D-3. At its
meeting held on July 20, 2000, PSCW granted the requested ruling. See Exhibit
D-4. The Acquisition was notified to the antitrust authorities pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and to the
provisions of similar antitrust or competition laws in other jurisdictions where
the companies operate. Early termination of the HSR Act waiting period was
granted on April 24, 2000.
For the reasons set forth herein, Consolidated Papers and the
Surviving Corporation qualify for an exemption from registration under Section
3(a)(3) of the Act.
APPLICABLE STATUTORY PROVISIONS
-------------------------------
SECTION 3(a)(3)
Section 3(a)(3) provides for exemption where a company is:
only incidentally a holding company, being primarily engaged
or interested in one or more businesses other than the
business of a public utility company and (A) not deriving,
directly or indirectly, any material part of its income from
any one or more subsidiary companies, the principal business
of which is that of a public utility company, or (B) deriving
a material part of its income from any one or more such
subsidiary companies, if substantially all the outstanding
securities of such companies are owned, directly or
indirectly, by such holding company.
7
<PAGE>
Consolidated Papers and the Surviving Corporation qualify for an order of
exemption under Section 3(a)(3) because each of them primarily engages in a
business other than that of a public utility company, and (i) does not receive a
material part of its income from its small nonexempt utility subsidiary
operations (Section 3(a)(3)(A)) or (ii) owns all outstanding securities of CWPCo
(Section 3(a)(3)(B)).
1. CWPCo's Operations Are Functionally Related to Consolidated
Papers' Primary Nonutility Business and, Following the
Acquisition, Will be Functionally Related to the Surviving
Corporation's Primary Nonutility Business.
------------------------------------------
The Surviving Corporation will succeed to Consolidated Papers'
existing paper business and the utility operations of CWPCo will serve the
nonutility operations of the Surviving Corporation in the same way that they
currently serve those of Consolidated Papers. Thus, Consolidated Papers
satisfies and the Surviving Corporation will satisfy the reverse functionality
test of Section 3(a)(3). In particular, paper companies have very frequently
qualified for Section 3(a)(3) exemptions. E.g., James River Corp., Holding Co.
Act Release No. 22608 (August 19, 1982) (granting Section 3(a)(3) exemption with
respect to a wholly-owned power subsidiary that supplied most of its power to
the parent company); Hammermill Paper Co., Holding Co. Act Release No. 19474
(April 9, 1976) (granting Section 3(a)(3) exemption with respect to a
wholly-owned power subsidiary that supplied 97% of its power output to the
parent paper company); St. Regis Paper Co., Holding Co. Act Release No. 19255
(November 20, 1975) (granting Section 3(a)(3) exemption to a
paper manufacturer with respect to a wholly-owned power subsidiary that supplied
78% of its power output to the parent paper company); Gilman Paper Co., Holding
Co. Act Release No. 11534 (October 8, 1952) (granting Section 3(a)(3)
8
<PAGE>
exemption with respect to a wholly-owned power subsidiary that
supplied most of its power to the parent paper company); Nekoosa Paper Co.,
Holding Co. Act Release No. 2389 (November 22, 1940) (granting Section 3(a)(3)
exemption with respect to a wholly-owned power subsidiary that
purchased power not used by the parent paper company and supplied it to the
local residents).
At present, CWPCo's total annual sales of electricity are
about 1.4 TWh, of which 99% is sold to Consolidated Papers. CWPCo generates
10-15% of its electricity supply annually, and purchases the remaining amount
from the wholesale market.
2. The Surviving Corporation Will Not Derive a Material Part of
Its Income from CWPCo.
