File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
AEP RESOURCES, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
Jeffrey D. Cross, General Counsel
AEP RESOURCES, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
American Electric Power Company, Inc. ("American"), a
registered holding company under the Public Utility Holding Company
Act of 1935, as amended ("1935 Act"), owns all of the common stock
of the non-utility subsidiary, AEP Resources, Inc. ("Resources")
(American and Resources collectively referred to herein as
"Applicants").
Pursuant to certain prior orders of the Commission, American
is authorized through December 31, 2000 (1) to apply proceeds from
issuances of debt and shares of common stock to acquisitions of
interest in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs") and, together with EWGs, ("Exempt
Projects"), as defined in sections 32 and 33 of the 1935 Act,
provided that American's "aggregate investment" does not exceed 50%
of "consolidated retained earnings" as defined in Rule 53(a)(1)
under the 1935 Act and (2) together with Resources, to form one or
more direct or indirect special purpose subsidiaries ("Project
Parents") to acquire and own or operate Exempt Projects on behalf
of American.FN1
FN1 See Release No. 35-26200, December 22, 1994 (authorizing,
inter alia, formation of Project Parents); Release Nos. 35-
26516, 35-26200, 35-25936, 35-25939, May 10, 1996, December
22, 1994, December 1, 1993 and December 6, 1993, respectively
(authorizing, inter alia, application of proceeds of sales of
debt and shares of common stock to investments in Exempt
Projects). American has pending before the Commission an
Application-Declaration docketed in File No. 70-9021
requesting an exemption from Rule 53(a) to permit American to
increase its aggregate investment in Exempt Projects to 100%
of consolidated retained earnings.
Rule 46 under the 1935 Act prohibits subsidiaries of
registered holding companies (but not Exempt Projects) from
declaring or paying dividends out of capital or unearned surplus.
Applicants herein seek authorization for Resources and on
behalf of certain existing Project Parents, namely (i) those
Project Parents (collectively, the "Yorkshire Project Parents")
formed in connection with American's 1997 acquisition of a 50%
ownership interest in Yorkshire Electricity Group plc, a U.K.
regional electricity company and a FUCO ("Yorkshire"), in a joint
venture with Public Service Company of ColoradoFN2;
FN2 The Yorkshire Project Parents are (1) Yorkshire Power Group
Limited ("Yorkshire Power Group"), a U.K. company in which
Resources and a subsidiary of Public Service Company of
Colorado have respective 50% ownership interests; and (2)
Yorkshire Holdings plc, the actual owner of Yorkshire and a
wholly-owned subsidiary of Yorkshire Power Group. For more
information with respect to Yorkshire Power Group's
acquisition of Yorkshire, reference is made to the
Application-Declaration in File No. 70-9021 and to the
Notification of Foreign Utility Company Status on Form U-57
filed by Resources on behalf of Yorkshire on February 19, 1997
and amended April 30, 1997.
(ii) those Project Parents (collectively, the "Nanyang Project
Parents") formed in connection with American's 1996 acquisition of
a 70% ownership interest in Nanyang General Light Electric Co.,
Ltd. ("Nanyang"), a cooperative joint venture company formed under
the laws of the People's Republic of China, established to own,
construct, finance and operate a coal-fired electric generating
station in Nanyang, Henan Province, ChinaFN3;
FN3 AEP Pushan Power LDC ("AEP Pushan") owns 70% of Nanyang, and
special purpose financing companies established by Henan
Electric Power Company and the City of Nanyang, respectively,
each own 15%. AEP Resources International, Limited and AEP
Resources Project Management Company, Ltd. are shareholders
and Project Parents of AEP Pushan.
and (iii) other existing and all future Project Parents formed
after the date hereof (together with the Yorkshire Project Parents
and Nanyang Project Parents, "Applicable Project Parents") to
declare and pay dividends to their parent companies from time to
time through December 31, 2002 out of capital or unearned surplus
to the extent permitted under applicable corporate law, provided
further, that Resources would pay any such dividend only to the
extent that the dividend is based upon (i) a corresponding dividend
or dividends out of capital or unearned surplus by an Applicable
Project Parent that is a direct subsidiary of Resources or (ii)
otherwise is based upon Resources' direct or indirect ownership of
an Exempt Project.
Applicants expect that situations will arise where Resources
itself or one or more Applicable Project Parents will have
unrestricted cash available for distribution in excess of current
and retained earnings. Consequently, in these situations the
declaration and payment of a dividend would have to be charged, in
whole or in part, to capital or unearned surplus.
