File No. 70-9353
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM U-1
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APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
AEP RESOURCES, INC.
AEP ENERGY SERVICES, 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)
* * *
Susan Tomasky, 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. ("AEP"), a holding company
registered under the Public Utility Holding Company Act of 1935, as amended
("1935 Act"), AEP Energy Services, Inc. ("AEPES") and AEP Resources, Inc.
("Resources"), wholly-owned non-utility subsidiaries of AEP, hereinafter
sometimes collectively referred to as "Applicants", hereby amend their
Application or Declaration on Form U-1 in File No. 70-9353 as follows:
1. By amending and restating Post-Effective Amendment No. 1 as
follows:
"By adding the following to the end of Item 1.C:
Dividends Out of Capital. By Orders dated September 13, 1996 (HCAR
No. 26572) and September 27, 1996 (HCAR No. 26583), the Commission
authorized AEP to form one or more direct or indirect nonutility
subsidiaries to broker and market certain energy commodities. By Order
dated November 2, 1998 (HCAR No. 26933), the Commission authorized
Applicants to acquire certain energy-related assets in the United States,
including natural gas production, gathering, processing, storage and
transportation facilities and equipment, liquid oil reserves and storage
facilities, and associated facilities.
Rule 46 under the 1935 Act prohibits subsidiaries of registered
holding companies, including those companies formed by Applicants to own
Energy Assets or to hold, directly or indirectly, Applicants' ownership
interests in such companies (collectively, 'Energy Asset Subsidiaries'),
from declaring or paying dividends out of capital or unearned surplus. It
is requested that Energy Asset 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.1 Resources
and AEPES may then pay dividends to AEP to the extent that the dividend is
based upon a (i) corresponding dividend paid to them out of capital or
unearned surplus by an Energy Asset Subsidiary that is a direct subsidiary
of Resources or AEPES, as the case may be, or (ii) Resources' or AEPES'
direct or indirect ownership of an Energy Asset Subsidiary.
It is expected that situations will arise where Energy Asset
Subsidiaries will have unrestricted cash available for distribution in
excess of current and retained earnings, if any. 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 an Energy Asset Subsidiary were
to sell a portion or all 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 Applicants out of
such cash proceeds.
Any dividend actually declared and paid by an Energy Asset
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 the Energy Asset Subsidiaries to use distributable
cash to pay dividends ultimately to Resources or AEPES will benefit the
AEP System by enabling Resources and AEPES to dividend the cash to AEP or
to apply such amounts to the reduction or refinancing of outstanding bank
borrowings and to fund operations of other AEP subsidiaries. In addition,
since Energy Asset Subsidiaries will be engaged in activities described in
this Application, the payment of dividends out of capital or unearned
surplus by these AEP direct and indirect subsidiaries will not adversely
affect the financial integrity of the AEP System or jeopardize the working
capital of AEP's Utility Subsidiaries within the contemplation of Section
12(c) of the 1935 Act. Similar authority was granted by the Commission in
Entergy Corporation, HCAR No. 27039 (June 22, 1999), GPU International,
Inc., HCAR No. 27023 (May 14, 1999) and Cinergy Corp., HCAR No. 26984
(March 1, 1999)." 2. By amending and restating Item 1.E: "E. Compliance
with Rule 54
Rule 54 provides that in determining whether to approve certain
transactions other than those involving an exempt wholesale generator
('EWG') or a foreign utility company ('FUCO'), 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. As set forth below, all applicable conditions of Rule
53(a) are currently satisfied and none of the conditions set forth in Rule
53(b) exist or will exist as a result of the transactions proposed herein,
thereby satisfying such provision and making Rule 53(c) inapplicable.
Rule 53(a)(1). As of September 30, 1999, AEP, through its
subsidiary, Resources, had aggregate investment in FUCOs of $826,228,000.
This investment represents approximately 48.3% of $1,711,072,000, the
average of the consolidated retained earnings of AEP reported on Forms
10-Q and 10-K for the four consecutive quarters ended September 30, 1999.
Rule 53(a)(2). Each FUCO in which AEP 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 utility
subsidiaries of AEP will, at any one time, directly or indirectly, render
services to any FUCO.
Rule 53(a)(4). AEP has submitted and will submit a copy of Item 9
and Exhibits G and H of AEP's Form U5S to each of the public service
commissions having jurisdiction over the retail rates of AEP's utility
subsidiaries.
Rule 53(b). (i) Neither AEP nor any subsidiary of AEP is the subject
of any pending bankruptcy or similar proceeding; (ii) AEP's average
consolidated retained earnings for the four most recent quarterly periods
($1,711,072,000) represented an increase of approximately $56,487,000 (or
3.4%) in the average consolidated retained earnings from the previous four
quarterly periods ($1,654,585,000); and (iii) for the fiscal year ended
December 31, 1998, AEP did not report operating losses attributable to its
direct or indirect investments in EWGs and FUCOs.
AEP was authorized to invest up to 100% of its consolidated retained
earnings in EWGs and FUCOs (HCAR No. 26864, April 27, 1998) (the '100%
Order') in File No. 70-9021. In connection with its consideration of AEP's
application for the 100% Order, the Commission reviewed AEP's procedures
for evaluating EWG or FUCO investments. Based on projected financial
ratios and on procedures and conditions established to limit the risks to
AEP involved with investments in EWGs and FUCOs, the Commission determined
that permitting AEP to invest up to 100% of its consolidated retained
earnings in EWGs and FUCOs would not have a substantial adverse impact
upon the financial integrity of AEP, nor would it have an adverse impact
on any of its utility subsidiaries or their customers, or on the ability
of state commissions to protect such utility subsidiaries or their
customers. Since similar considerations are involved hereunder with
respect to Rule 54, Applicants should not be required to make subsequent
Rule 54 filings once AEP's aggregate investment in EWGs and FUCOs exceeds
50% of its consolidated retained earnings." 3. By adding the following
paragraph to the end of Item 2. FEES,
COMMISSIONS and EXPENSES:
"The fees, commissions and expenses incurred or expected to be
incurred in connection with the transactions proposed in the
Post-Effective Amendment are estimated not to exceed $2,000."
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 ENERGY SERVICES, INC.
AEP RESOURCES, INC.
By_/s/ Henry W. Fayne_____________
Vice President
Dated: November 29, 1999
1 This authorization will not apply if any company becomes a 'public
utility' as defined in the 1935 Act.