----------------------
CWPCo will be small in both a relative and absolute sense. In
AES Corporation, Holding Co. Act Release No. 27063 (Aug. 20,1999), the SEC
observed that the same materiality test is applied under Sections 3(a)(3) and
3(a)(5), i.e., the holding company may derive no material part of its income
from electric utility subsidiaries. In granting AES's request for exemption
under Section 3(a)(5), the SEC found that the utility operations that AES was
acquiring (CILCO) were small both in a relative sense (not material to AES) and
in an absolute sense. The SEC first examined whether CILCO was small in a
relative sense. The SEC found that in 1998 CILCO had operating revenues of
$532.3 million and net income of $41 million versus AES's operating revenues of
$2.4 billion and net income of $311 million. AES, Rel. No. 35-27063 (Aug. 20,
1999). The SEC found that on a pro forma basis CILCO, the utility subsidiary of
CILCORP, would have contributed 10.35% to AES's total operating revenues. Id.
In this matter, on a pro forma basis using 1999 numbers, CWPCo
would represent only 2.13% of the Surviving Corporation's total revenues (and
only 0.30% of Stora Enso's total revenues). CWPCo's sales analysis for the year
9
<PAGE>
ended December 31, 1999 reports $39.2 million in total revenue, and $0.7 million
in net operating revenue. In contrast, for the year ended December 31, 1999,
Consolidated Papers (and hence, the Surviving Corporation) had total revenues of
approximately $1.8 billion, after intercompany eliminations, and its net
operating revenues were approximately $164 million. CWPCo's net income of $1.7
million compares to Consolidated Papers' net income of $110.1 million.<F5>
In AES, the SEC assessed the contribution of CILCO (the
utility subsidiary of CILCORP) to the gross revenues, net operating revenues,
net income and net assets of a pro forma combined AES/CILCORP consolidated
holding company. According to table 1 of the SEC's decision, on a pro forma
consolidated basis, CILCO contributed 12.81% of 1998 gross revenues; 10.35% of
1998 net operating revenues; 12.54% of 1998 net income and 7.78% of 1998 net
assets.
In Gaz Metropolitain, Holding Co. Act Release No. 26170 (Nov.
23, 1994), a Canadian company received an exemption under Section 3(a)(5) in
connection with its indirect acquisition of a Vermont gas utility. The Vermont
gas utility's revenues of $38 million, net income of $2.8 million and customer
base (24,600 customers) were relatively small and represented 4.2% of the
acquirer's consolidated revenues and 3.1% of consolidated net income. By
comparison, CWPCo contributes only 2.13% of 1999 gross revenues, 0.43% of 1999
net operating revenues, 2.12% of 1999 net income and 0.93% of 1999 net assets to
Consolidated Papers and 0.30% of 1999 gross revenues, 0.04% of 1999 net
operating revenues, 0.16% of 1999 net income and 0.16% of 1999 net assets to
Stora Enso on a pro forma consolidated basis after the Acquisition. The
--------
[FN]
<F5> The combined Stora Enso/Consolidated Papers enterprise would have had 1999
sales revenues of approximately $13.2 billion on a pro forma basis.