One such situation could result if American was to acquire all
of the capital stock of an Exempt Project indirectly through
Resources and an Applicable Project Parent subsidiary of Resources,
and following the acquisition the Exempt Project incurred
borrowings, some or all of the proceeds of which were distributed
to the Applicable Project Parent, its immediate parent company, as
a reduction in the amount invested in such Exempt Project (i.e.,
return of capital). Assuming it had no earnings, the Applicable
Project Parent could not, without prior Commission approval,
distribute such cash to Resources, its immediate parent, for
ultimate distribution to American.
In that same example, if the Applicable Project Parent were to
sell a portion of its equity in the Exempt Project to a third party
for cash, the Applicable Project Parent would again have
substantial unrestricted cash available for upstream distribution,
but (assuming no profit on the stock sale) would not have available
current earnings and therefore could not, without prior Commission
approval, declare and pay a dividend to Resources out of such cash
proceeds.
Even in circumstances where a Project Parent has sufficient
earnings, and therefore may declare and pay a dividend to its
immediate parent (whether another Project Parent or Resources), the
immediate parent may have negative retained earnings, even after
receipt of the dividend, due to losses from other operations. In
this instance, cash would be trapped at an intermediate subsidiary
level where there is no current need for it.
Any dividend actually declared and paid by Resources or any
Project Parent out of capital or unearned surplus pursuant to the
authority requested herein will conform to applicable law of the
respective company's jurisdiction of organization and applicable
covenant restrictions in loan or other financing agreements.
The ability of the Applicable Project Parents and Resources to
use distributable cash to pay dividends ultimately to American will
benefit the American system by enabling American to apply such
amounts to the reduction or refinancing of outstanding bank
borrowings and to fund operations of other American subsidiaries.
In addition, since the Applicable Project Parents are or will be
engaged in activities exclusively dedicated to owning or operating
Exempt Projects as permitted under existing Commission orders, and
since the authority requested herein for Resources to declare and
pay dividends out of capital or unearned surplus is expressly tied
to and restricted by Resources' direct or indirect ownership of
Exempt Projects, the payment of dividends by these American direct
and indirect subsidiaries out of capital or unearned surplus will
not adversely affect the financial integrity of the American system
or jeopardize the working capital of American's domestic public
utility company subsidiaries within the contemplation of section
12(c) of the 1935 Act.
The Commission has recently issued orders authorizing the
payment of dividends out of capital or unearned surplus under
circumstances substantially similar to those proposed herein. See
GPU International, Inc., et al., Release No. 35-26678, February 28,
1997; The Southern Company, et al., Release No. 35-26543, July 17,
1996; Cinergy Corp., et al., Release No. 35-26719, May 22, 1997.
Compliance with Rule 54
Rule 54 provides that in determining whether to approve
certain transactions other than those involving EWGs or FUCOs, as
defined in the 1935 Act, the Commission will not consider the
effect of the capitalization or earnings of any subsidiary which is
an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. The
requirements of Rule 53(a), (b) and (c) are satisfied.
Rule 53(a)(1). As of March 31, 1997, American, through its
subsidiary, AEP Resources, Inc., had invested $369,674,000 in
FUCOs. This investment represents approximately 25% of
$1,540,440,000, the average of the consolidated retained earnings
of American reported on Form 10-K or Form 10-Q, as applicable, for
the four consecutive quarters ended March 31, 1997.
Rule 53(a)(2). Each FUCO in which American invests will
maintain books and records and make available the books and records
required by Rule 53(a)(2).
Rule 53(a)(3). No more than 2% of the employees of the
Electric Utility Companies will, at any one time, directly or
indirectly, render services to any FUCO.
Rule 53(a)(4). American has submitted and will submit a copy
of Item 9 and Exhibits G and H of American's Form U5S to each of
the public service commissions having jurisdiction over the retail
rates of the Electric Utility Companies.
Rule 53(b). (i) Neither American nor any subsidiary of
American is the subject of any pending bankruptcy or similar
proceeding; (ii) American's average consolidated retained earnings
for the four most recent quarterly periods ($1,540,440,000)
represented an increase of approximately $32,481,000 (or 2.2%) in
the average consolidated retained earnings from the previous four
quarterly periods ($1,504,959,000); and (iii) for the fiscal year
ended December 31, 1996, American did not report operating losses
attributable to its direct or indirect investments in EWGs and
FUCOs.
Rule 53(c). Rule 53(c) is inapplicable because the
requirements of Rule 53(a) and (b) have been satisfied.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
No fees, commissions or expenses other than expenses estimated
not to exceed $10,000 to be billed at cost by American Electric
Power Service Corporation, are to be paid by the Applicants or any
associate company in connection with the proposed transaction.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
The Applicants believe that Section 12(c) and Rules 46 and 54
thereunder may be applicable to the proposed transactions described
herein.
