File No. 70-9145
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
* * *
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
John F. Di Lorenzo, Jr., Associate General Counsel
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)
American Electric Power Company, Inc. ("American"), a holding
company registered under the Public Utility Holding Company Act of
1935, as amended, and AEP Resources, Inc., a wholly-owned non-
utility subsidiary of American, hereby amend their Application or
Declaration on Form U-1 in File No. 70-9145 by filing Exhibit G,
Form of Notice.
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 their behalf by the undersigned
thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
AEP RESOURCES, INC.
By__/s/ John F. Di Lorenzo, Jr._______
Secretary
Dated: December 1, 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 :
:
(70-9145) :
_________________________________________:
NOTICE OF PROPOSED FINANCING OF POWER PROJECTS
American Electric Power Company, Inc. ("American"), a registered
holding company, and AEP Resources, Inc. ("Resources"), a wholly-
owned non-utility 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 Sections 6, 7, 9, 10 and 12 and Rules 45, 46,
52 and 54 promulgated thereunder as applicable the proposed
transactions.
American and Resources request authority (i) for Resources, or a
wholly-owned subsidiary, to enter into a joint venture ("Management
Company") with Conoco Inc. ("Conoco") that will provide energy
services to industrial, commercial and institutional customers;
(ii) for Resources, or a wholly-owned subsidiary, to enter into a
joint venture ("Capital Company") with Conoco and its parent, E. I.
du Pont de Nemours and Company ("DuPont") that will provide
financing for energy-related assets to customers of Management
Company; (iii) for American or Resources to provide Management
Company and its subsidiaries with up to $100 million in guarantees
through December 31, 2002; (iv) for Resources, Capital Company or
Management Company to form, and guarantee the obligations of, one
or more subsidiaries; (v) for Capital Company, Management Company
and their subsidiaries to issue membership or partnership
interests; and (vi) for Capital Company and Management Company and
their subsidiaries to pay dividends out of capital or unearned
surplus to the extent permitted by applicable law. American and
Resources on the one hand and Conoco and DuPont on the other hand
are sometimes hereinafter referred to as the "Parties".
(1) The Ventures
Resources and Conoco/DuPont intend, through Capital Company
and Management Company (collectively, "Ventures"), to develop a new
business that will provide energy management and capital for Energy
Facilities. "Energy Facilities" include facilities and equipment
that are used by industrial, commercial and institutional entities
to produce, convert, store and distribute (i) thermal energy
products, such as process steam, heat, hot water, chilled water,
and air conditioning, (ii) electricity, (iii) compressed air, (iv)
process and potable water, (v) industrial gases, such as nitrogen,
and (vi) other similar products. Energy Facilities also include
related facilities that transport, handle and store fuel, such as
coal handling and oil storage tanks, and facilities that treat
waste for these entities, such as scrubbers, precipitators, cooling
towers and water treatment facilities. Their goal is to allow a
customer to focus its management and capital on its core businesses
and allow the Ventures to manage and finance the energy
requirements of the customer. As permitted by applicable law,
Management Company intends to provide Energy Facilities Management
Services, Energy Conservation Services, Procurement Services, Other
Energy Services and Incidental Services as described below.
Capital Company intends to provide lease and other financing for
the Energy Facilities of Management Company's customers.
The Ventures initially will finance and manage Energy
Facilities used at 16 manufacturing sites for DuPont's industrial
production. Similar assets at 17 additional DuPont and Conoco
manufacturing sites also have been identified as potential projects
for the Ventures. The Ventures will seek additional customers not
affiliated with DuPont.
American will not seek recovery through higher rates to the
Utility Subsidiaries' customers in order to compensate American for
any possible losses that it may sustain on investment in Ventures
or for any inadequate returns on such investments. The seven
electric utility subsidiaries in the AEP System are Appalachian
Power Company, Columbus Southern Power Company, Indiana Michigan
Power Company, Kentucky Power Company, Kingsport Power Company,
Ohio Power Company and Wheeling Power Company (collectively, the
"Utility Subsidiaries"). American also owns all of the common
stock of AEP Generating Company, which sells power at wholesale to
various AEP System companies and others, and minority interests in
Ohio Valley Electric Corporation and its subsidiary, Indiana
Kentucky Electric Corporation, which supply power to certain
government facilities.Neither Management Company nor Capital
Company will be a public utility company as defined in the 1935
Act, and without further Commission approval, neither company will
undertake any activity if, as a result, it would become a public
utility company as defined in the 1935 Act. Without further
authorization of this Commission, the Ventures will not provide
their services outside the United States.
