File No. 70-9171
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
GULF POWER COMPANY MISSISSIPPI POWER COMPANY
500 Bayfront Parkway 2992 West Beach
Pensacola, Florida 32501 Gulfport, Mississippi 39501
(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 Michael W. Southern, Vice President,
Gulf Power Company Secretary, Treasurer and
500 Bayfront Parkway Chief Financial Officer
Pensacola, Florida 32501 Mississippi Power Company
2992 West Beach
Gulfport, Mississippi 39501
(Names and addresses of agents 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., Suite 5200
270 Peachtree Street, N.W. Atlanta, Georgia 30308
Atlanta, Georgia 30303
<PAGE>
Item 3. Applicable Statutory Provisions.
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 March 31, 1998, Southern's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.947 billion, or about
77.70% of Southern's "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended December 31, 1997 ($3,793 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
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. issuance of Senior Notes by Gulf
and Mississippi) 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.
<PAGE>
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
1997, that ratio was 47.5% equity and 52.5% debt (including $4.593 billion of
long-term, non-recourse debt and short-term debt related to EWGs and FUCOs). On
a pro forma basis, taking into consideration, among other things, the
transactions contemplated hereby such ratios are 47.5% and 52.5%, respectively,
for equity and debt. The common equity component of Southern's pro forma
consolidated capitalization represents 35.1% of total capitalization at December
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. 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+". As a point of reference, the pro forma percentage of debt in the total
capital structure of the Southern domestic operating utility companies is 45.1%,
which is at 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
8.6% per year from 1992 through 1996. In 1997, consolidated retained earnings
increased approximately $78,148,000, or slightly more than 2%. The reduction in
the rate of earnings growth in 1997 was primarily due to a $111 million windfall
profits tax assessed against South Western Electricity in the United Kingdom.
Excluding the impact of such tax, 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 H filed herewith which reflects
capitalization at December 31, 1997 and the Statement of Income for the year
ended December 31, 1997 for Southern and subsidiaries consolidated.
- --------
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%.
<PAGE>
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
F-1 Opinion of Beggs & Lane, counsel for Gulf.
F-2 Opinion of Eaton and Cottrell, P.A., counsel for
Mississippi.
H Capitalization and Income Statement of The Southern
Company and Subsidiary Companies after giving effect
to the issuance of the Senior Notes.
(b) Financial Statements:
Balance sheet of each Applicant at December 31, 1997.
(Designated in each Applicant's Form 10-K for the year ended
December 31, 1997, File Nos. 0-2429 and 0-6849.)
Statements of Income of each Applicant for the period ended
December 31, 1997. (Designated in each Applicant's Form 10-K
for the year ended December 31, 1997, File Nos. 0-2429 and
0-6849.)
Since December 31, 1997, there have been no material adverse changes,
not in the ordinary course of business, in the financial condition of the
Applicants from that set forth in or contemplated by the foregoing financial
statements.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this amendment to be signed
on their behalf by the undersigned thereunto duly authorized.
Date: April 14, 1998 GULF POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
MISSISSIPPI POWER COMPANY
By /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit F-1
Beggs & Lane
Seventh Floor Blount Building
3 West Garden Street
Pensacola, Florida 32501
April 14, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Re: Statement on Form U-1 of
Gulf Power Company
(herein called the "Company")
File No. 70-9171
Ladies and Gentlemen:
We have read the statement on Form U-1, as amended, referred to above,
and are furnishing this opinion with respect to the proposed transactions
described therein relating to the issuance by the Company of the Senior Notes
(as defined therein).
We are of the opinion that the Company is validly organized and duly
existing as a corporation under the laws of the State of Maine and is duly
admitted to do business as a foreign corporation in the States of Florida,
Georgia and Mississippi and that, upon the adoption of appropriate resolutions
by the board of directors of the Company (or a duly authorized committee
thereof), upon the issuance of your order or orders in this matter permitting
such statement on Form U-1 to become effective with respect to such proposed
transactions, upon compliance with the relevant provisions of the Securities Act
of 1933 and the Trust Indenture Act of 1939, and in the event that the proposed
transactions are consummated in accordance with such statement on Form U-1 and
your order or orders in respect thereof and with the order or orders of the
Florida Public Service Commission with respect thereto:
(a) all State laws applicable to the proposed transactions will
have been complied with;
(b) the Senior Notes will be valid and binding obligations of the
Company in accordance with their terms; and
(c) the consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by
the Company or any associate company thereof.
