SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
ALABAMA POWER COMPANY
600 North 18th Street
Birmingham, Alabama 35291
(Name of company or companies filing this statement and addresses of
principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of each
applicant or declarant)
William E. Zales, Jr.
Vice President, Corporate
Secretary and Assistant Treasurer
Alabama Power Company
600 North 18th Street
Birmingham, Alabama 35291
(Names and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices
and communications to:
W. L. Westbrook John D. McLanahan, Esq.
Financial Vice President Troutman Sanders LLP
The Southern Company 600 Peachtree Street, N.E.
270 Peachtree Street, NW Suite 5200
Atlanta, Georgia 30303 Atlanta, Georgia 30308-2216
Walter M. Beale, Jr., Esq.
Balch & Bingham LLP
1901 Sixth Avenue North, Suite 2600
Birmingham, Alabama 35203
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
Alabama Power Company ("Alabama Power") is a wholly-owned
subsidiary of The Southern Company, a registered holding company under the
Public Utility Holding Company Act of 1935 (the "Act"). In 1985, the Legislature
of the State of Alabama enacted a law aimed at eliminating and avoiding the
unnecessary duplication of electric distribution facilities by electric
suppliers in the state, which law is now codified as ss.37-14-30 et seq., Code
of Alabama, 1975 (the "Territorial Act"). After extended litigation, the
Territorial Act's constitutionality has been upheld by the Supreme Court of
Alabama and is now being implemented. Under the Territorial Act, the primary
electric supplier within each municipality in the state is granted the option to
acquire all distribution facilities of any secondary electric supplier used to
supply retail electric service within the municipal limits of such municipality,
and establishes a method of determining the price to be paid for such
distribution facilities. Alabama Power and certain other primary electric
suppliers have exercised this option.
In some municipalities in Alabama, Alabama Power is the primary
electric supplier, while in others it is the secondary electric supplier.
Accordingly, in those municipalities where Alabama Power is the primary electric
supplier, it proposes to exercise the option to purchase the distribution
facilities of the secondary electric supplier in such municipalities for a
stated consideration calculated in accordance with the provisions of the
Territorial Act, which consideration shall not exceed, in the aggregate, $20
million. The facilities proposed to be acquired by Alabama Power will,
immediately after their purchase, be connected to other distribution facilities
owned by Alabama Power.
In certain municipalities where Alabama Power is the secondary
electric supplier, it has received timely notice of the exercise of the purchase
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option from the primary electric supplier in such municipalities for a stated
consideration for Alabama Power's distribution facilities calculated in
accordance with the provisions of the Territorial Act, which consideration shall
not exceed, in the aggregate, $10 million. The facilities proposed to be sold by
Alabama Power will, immediately after their sale, be disconnected from its
distribution system and connected to that of each purchaser.
The primary and secondary suppliers in the municipalities affected
by the Territorial Act, other than Alabama Power, are comprised of electric
membership corporations, rural electric cooperatives and/or municipally-owned
electric distributors.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees and expenses to be paid or incurred, directly or
indirectly, in connection with the proposed transaction are:
Legal Fees......................$20,000.00
Miscellaneous................. 1,000.00
Total...........................$21,000.00
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
3.1 The proposed acquisition of the distribution facilities by
Alabama Power is subject to Sections 9(a) and 10 of the Act. The proposed sale
of the distribution facilities by Alabama Power is subject to Section 12(d) of
the Act and Rule 44 thereunder.
3.2 The proposed transaction will be carried out in accordance with
the procedure specified in Rule 23 and pursuant to an order of the Commission in
respect thereto. It is expected that the proposed transaction will be
consummated as soon as practicable after receipt of all necessary regulatory
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approvals. However, Alabama Power requests authority to consummate the
transaction at any time on or before December 31, 2000.
3.3 Rule 54 Analysis: The proposed transactions are also subject to
Rule 54, which provides that, in determining whether to approve an application
which does not relate to any "exempt wholesale generator" ("EWG") or "foreign
utility company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied.