</FN>
10
<PAGE>
counterpart figures for CWPCo, Consolidated Papers and the combined Stora
Enso/Consolidated Papers enterprise would have been as follows for the past
three years:
<TABLE>
CWPCO CONTRIBUTIONS TO CONSOLIDATED PAPERS AND TO
STORA ENSO/CONSOLIDATED PAPERS COMBINED COMPANY<F6>
($MM)
<CAPTION>
CWPCO AS % OF CWPCO AS % OF
CONSOLIDATED TOTAL PRO FORMA
PAPERS CONSOLIDATED STORA PRO FORMA COMBINED
CWPCO (EXCL. CWPCO) PAPERS ENSO OYJ COMBINED
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL SALES 1997 $37.1 $1,642.4 2.21% $10,650.9 $12,330.4 0.30%
REVENUES
1998 38.4 1,951.0 1.93 11,174.5 13,163.9 0.29
1999 39.2 1,799.6 2.13 11,330.2 13,169.0 0.30
NET OPERATING 1997 $1.0 $208.5 0.48% $875.8 $1,185.3 0.08%
REVENUES
1998 1.9 236.1 0.80% 765.5 1,003.5 0.19
1999 0.7 163.1 0.43% 1,510.7 1,674.5 0.04
NET INCOME 1997 $1.5 $188.9 0.79% $677.5 $867.9 0.17%
BEFORE TAXES
1998 2.4 175.8 1.35 361.6 539.8 0.44
1999 1.7 108.4 1.54 1,226.7 1,336.4 0.13
NET INCOME 1997 $1.0 $117.0 0.85% $435.7 $553.7 0.18%
1998 2.0 100.4 1.95 203.5 305.9 0.65
1999 1.4 64.7 2.12 801.6 867.7 0.16
NET ASSETS 1997 $30.4 $3,317.1 0.91% $16,569.7 $19,917.2 0.15%
1998 32.5 3,594.9 0.90 16,419.6 20,047.0 0.16
1999 32.8 3,493.4 0.93 17,081.0 20,607.2 0.16
</TABLE>
In AES, the SEC assessed whether CILCO was small in an
absolute sense by considering what proportion CILCO represented of Illinois's
electricity revenues and of that State's electricity customers. CILCO
--------
[FN]
<F6> The calculations in this table are based on the assumption that Euro/Dollar
exchange rate of 1:1.0653 (an average noon buying rate for the year ended
December 31, 1999, as reported in the Federal Reserve Statistical Release No.
G5A (405, January 3, 2000)) is applicable to all the periods reflected in the
table. Stora Enso's financial information presented in the table has been
calculated in accordance with International Accounting Standards ("IAS"). Stora
Enso's 1999 financial statements were reconciled to U.S. GAAP in connection with
the registration of Stora Enso's ADSs and are included in the Definitive Proxy
Statement/Prospectus. See Exhibit C-1. If the Stora Enso figures in this table
were calculated in accordance with U.S. GAAP, some of the numbers and
percentages would be different. Even after giving effect to the reconciliation
with U.S. GAAP, CWPCo's contribution to the pro forma combined entity does not
exceed 1% in any category for 1999.
</FN>
11
<PAGE>
represented only 2.8% of the State's electric utility revenues and 3.4% of State
customers. Like CILCO, CWPCo is a minute factor in the State of Wisconsin: CWPCo
represents only 1.1% of Wisconsin's electricity revenues and less than 1% of its
customers.<F7> CILCO represented only 0.9% of its region's revenues, while CWPCo
represents less than 0.29% of the Mid-American Interconnected Network ("MAIN")
region's revenues. Unlike CILCO, which was a relatively significant gas utility,
CWPCo does not engage in the gas utility business. Thus, both from the
perspective of relative size/materiality and from the perspective of absolute
size, CWPCo satisfies the Section 3(a)(3) requirement that revenues derived from
U.S. utility subsidiary interests are not material in relative or absolute
terms.
Viewed in light of the AES and Gaz Metropolitain precedents,
Consolidated Papers and Stora Enso represent an a fortiori case. CWPCo is a
smaller utility both in an absolute sense (amount of sales and number of
customers) and in a relative sense (relative to Consolidated Papers and/or Stora
Enso) than the utility interests at issue in AES and Gaz Metropolitan. Compare
Cities Service Co. 8 SEC 318 (1940) (Section 3(a)(3) exemption unavailable where
utility operations accounted for 47.3% of holding company assets and 32.6% of
revenues).
2. Consolidated Papers Owns and the Surviving Corporation Will
Own Substantially All of the Outstanding Securities of CWPCo.
Section 3(a)(3)(B) of the Act provides an exemption in cases
where an "incidental" holding company owns "substantially all outstanding
securities" of a public utility, regardless of whether such holding company
derives a material part of its income from its public utility subsidiary.