We hereby give our written consent to the use of this opinion in
connection with the above-mentioned statement on Form U-1.
Very truly yours,
/s/Beggs and Lane
BEGGS AND LANE
Exhibit F-2
Eaton and Cottrell, P.A.
1310 Twenty Fifth Avenue
Gulfport, Mississippi 39501
601-864-8221April 14, 1998
Securities and Exchange Commission
Washington, D.C. 20549
Re: Statement on Form U-1 of
Mississippi Power Company
(herein called the "Company")
File No. 70-9171
Ladies and Gentlemen:
We have read the statement on Form U-1, as amended, referred to above,
and are furnishing this opinion with respect to the proposed transactions
described therein relating to the issuance by the Company of the Senior Notes
(as defined therein).
We are of the opinion that the Company is validly organized and duly
existing as a corporation under the laws of the State of Mississippi and is duly
admitted to do business under the laws of the State of Alabama and that, upon
the adoption of appropriate resolutions by the board of directors of the Company
(or a duly authorized committee thereof), upon the issuance of your order or
orders in this matter permitting such statement on Form U-1 to become effective
with respect to such proposed transactions, upon compliance with the relevant
provisions of the Securities Act of 1933 and the Trust Indenture Act of 1939,
and in the event that the proposed transactions are consummated in accordance
with such statement on Form U-1 and your order or orders in respect thereof:
(a) all State laws applicable to the proposed transactions will
have been complied with;
(b) the Senior Notes will be valid and binding obligations of the
Company in accordance with their terms; and
(c) the consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by
the Company or any associate company thereof.
We hereby give our written consent to the use of this opinion in
connection with the above-mentioned statement on Form U-1.
Very truly yours,
/s/Eaton and Cottrell, P.A.
EATON AND COTTRELL, P.A.
Exhibit H
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
Capitalization Ratios at December 31, 1997
<TABLE>
<CAPTION>
Consolidated Pro Forma
per 10-Q Amounts (A) Equity Debt
---------------- --------------- ---------------- ----------------
Capitalization (in thousands of dollars):
<S> <C> <C> <C> <C>
Common stock..........................................$3,467,115 $ - $3,467,115
Paid-in capital........................................2,337,714 - 2,337,714
Retained earnings......................................3,842,135 (101,974)(B) 3,740,161
Preferred stock..........................................493,346 200,000 (B) 693,346
Capital & preferred securities.........................1,743,520 935,750 (B) 2,679,270
Long-term debt........................................10,273,606 1,184,070.(B,D) $11,457,676
Preferred due within one year..................................- - -
Long-term debt due within one year.......................783,805 - 783,805
Notes payable & commercial paper.......................2,064,249 - 2,064,249
================ ============ ============ ================
Total (Incl Amts Due in 1 Year)...............$25,005,490 $2,217,846 $12,917,606 $14,305,730
================ ============ ============ ================
Actual Amounts in Millions of Dollars....................$25,006 $11,884 $13,122
Actual Capitalization Ratios...............................100.0% 47.5% 52.5%
Pro Forma Amounts in Millions of Dollars.................$27,224 $12,918 $14,306
Pro Forma Capitalization Ratios............................100.0% 47.5% 52.5%
</TABLE>
Pro Forma Consolidated Statements of Income (Unaudited)
(Stated in Thousands of Dollars)
<TABLE>
<CAPTION>
For the Twelve Months Ended Pro Forma
December 31, 1997 Amounts (A) As Adjusted
<S> <C> <C> <C>
OPERATING REVENUES $ 12,610,972 $ - $ 12,610,972
---------------- ------------ ----------------
OPERATING EXPENSES:
Operation--
Fuel 2,280,956 - 2,280,956
Purchased power 3,032,637 - 3,032,637
Other 1,930,064 - 1,930,064