Southern currently meets all of the conditions of Rule 53(a),
except for clause (1). At July 31, 1999, Southern's "aggregate investment," as
defined in Rule 53(a)(1), in EWGs and FUCOs was approximately $3.605 billion, or
about 90.92% of Southern's "consolidated retained earnings," also as defined in
Rule 53(a)(1), for the year ended June 30, 1999 ($3.965 billion). With respect
to Rule 53(a)(1), however, the Commission has determined that Southern's
financing of investments in EWGs and FUCOs in an amount greater than the amount
that would otherwise be allowed by Rule 53(a)(1) would not have either of the
adverse effects set forth in Rule 53(c). See The Southern Company, Holding
Company Act Release No. 26501, dated April 1, 1996 (the "Rule 53(c) Order"); and
Holding Company Act Release No. 26646, dated January 15, 1997 (order denying
request for reconsideration and motion to stay).
In addition, Southern has complied and will continue to comply with
the record-keeping requirements of Rule 53(a)(2), the limitation under Rule
53(a)(3) on the use of Operating Company personnel to render services to EWGs
and FUCOs, and the requirements of Rule 53(a)(4) concerning the submission of
copies of certain filings under the Act to retail rate regulatory commissions.
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Further, none of the circumstances described in Rule 53(b) has occurred.
Moreover, even if the effect of the capitalization and earnings of
EWGs and FUCOs in which Southern has an ownership interest upon the Southern
holding company system were considered, there would be no basis for the
Commission to withhold or deny approval for the proposal made in this
Application-Declaration. The action requested in the instant filing would not,
by itself, or even considered in conjunction with the effect of the
capitalization and earnings of Southern's EWGs and FUCOs, have a material
adverse effect on the financial integrity of the Southern system, or an adverse
impact on Southern's public-utility subsidiaries, their customers, or the
ability of State commissions to protect such public-utility customers.
The Rule 53(c) Order was predicated, in part, upon an assessment of
Southern's overall financial condition which took into account, among other
factors, Southern's consolidated capitalization ratio and the recent growth
trend in Southern's retained earnings. As of December 31, 1995, the most recent
fiscal year preceding the Rule 53(c) Order, Southern's consolidated
capitalization consisted of 49.3% equity (including mandatorily redeemable
preferred securities) and 50.7% debt (including $1.68 billion of long-term,
non-recourse debt and short-term debt related to EWGs and FUCOs). Southern's
consolidated capitalization as of June 30, 1999, was 44.4% equity, 55.6% debt
including all non-recourse debt, and 56.0% equity and 44.0% debt excluding all
non-recourse debt. Both are within accepted industry ranges and within the
limits set by independent rating agencies (such as Standard and Poor's) for "A"
rated utilities.
Thus, since the date of the Rule 53(c) Order, there has been no
material change in Southern's consolidated capitalization ratio, which remains
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within acceptable ranges and limits of rating agencies as evident by the
continued "A" corporate credit rating of Southern. Specifically, in January 1997
Standard & Poor's assigned Southern its corporate credit rating of "A" which was
consistent with the implied corporate rating previously held by Southern. This
implied rating had been in effect since May 1995. Therefore, since the April
1996 issue of the Rule 53(c) Order, the Southern consolidated credit rating has
remained at "A" thereby demonstrating Southern's continued strong financial
integrity. In addition, the underlying ratings of the affiliated operating
companies, which have a strong influence on the Southern corporate rating, are
all "A+" or better. As a point of reference, the percentage of debt in the total
capital structure of the Southern domestic operating utility companies was 46.9%
at June 30,1999, which is lower than the average for the Standard & Poor's `A'
rated electric utilities. At year-end 1998, according to Standard & Poor's, the
average total debt (both long-term and short-term) for `A' rated electric
utilities was 50.4% of total capitalization.
Southern's consolidated retained earnings grew on average
approximately 5.5% per year over the last five years. Excluding the $111 million
one-time windfall profits tax imposed on SWEB in 1997 and the write down of
assets in 1998, the average growth would be 7.2%. In 1998, consolidated retained
earnings increased $36 million, or slightly less than 1%. Southern's interests
in EWGs and FUCOs have made a positive contribution to earnings in the three
calendar years ending after the Rule 53(c) order.
Accordingly, since the date of the Rule 53(c) Order, the
capitalization and earnings attributable to Southern's investments in EWGs and
FUCOs has not had any adverse impact on Southern's financial integrity.
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Item 4. Regulatory Approval.
The proposed transaction is not subject to the jurisdiction of any
state commission. The proposed transaction is not subject to the jurisdiction of
any federal commission other than the Commission.