--------
[FN]
<F7> CWPCo's 1998 electric revenue was $38,215,340, compared to Wisconsin's
statewide retail electric revenues of $3,375,961,000. In 1998, CWPCo served
1,035 of Wisconsin's 2,536,715 retail electric consumers. Wisconsin figures are
taken from ftp://ftp.eia.doe.gov/pub/pdf/electricity/054098.pdf, at page 217.
</FN>
12
<PAGE>
Consolidated Papers owns and the Surviving Corporation will own substantially
all of the outstanding securities of CWPCo.
3. Exemption of Consolidated Papers and of the Surviving
Corporation Satisfies the "Public Interest" Test of Section
3(a).
-----
Under the "unless and except" clause of Section 3(a), the
Commission has the authority to deny a request for exemption if it were to
determine that granting the exemption would be "detrimental to the public
interest or to the interest of investors or consumers." The Surviving
Corporation will succeed to the rights, duties and obligations of Consolidated
Papers, which is already exempt under one of the paragraphs of Section 3(a).
Moreover, no public interest concerns are presented with respect to the
Surviving Corporation. First, the Acquisition preserves what is already an
economical and efficient operation. Second, Stora Enso's acquisition of
Consolidated Papers will foster economic efficiency. Apart from substantial
synergies expected for the paper business, the transaction will offer a modest
benefit to Consolidated Papers' small U.S. utility operations. In the event that
additional capital is needed for expansion, Stora Enso by virtue of its
extensive financial resources will enhance Consolidated Papers' borrowing
capability.<F8>
At the same time, Stora Enso's acquisition of Consolidated
Papers (i) will not diminish CWPCo's ability to provide adequate, reliable,
efficient, and safe utility service; (ii) will not impair the ability of CWPCo
to raise necessary capital on reasonable terms or to maintain a reasonable
capital structure; (iii) will not undermine the ability of PSCW to regulate
CWPCo's retail operations; (iv) is not likely to have any adverse impact on
retail electricity customers of CWPCo; (v) does not present significant
opportunity for abusive affiliate transactions or cross-subsidization; and (vi)
is not likely to have a significant adverse effect on competition.
--------
[FN]
<F8> See WPL Holdings, Holding Co. Act Rel. No. 35-25377(restructuring will help
financing alternatives).
</FN>
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<PAGE>
REGULATORY APPROVALS
--------------------
Consummation of the Acquisition is subject to approval by the
holders of at least two-thirds of the outstanding Consolidated Papers common
stock. Issuance of Stora Enso ADSs in the Acquisition is subject to approval by
the holders of two-thirds by number and voting power of the Stora Enso Series A
shares and the Stora Enso Series R shares present and voting as a single class
at a meeting called for the purpose of voting on such matter. Meetings of the
Stora Enso and Consolidated Papers shareholders will be held in August for the
purpose of approving the Acquisition and related matters. Stora Enso's
registration statement relating to the ADSs was declared effective by the SEC
and the ADSs are expected to be approved for listing on NYSE (or, failing that,
approved for quotation on NASDAQ).
The Acquisition was also subject to approval by FERC. An
application for such approval was filed on March 23, 2000 and on June 15, 2000
FERC granted its approval. Exhibits D-1 and D-2.
Stora Enso and Consolidated Papers applied to PSCW for a
declaratory order confirming that the Surviving Corporation will continue to be
exempt from the provisions of WPUHCA, which includes the requirement that the
sum of the assets of all non-utility affiliates in a holding company system of
any holding company formed on or after November 28, 1985 may not exceed 25% of
the assets of all public utility affiliates. See also Wis. Stat.
ss.196.795(5)(p). See petition dated March 22, 2000. Exhibit D-3. PSCW granted
the petition at its meeting held on July 20, 2000. Exhibit D-4.
The Acquisition was subject to the notification provisions of
the HSR Act and to the provisions of similar antitrust or competition laws in
other jurisdictions where the companies operate. The antitrust authorities
granted early termination of the HSR Act waiting period on April 24, 2000.