(2) Management Company
Management Company will provide the following services:
(a) "Energy Facility Management Services" include the
day-to-day operations, maintenance, and management, and other
technical and administrative services required to operate, maintain
and manage the Energy Facilities, as well as long-term planning and
budgeting for and evaluation of improvements to Energy Facilities.
(b) "Energy Conservation Services" include (1)
identification (through energy audits or otherwise) of energy and
other resource (water, labor, maintenance, materials, etc.) cost
reduction or efficiency opportunities; (2) design of facility or
process modifications or enhancements to realize such
opportunities; (3) management, or direct construction or
installation, of energy conservation or efficiency equipment; (4)
training of customer personnel in the operation of equipment; (5)
maintenance of energy systems, (6) design, management or direct
construction and installation of new and retrofit heating,
ventilating, and air conditioning ("HVAC"), electrical and power
systems, motors, pumps, lighting, water and plumbing systems, and
related structures, to realize energy and other resource efficiency
goals or to otherwise meet a customer's energy-related needs; (7)
system commissioning (i.e., monitoring the operation of an
installed system to ensure that it meets design specifications);
(8) reporting of system results; (9) design of energy conservation
programs; (10) implementation of energy conservation programs; (11)
provision of conditioned power services (i.e., services designed to
prevent, control or mitigate adverse effects of power disturbances
on a customer's electrical system to ensure the level of power
quality required by the customer, particularly with respect to
sensitive electronic equipment); and (12) other similar or related
activities.
(c) "Procurement Services" include arranging as agent or
broker for a customer to purchase electricity, natural gas, oil,
propane, industrial gases and other commodities and supplies used
by or distributed through Energy Facilities ("Energy Commodities").
Procurement Services also include the purchase and sale, as
principal, of electricity and natural gas, to the extent permitted
by state law and state commission orders, and other Energy
Commodities, but Management Company will not take positions in, or
trade, Energy Commodities for a profit.
(d) "Other Energy Services" including development,
design, construction, ownership, operation, and sale, and providing
other managerial and technical services for, Energy Facilities and
equipment used in and improvements to Energy Facilities.
(e) "Incidental Services" include products and services
that are incidental to Energy Facilities Management Services,
Energy Conservation Services, Procurement Services and Other Energy
Services. These incidental products and services will be closely
related to the consumption of energy and/or the maintenance of
Energy Facilities.
These services will be provided to DuPont, Conoco, any
other affiliate of Management Company (other than American, any
other registered holding company and any subsidiaries of either)
and any nonaffiliate at market-based prices. Payment for services
will vary by project and may include fee-for-service, fixed price,
time and materials, progress payments, turnkey payment, Capital
Company or third-party financing arrangements, performance
contracts with a savings guarantee or payment based on the energy
or other resource savings achieved, the output of equipment (for
example, steam, water, chilled water, air or heat), commissions,
and other payment structures.
American and Conoco will contribute equal amounts of
equity capital to Management Company for the purpose of providing
working capital for Management Company. Management Company may
also obtain debt financing from American or Resources, Conoco or
unaffiliated third parties such as commercial banks. Loans from
American or Resources to Management Company would be made at the
cost of funds incurred by American or Resources in accordance with
Rule 52.
Management Company will be staffed primarily by current
employees of DuPont and Conoco at the facilities. It is expected
that initially not more than 25 employees of American Electric
Power Service Corporation, a service company ("AEPSC"), and the
Utility Subsidiaries will be transferred to Management Company. In
addition, AEPSC, the Utility Subsidiaries, AEP Resources Service
Company ("RESCo"), AEP Energy Services, Inc. ("AEPES") and Conoco
and its affiliates may provide services or sell goods to Management
Company. In accordance with Rules 87(a) and 90, services and goods
provided by AEPSC or the Utility Subsidiaries to Management Company
will be at cost. Services and goods may be provided by RESCo and
AEPES at other than cost in accordance with Rules 87(b)(1) and
90(d)(1). In no event will more than 2% of the total employees of
AEPSC and the Utility Subsidiaries render services to Management
Company at any one time.
(3) Capital Company
Capital Company will offer financing for existing energy
assets and improvements and provide new capital for customers of
Management Company through sale and leaseback, project financing or
other creative financing facilities. Assets financed by Capital
Company generally will be managed by Management Company. In
addition, Capital Company will make its financing services
available to customers of Management Company to assist Management
Company in connection with its program to provide energy management
and related services to its customers.
Capital Company anticipates purchasing from DuPont and Conoco
the Energy Facilities located at 33 of their industrial and
refining facilities at their fair market value, estimated to be
approximately $1 billion. Capital Company will lease the
facilities back to DuPont and Conoco.