ITEM 4. REGULATORY APPROVAL
No commission other than the Securities and Exchange
Commission has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE
It is requested, pursuant to Rule 23(c) of the Rules and
Regulations of the Commission, that the Commission's order granting
and permitting to become effective this Application or Declaration
be issued on or before August 20, 1997. Applicants waive any
recommended decision by a hearing officer or by any other
responsible officer of the Commission and waive the 10-day waiting
period between the issuance of the Commission's order and the date
it is to become effective, since it is desired that the
Commission's order, when issued, become effective forthwith.
Applicants consent to the Office of Public Utility Regulation
assisting in the preparation of the Commission's decision and/or
order in this matter, unless the Office opposes the matter covered
by this Application or Declaration.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed as
part of this statement:
(a) Exhibits:
Exhibit F Opinion of Counsel (to be filed by amendment).
Exhibit G Proposed form of Notice
(b) Financial Statements:
Balance sheets, per books, as of March 31, 1997 and
statements of income and retained earnings for the twelve months
then ended of American and Resources and of American and its
subsidiaries consolidated. (To be filed by amendment.)
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
It is believed that the granting and permitting to become
effective of this Application or Declaration will not constitute a
major federal action significantly affecting the quality of the
human environment. No other federal agency has prepared or is
preparing an environmental impact statement with respect to the
proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on its behalf by its duly authorized
officer.
AMERICAN ELECTRIC POWER COMPANY, INC.
By_/s/ G. P. Maloney________________
Vice President
AEP RESOURCES, INC.
By_/s/ G. P. Maloney________________
Vice Chairman
Dated: July 18, 1997
Exhibit G
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. / , 1997
_________________________________________
:
In the Matter of :
:
AMERICAN ELECTRIC POWER COMPANY, INC. :
AEP RESOURCES, INC. :
1 Riverside Plaza :
Columbus, Ohio 43215 :
:
(70- ) :
_________________________________________:
NOTICE OF PROPOSED DECLARATION OF DIVIDEND OUT OF CAPITAL SURPLUS
American Electric Power Company, Inc. ("American"), a registered
holding company, and AEP Resources, Inc. ("Resources"), a
subsidiary of American, (American and Resources sometimes
hereinafter collectively referred to as the "Applicants") have
filed with the Commission an Application or Declaration pursuant to
the Public Utility Holding Company Act of 1935 (the "Act"),
designating Section 12(c) and Rules 46 and 54 promulgated
thereunder as applicable the proposed transactions.
Pursuant to certain prior orders of the Commission, American is
authorized through December 31, 2000 (1) to apply proceeds from
issuances of debt and shares of common stock to acquisitions of
interest in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs") and, together with EWGs, ("Exempt
Projects"), as defined in sections 32 and 33 of the 1935 Act,
provided that American's "aggregate investment" does not exceed 50%
of "consolidated retained earnings" as defined in Rule 53(a)(1)
under the 1935 Act and (2) together with Resources, to form one or
more direct or indirect special purpose subsidiaries ("Project
Parents") to acquire and own or operate Exempt Projects on behalf
of American.
Applicants herein seek authorization for Resources and on behalf of
certain existing Project Parents and other existing and all future
Project Parents formed after the date hereof (the "Applicable
Project Parents") to declare and pay dividends to their parent
companies from time to time through December 31, 2002 out of
capital or unearned surplus to the extent permitted under
applicable corporate law, provided further, that Resources would
pay any such dividend only to the extent that the dividend is based
upon (i) a corresponding dividend or dividends out of capital or
unearned surplus by an Applicable Project Parent that is a direct
subsidiary of Resources or (ii) otherwise is based upon Resources'
direct or indirect ownership of an Exempt Project.
The Commission has recently issued orders authorizing the payment
of dividends out of capital or unearned surplus under circumstances
substantially similar to those proposed herein. See GPU
International, Inc., et al., Release No. 35-26678, February 28,
1997; The Southern Company, et al., Release No. 35-26543, July 17,
1996; Cinergy Corp., et al., Release No. 35-26719, May 22, 1997.
The Application or Declaration and any amendments thereto are
available for public inspection through the Commission's Office of
Public Reference. Interested persons wishing to comment or request
a hearing should submit their views in writing by August , 1997
to the Secretary, Securities and Exchange Commission, Washington,
D.C. 20549, and serve a copy on the declarant at the address
specified above. Proof of service (by affidavit or, in case of any
attorney at law, by certificate) should be filed with the request.
Any request for a 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 this matter. After said date, the
Application or Declaration, as filed or as it may be amended, may
be permitted to become effective.
For the Commission, by the Office of Public Utility Regulation,
pursuant to delegated authority.
Jonathan G. Katz
Secretary
