File No. 70-8949
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
AMENDMENT NO. 3
TO
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
GULF POWER COMPANY
500 Bayfront Parkway
Pensacola, Florida 32501
(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)
Warren E. Tate
Secretary and Treasurer
Gulf Power Company
500 Bayfront Parkway
Pensacola, Florida 32501
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all orders, notices
and communications to the above agents for service and 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, N.W. Suite 5200
Atlanta, Georgia 30303 Atlanta, Georgia 30308-2216
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INFORMATION REQUIRED
Item 3. Applicable Statutory Provisions.
Item 3 is hereby amended by replacing the Rule 54 Analysis with the
following:
Rule 54 Analysis: The proposed transaction is 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 May 31, 1997, Southern's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.117 billion, or about
56.78% of Southern's "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended March 31, 1997 ($3,728 million). 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. 16501, 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
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certain filings under the Act to retail rate regulatory commissions. 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 is 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 (viz. certain financing transactions by
Gulf) 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). As of year-end
1996, that ratio was 52.9% equity and 47.1% debt (including $1.74 billion of
long-term, non-recourse debt and short-term debt related to EWGs and FUCOs); and
as of March 31, 1997, following completion of Southern's acquisition of a
controlling interest in Consolidated Electric Power Asia Ltd., the comparable
ratio was 48.7% equity and 51.3% debt (including $3.82 billion of long-term,
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non-recourse debt and short-term debt related to EWGs and FUCOs). On a pro forma
basis, taking into consideration, among other things, the proposed issuance of
Revenue Bonds, new Bonds and new Preferred Stock by Gulf Power Company, there is
no significant effect on consolidated capitalization. The common equity
component of Southern's pro forma consolidated capitalization represents 37.7%
of total capitalization at March 31, 1997. Thus, since the date of the Rule
53(c) Order, there has been no material change in Southern's consolidated
capitalization ratio, which remains within acceptable ranges and limits of
rating agencies as evident by the continued "A" corporate credit rating of
Southern Company. Specifically, in January 1997 Standard & Poor's assigned
Southern Company 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 Company corporate rating, are all "A+".
As a point of reference, the consolidated pro forma percentage of debt in the
total capital structure of the Southern domestic operating utility companies is
42.8%, which is solidly below the median total debt ratio of the Standard &
Poor's "A" rated vertically integrated utilities.1
Southern's consolidated retained earnings grew on average approximately
8.8% per year from 1991 through 1995. In 1996, consolidated retained earnings
increased $280,365,000, or slightly more than 8%. The small reduction in the
rate of earnings growth was primarily attributable to reduced domestic utility
1 Currently, capitalization ratios, including short-term debt, for "A"
rated vertically integrated electric utilities have a median total debt
to total capital ratio of 45% as noted by Standard & Poor's in May 1997
for companies rated both publicly and confidentially. Prior to issuing
this rating standard, the Standard & Poor's total debt to total capital
benchmark for an "A" rated vertically integrated investor-owned-utility
having an average business position was 47%.
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sales due to mild weather conditions throughout most of 1996 in the southeastern
United States. Earnings attributable to Southern's investments in EWGs and FUCOs
continued to contribute modestly to consolidated retained earnings.
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.
Reference is made to Exhibit G filed herewith which reflects
capitalization at March 31, 1997 and the Statement of Income for the twelve
months ended March 31, 1997 for The Southern Company and subsidiaries
consolidated. In addition, the exhibit is adjusted to give effect to, among
other things, the proposed issuance of the Revenue Bonds, the new Bonds and the
new Preferred Stock by Gulf.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned company has duly caused this amendment to
be signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 27, 1997 GULF POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