Capital Company expects to maintain (i) a debt to total
capitalization ratio of approximately 75% and (ii) an investment
grade rating. All debt financing obtained by Capital Company will
be non-recourse to American, Resources, DuPont and Conoco.
American will contribute cash to fund its portion of the equity
contributions required by Capital Company. DuPont and Conoco will
contribute cash or assets to fund their portion of the equity
contributions.
Capital Company may have a small staff, initially less than
ten employees; Management Company will most likely provide it with
many services. In addition, AEPSC, the Utility Subsidiaries,
RESCo, AEPES and Conoco and its affiliates may provide services to
Capital Company.
(4) Guarantees of Management Company
American or Resources may guarantee the debt and other
obligations of Management Company. Debt financing of Management
Company which is guaranteed by American will not (i) exceed a term
of 15 years or (ii) (a) bear a floating interest rate in excess of
2% over the prime rate, London Interbank Offered Rate or other
appropriate index in effect from time to time or (b) bear a fixed
interest rate in excess of 2.5% above the yield at the time of
issuance of United States Treasury obligations of a comparable
maturity. Nondebt obligations of Management Company which may be
guaranteed by American may take the form of bid bonds or
performance or other direct or indirect guarantees of contractual
or other obligations. The maximum amount of these obligations that
American or Resources proposes to guarantee is $100 million. These
guarantees are in addition to those authorized in the Orders dated
May 2, 1997 (HCAR No. 26713) and May 10, 1996 (HCAR No. 26516).
(5) Additional Subsidiaries
Resources may form special purpose subsidiaries to hold its
interests in Management Company and Capital Company.
Resources may guarantee the debt and other obligations of
these subsidiaries. From time to time it may be advantageous for
Capital Company or Management Company to form subsidiaries to
undertake one or more of the activities described herein. These
subsidiaries may be organized (i) in order to facilitate the making
of proposals to a prospective customer; or (ii) after the award of
a bid proposal, in order to facilitate closing on the purchase or
financing of the underlying assets; or (iii) at any time after the
consummation of a transaction in order, among other things, to
comply with applicable federal or state laws; or (iv) as part of
tax planning, to limit exposure to U.S. and state taxes; or (v) for
other lawful business purposes. Capital Company and Management
Company may guarantee the debt and other obligations of these
subsidiaries.
(6) Issuance of Membership Interests
It is anticipated that Capital Company and Management Company
will be limited liability companies which will issue membership
interests to Resources, DuPont and Conoco. In addition,
subsidiaries of Capital Company or Management Company may be
limited liability companies or partnerships which will issue
membership or partnership interests. Capital Company, Management
Company and their subsidiaries request authority to issue
membership or partnership interests, as the case may be.
The Management Company Operating Agreement will provide for
initial contributions by the members to the Management Company of
$1,000 and such additional amounts as may determined by the
Management Committee. The Capital Company Operating Agreement will
provide for initial contributions by the members to the Capital
Company of $1,000 and such additional amounts as may determined by
the Management Committee. Membership interests may be issued to
third parties by Management or Capital Company on terms to be
agreed by the members. Membership or partnership interests may be
issued by subsidiaries of Management or Capital Company on terms to
be decided.
(7) Dividends Out of Capital
Rule 46 under the 1935 Act prohibits subsidiaries of
registered holding companies, including Management Company, Capital
Company and their subsidiaries, from declaring or paying dividends
out of capital or unearned surplus. It is requested that
Management Company, Capital Company and their subsidiaries be
authorized to declare and pay dividends to their parent companies
from time to time out of capital or unearned surplus to the extent
permitted by applicable law.
It is expected that situations will arise where Management
Company, Capital Company or one or more of their subsidiaries 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 Management Company or
Capital Company were to sell a portion of its equity in a
subsidiary to a third party for cash. It then would have
substantial unrestricted cash available for upstream distribution,
but (assuming no profit on the sale) would not have available
current earnings and therefore could not, without prior Commission
approval, declare and pay a dividend to the Parties out of such
cash proceeds.
Any dividend actually declared and paid by Management Company,
Capital Company or a subsidiary 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 these companies to use distributable cash to
pay dividends ultimately to Resources will benefit the American
System by enabling Resources to dividend the cash to American or
to apply such amounts to the reduction or refinancing of
outstanding bank borrowings and to fund operations of other
American subsidiaries. In addition, since Management Company,
Capital Company and their subsidiaries will be engaged in
activities described in this Application, the payment of dividends
out of capital or unearned surplus by these American direct and
indirect subsidiaries will not adversely affect the financial
integrity of the American System or jeopardize the working capital
of American's Utility Subsidiaries within the contemplation of
Section 12(c) of the 1935 Act.
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 December , 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