14
<PAGE>
PROCEDURE
---------
Consolidated Papers respectfully requests that the Commission
issue its order granting and permitting the requested exemption as soon as
practicable, but in no event later than August 30, 2000 (the date of the special
meeting of Consolidated Papers' shareholders to consider the Acquisition).
It is submitted that a recommended decision by a hearing
officer is not needed for approval of the proposed transaction. The Division of
Investment Management may assist in the preparation of the Commission's
decision. There should be no waiting period between issuance of the Commission's
Order and the date on which it is to become effective.
EXHIBITS AND FINANCIAL STATEMENTS
---------------------------------
A. Exhibits.
--------
A-1 Articles of Incorporation of Consolidated Papers (previously
filed with the Commission as Exhibit (3)(i)to Consolidated
Papers' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, File No. 001-11359, and incorporated herein by
reference)
A-2 By-Laws of Consolidated Papers (previously filed with the
commission as Exhibit 3.B. to the Consolidated Papers' Annual
Report on Form 10-K for the year ended December 31, 1999,
filed on March 26, 1998, file No. 001-11359, and incorporated
herein by reference)
B-1 Agreement and Plan of Merger (previously filed with the
Commission as Exhibit 2.1 to the Consolidated Papers' Current
Report on Form 8-K, filed on March 2, 2000, File No.
001-11359, and incorporated herein by reference)
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C-1 Definitive Proxy Statement/Prospectus relating to the special
meeting of shareholders of Consolidated Papers, Inc. to
approve the merger with Stora Enso (previously filed with the
Commission on July 28, 2000, File No. 001-11359, and
incorporated herein by reference)
D-1 Application to FERC, filed on March 23, 2000 (previously filed
with the Commission as Exhibit D-2 to Stora Enso's Application
Under the Public Utility Holding Company Act of 1935 on Form
U-1, filed on March 28, 2000, File No. 070-09651, and
incorporated herein by reference)
D-2 Order Issued by the Federal Energy Regulatory Commission
pursuant to the application filed on March 22, 2000
D-3 Petition to the Public Service Commission of Wisconsin, filed
on March 22, 2000 (previously filed with the Commission as
Exhibit D-1 to Stora Enso's application under the Public
Utility Holding Company Act of 1935 on Form U-1, filed on
March 28, 2000, File No. 070-09651, and incorporated herein by
reference)
D-4 Order Issued by the Public Service Commission of Wisconsin
pursuant to petition filed by CWPCo on March 22, 2000 (to be
filed by amendment)
E-1 Consolidated Papers organization chart (previously filed with
the Commission as Exhibit E-1 to Stora Enso's Application
Under the Public Utility Holding Company Act of 1935 on Form
U-1/A, filed on May 9, 2000, File No. 070-09651, and
incorporated herein by reference)
F-1 Consolidated Papers' Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 1999 (File No. 001-11359, filed
on May 12, 2000 and incorporated herein by reference)
F-2 Consolidated Papers' Annual Report on Form 10-K for the fiscal
year ended December 31, 1999 (File No. 001-11359, filed on
March 24, 2000 and incorporated herein by reference)
F-3 Consolidated Papers' Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (File No. 001-11359, filed on
March 26, 1999, and incorporated herein by reference)
F-4 Consolidated Papers Statement by Holding Company on Form
U-3A-2 for the fiscal year ended December 31, 1999 (File No.
69-53-3, filed on February 25, 2000 and incorporated herein by
reference)
F-5 Consolidated Papers Statement by Holding Company on Form
U-3A-2 for the fiscal year ended December 31, 1998 (File No.
69-53-3, filed on February 25, 1999 and incorporated herein by
reference)
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F-6 Consolidated Papers Statement by Holding Company on Form
U-3A-2 for the fiscal year ended December 31, 1997 (File No.