Item 5. Procedure.
Alabama Power requests that the Commission's order herein be issued
as soon as the rules will allow and that there be no thirty-day waiting period
between the issuance of the Commission's order and the date on which it is to
become effective. Alabama Power waives a recommended decision by a hearing
officer or other responsible officer of the Commission and hereby consents that
the Division of Investment Management may assist in the preparation of the
Commission's decision and/or order herein, unless such division opposes the
matter covered by this application or declaration.
Item 6. Exhibits and Financial Statements.
(a) Exhibits.
A - None.
B - None.
C - None.
D - None.
E - None.
F - Opinion of Balch & Bingham LLP.
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G - None.
H - Form of Notice.
(b) Financial Statements.
Alabama Power's Form 10-Q for the quarter ended June 30, 1999, File
No. 1-3164, is incorporated herein by reference.
Item 7. Information as to Environmental Effects.
(a) In view of the nature of the proposed transaction described
herein, the Commission's action in this matter will not constitute any major
federal action significantly affecting the quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: September 9, 1999 ALABAMA POWER COMPANY
By:___/s/ Wayne Boston________________
Wayne Boston, Assistant Secretary
Exhibit F
BALCH & BINGHAM LLP
September 9, 1999
Securities and Exchange Commission
Washington, DC 20549
RE: Alabama Power Company
Application or Declaration on Form U-1
Ladies and Gentlemen:
We are familiar with the statement on Form U-1 filed by Alabama Power
Company ("Alabama Power"), a wholly-owned subsidiary of The Southern Company, a
registered holding company, in the above-referenced proceeding, and are
furnishing this opinion with respect to the actions requested therein, which, if
granted, would authorize Alabama Power to purchase up to $20 million of
distribution systems from and sell up to $10 million of distribution systems to
certain electric suppliers within the State of Alabama.
We are of the opinion that Alabama Power is a validly organized and
duly existing corporation under the laws of the State of Alabama and that, upon
the issuance of your order or orders herein, and in the event the proposed
transactions are carried out in accordance with the terms of such statement on
Form U-1 and your order or orders:
(a) all state laws applicable to the proposed transactions will have
been complied with; and
(b) the consummation of the proposed transactions will not violate the
legal rights of the holders of any securities issued by Alabama Power or any
associate company of Alabama Power.
We hereby consent to the use of this opinion in connection with the
filing of such statement on Form U-1.
Very truly yours,
/s/ Balch & Bingham LLP
Balch & Bingham LLP
Exhibit H
Alabama Power Company
Proposed Notice of Proceedings
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Alabama Power Company ("Alabama Power"), a wholly-owned subsidiary of
The Southern Company ("Southern"), a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act"), has filed an
application-declaration (the "Application") under Sections 9(a) and 10 of the
Act and Rules 44 and 23 thereunder. Alabama Power is sometimes hereinafter
referred to as the "Applicant."
In 1985, the Legislature of the State of Alabama enacted a law
aimed at eliminating and avoiding the unnecessary duplication of electric
distribution facilities by electric suppliers in the state, which law is now
codified as ss.37-14-30 et seq., Code of Alabama, 1975 (the "Territorial Act").
Under the Territorial Act, the primary electric supplier within each
municipality in the state is granted the option to acquire all distribution
facilities of any secondary electric supplier used to supply retail electric
service within the municipal limits of such municipality, and establishes a
method of determining the price to be paid for such distribution facilities.
Alabama Power and certain other primary electric suppliers have exercised this
option.
In some municipalities in Alabama, Alabama Power is the primary
electric supplier, while in others it is the secondary electric supplier.
Accordingly, in those municipalities where Alabama Power is the primary electric
supplier, it proposes to exercise the option to purchase the distribution
facilities of the secondary electric supplier in such municipalities for a
stated consideration calculated in accordance with the provisions of the
Territorial Act, which consideration shall not exceed, in the aggregate, $20
million.
In certain municipalities where Alabama Power is the secondary
electric supplier, it has received timely notice of the exercise of the purchase
option from the primary electric supplier in such municipalities for the
purchase of Alabama Power's distribution facilities for a stated consideration
calculated in accordance with the provisions of the Territorial Act, which
consideration shall not exceed, in the aggregate, $10 million.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