Maintenance 762,945 - 762,945
Depreciation and amortization 1,246,111 - 1,246,111
Amortization of deferred Plant Vogtle costs 120,577 - 120,577
Taxes other than income taxes 572,341 - 572,341
Income taxes 724,881 (55,516)(C) 669,365
---------------- ------------ ----------------
Total operating expenses 10,670,512 (55,516) 10,614,996
---------------- ------------ ----------------
OPERATING INCOME 1,940,460 55,516 1,995,976
OTHER INCOME:
Allowance for equity funds used during construction 6,461 - 6,461
Interest income 151,693 - 151,693
Other, net 52,960 - 52,960
Income taxes applicable to other income 33,868 - 33,868
Windfall profits tax assessed in United Kingdom (148,062) - (148,062)
---------------- ------------ ----------------
INCOME BEFORE INTEREST CHARGES 2,037,380 55,516 2,092,896
---------------- ------------ ----------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 679,696 78,874 (C,D) 758,570
Allowance for debt funds used during construction (14,053) - (14,053)
Interest on notes payable 111,694 - 111,694
Amortization of debt discount, premium and expense, net 34,233 - 34,233
Other interest charges 63,250 - 63,250
Minority interest in subsidiaries 28,666 - 28,666
Distributions on capital and preferred securities of subsidiary companies 119,577 66,616 (C) 186,193
Preferred dividends of subsidiary companies 42,741 12,000 (C) 54,741
---------------- ------------ ----------------
Interest charges and other, net 1,065,804 157,490 1,223,294
---------------- ------------ ----------------
CONSOLIDATED NET INCOME $ 971,576 $ (101,974) $ 869,602
================ ============ ================
</TABLE>
(See Notes on Following Page)
<PAGE>
NOTES
(A) The amounts and types of the securities to be issued will be dependent
upon, among other things, market conditions prevailing at the time of
issuance. The amounts estimated to be issued are the maximum amounts
requested in the subject application, together with remaining
authorizations in certain previous applications, and are used solely
for the purpose of illustrating the effect upon Southern Company
consolidated capitalization and earnings. In addition, no assumptions
are made in connection with possible refundings.
(B) To give effect to (i) the proposed issuance of $500,000,000 of
preferred securities by Alabama Power Company; (ii) the proposed
issuance of $310,750,000 of preferred securities by Georgia Power
Company; (iii) the proposed issuance of $75,000,000 of preferred
securities and $75,000,000 of pollution control obligations by
Mississippi Power Company; and (iv) the issuance in January 1998 by
Gulf Power Company of $45,000,000 of 7% Trust Preferred Securities and
the proposed issuance by Gulf Power Company of $5,000,000 additional
preferred securities, $200,000,000 of first mortgage bonds,
$200,000,000 of preferred stock and $159,070,000 of pollution control
obligations.
(C) To give effect to (i) the proposed issuance of $500,000,000 of
preferred securities by Alabama Power Company at an assumed rate of
7.125%; (ii) the proposed issuance of $310,750,000 of preferred
securities by Georgia Power Company at an assumed rate of 7.125%; (iii)
the proposed issuance by Mississippi Power Company of $75,000,000 of
preferred securities at an assumed rate of 7.125% and $75,000,000 of
pollution control obligations at an assumed rate of 5.50%; and (iv) the
issuance in January 1998 by Gulf Power Company of $45,000,000 of 7%
Trust Preferred Securities and the proposed issuance by Gulf Power
Company of $5,000,000 additional preferred securities at an assumed
rate of 7.125%, $200,000,000 of first mortgage bonds at an assumed rate
of 6.75%, $200,000,000 of preferred stock at an assumed rate of 6%,
$159,070,000 of pollution control obligations at an assumed rate of
5.50%.
(D) To give effect to the proposed issuance of $350,000,000 of senior notes
by Gulf Power Company and the proposed issuance of $400,000,000 senior
notes by Mississippi Power Company, both of which are contemplated in
this Form U-1 application.