69-53-3, filed on February 24, 1998 and incorporated herein by
reference)
G-1 Stora Enso's Annual Report to the Finnish National Board of
Patents and Registration for the fiscal year ended December
31, 1999 (previously filed with the Commission as Exhibit G-1
to Stora Enso's Application Under the Public Utility Holding
Company Act of 1935 on Form U-1/A, filed on May 9, 2000, File
No. 070-09651, and incorporated herein by reference)
G-2 Stora Enso's Annual Report to the Finnish National Board of
Patents and Registration for the fiscal year ended December
31, 1998 (previously filed with the Commission as Exhibit G-3
to Stora Enso's Application Under the Public Utility Holding
Company Act of 1935 on Form U-1/A, filed on May 9, 2000, File
No. 070-09651, and incorporated herein by reference)
H-1 Proposed Form of Notice
I-1 Stora Enso's Energy Assets
B. Financial Statements
--------------------
FS-1 Consolidated Papers' Consolidated Balance Sheet as of December
31, 1999 (previously filed with the Commission in Consolidated
Papers' Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (Exhibit F-1 hereto), filed on May 12, 2000,
File No. 001-11359, and incorporated herein by reference)
FS-2 Consolidated Papers' Consolidated Statement of Income for the
12 months ended December 31, 1999 (previously filed with the
Commission in Consolidated Papers' Quarterly Report on Form
10-Q for the quarter ended March 31, 2000 (Exhibit F-1
hereto), filed on May 12, 2000, File No. 001-11359, and
incorporated herein by reference)
FS-3 Consolidated Papers' Consolidated Balance Sheet as of December
31, 1999 (previously filed with the Commission in Consolidated
Papers' Annual Report on Form 10-K for the year ended December
31, 1999 (Exhibit F-2 hereto), filed on March 24, 2000, File
No. 001-11359, and incorporated herein by reference)
FS-4 Consolidated Papers' Consolidated Statement of Income for the
12 months ended December 31, 1999 (previously filed with the
Commission in Consolidated Papers' Annual Report on Form 10-K
for the year ended December 31, 1999 (Exhibit F-2 hereto),
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filed on March 24, 2000, File No. 001-11359, and incorporated
herein by reference)
FS-5 Consolidated Papers' Consolidated Balance Sheet as of December
31, 1998 (previously filed with the Commission in Consolidated
Papers' Annual Report on Form 10-K for the year ended December
31, 1998 (Exhibit F-3 hereto), filed March 26, 1999, File No.
001-11359, and incorporated herein by reference)
FS-6 Consolidated Papers Consolidated Statement of Income for the
12 months ended December 31, 1998 (previously filed with the
Commission in Consolidated Papers' Annual Report on Form 10-K
for the year ended December 31, 1998 (Exhibit F-3 hereto),
filed March 26, 1999, File No. 001-11359, and incorporated
herein by reference)
FS-7 Stora Enso's Consolidated Balance Sheet as of December 31,
1999, 1998 and 1997 (previously filed with the Commission as
Exhibit FS-1 to Stora Enso's Application Under the Public
Utility Holding Company Act of 1935 on Form U-1, filed on
March 28, 2000, File No. 070-09651, and incorporated herein by
reference)
FS-8 Stora Enso's Consolidated Statement of Income for the 12
months ended December 31, 1999, 1998 and 1997 (previously
filed with the Commission as Exhibit FS-2 to Stora Enso's
Application Under the Public Utility Holding Company Act of
1935 on Form U-1, filed on March 28, 2000, File No. 070-09651,
and incorporated herein by reference)
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this Application to
be signed on its behalf by the undersigned thereunto duly authorized.
CONSOLIDATED PAPERS, INC.
By: /s/ Carl H. Wartman
----------------------------------------
Name: Carl H. Wartman
Title: Secretary and General Counsel
STORA ENSO ACQUISITION, INC.
By: /s/ Leif Smedman
----------------------------------------
Name: Leif Smedman
Title: Director
Date: August 3, 2000
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