614-223-1648
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
November 16, 2000
American Electric Power Company, Inc. and AEP Resources, Inc. hereby transmit
Post-Effective Amendment No. 5 in File No. 70-8429.
Please contact either William E. Johnson, Esq. (614-223-1624) or me with any
questions regarding this filing.
Very truly yours,
/s/ Thomas G. Berkemeyer
Thomas G. Berkemeyer
Assistant Secretary
File No. 70-8429
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------
POST-EFFECTIVE AMENDMENT NO. 5
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.
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
---------------------------------------
(Names and addresses of agents for service)
American Electric Power Company, Inc. ("AEP"), a registered holding
company under the Public Utility Holding Company Act of 1935, as amended ("1935
Act"), and its subsidiary, AEP Resources, Inc. ("Resources"), hereby amend their
Application-Declaration on Form U-1 in File No. 70-8429 and restate the
Application-Declaration in the following respects. In all other respects the
Application-Declaration as previously filed and amended will remain the same.
By order dated December 22, 1994 (HCAR No. 26200) ("1994 Order"), the
Commission authorized AEP and Resources to issue and sell up to $300 million
("1994 Investment Limit") in debt and/or equity securities through June 30, 1997
and to invest the proceeds in "exempt wholesale generators" ("EWGs"), as defined
in section 32 of the 1935 Act, and in "foreign utility companies" ("FUCOs"), as
defined in section 33 of the 1935 Act. The 1994 Order also authorized AEP and
Resources to acquire the securities of one or more companies ("Project Parents")
that directly or indirectly, but exclusively, hold the securities of one or more
FUCOs or EWGs ("Power Projects") (Power Parents and Power Projects are referred
to collectively as "Exempt Entities"). The 1994 Order also authorized (i) AEP to
guarantee the indebtedness and other financial commitments of Resources; (ii)
AEP and Resources to guarantee the indebtedness and other financial commitments
of one or more Project Parents or Power Projects; and (iii) Project Parents to
guarantee the indebtedness and other financial commitments of their Power
Projects, through June 30, 1997, in an aggregate amount which, with the
securities issued, would never exceed the 1994 Investment Limit.
By order dated May 10, 1996 (HCAR No. 26516) ("1996 Order"), the
Commission authorized an increase in the 1994 Investment Limit to an amount
that, when added to the other direct or indirect investments in EWGs or FUCOs of
AEP, was equal to 50% of the consolidated retained earnings of AEP determined in
accordance with Rule 53 ("1996 Investment Limit"). The Commission further
authorized in the 1996 Order an extension through December 31, 2000 of the
authority granted in the 1994 Order: (i) for AEP to issue and sell debt and
equity securities and to guarantee obligations; (ii) for Resources and the
Project Parents to acquire the securities of new Project Parents; and (iii) for
AEP, Resources and the Project Parents to guarantee securities. In addition, the
Commission authorized the issuance and sale by AEP of up to 10 million
additional shares of its common stock par value $ 6.50 per share, which were
authorized but unissued or were treasury shares, provided the gross proceeds
from the sale of such stock would not exceed the 1996 Investment Limit.
By order dated January 24, 1997 (HCAR No. 26653), the Commission
authorized Central and South West Corporation ("CSW") to issue and sell
securities in an amount up to 100% of its consolidated retained earnings for
investment in EWGs or FUCOs.
By order dated April 27, 1998 (HCAR No. 26864), the Commission authorized
an increase in the 1996 Investment Limit to an amount that, when added to the
other direct or indirect investments in EWGs or FUCOs of AEP, was equal to 100%
of the consolidated retained earnings of AEP determined in accordance with Rule
53 ("1998 Investment Limit").
By order dated June 14, 2000 (HCAR No. 27186), the Commission, among other
things contemplated by the merger of a wholly owned subsidiary of AEP with and
into CSW ("Merger"), terminated the 1997 Order upon consummation of the Merger
and authorized AEP to issue and sell securities in an amount of up to 100% of
its consolidated retained earnings for investment in EWGs and FUCOs, with
consolidated retained earnings to be calculated on the basis of the combined
consolidated retained earnings of AEP after giving effect to the Merger ("2000
Investment Limit").
AEP proposes to extend from December 31, 2000 to June 30, 2005 its
authority to (i) issue short-term indebtedness and issue and sell equity
securities; (ii) guarantee the indebtedness of Resources, Project Parents and
Power Projects; and (iii) guarantee financial commitments other than
indebtedness of Resources, Project Parents and Power Projects, solely for the
purpose of investing in and guaranteeing the operations of, either directly or
indirectly, Power Projects, provided that the total of the net proceeds used for
these investments and guarantees outstanding at any one time may not, when added
to AEP's aggregate investment in all EWGs and FUCOs, exceed the 2000 Investment
Limit.
Resources and Power Projects propose to extend from December 31, 2000 to
June 30, 2005 authority to guarantee financial commitments, other than
indebtedness, of Exempt Entities ("Non-Utility Subsidiary Guarantees") in an
aggregate principal amount not to exceed $3 billion outstanding at any one time,
exclusive of any guarantees and other forms of credit support that are exempt
pursuant to Rule 45(b) and Rule 52(b), provided, however, that the amount of
Non-Utility Guarantees in respect of obligations of any Rule 58 subsidiaries of
AEP shall remain subject to the limitations of Rule 58(a)(1).
Applicants do not seek an expansion of the 2000 Investment Limit, only an
extension of the authorized period is requested. Applicants submit that any
securities issued by entities other than AEP would be exempt under Rule 52.
With respect to equity financing, AEP proposes to issue and sell up to ten
million additional shares ("Shares") of its common stock, par value $6.50 per
share, which are authorized but unissued or held by AEP, provided that the gross
proceeds from such sale will not exceed the 2000 Investment Limit. AEP proposes
to effect the issuance and sale by competitive bidding, negotiations with
underwriters or agents, or agents at market prices. The fees and expenses
associated with the sale of the Shares shall not exceed 5% of the aggregate
price for that common stock.
With respect to short-term indebtedness issued by AEP or short-term
indebtedness issued by Resources, Project Parents or Power Projects and
guaranteed by AEP, Applicants request authorization that such indebtedness be
incurred through the issuance and sale of notes to banks and commercial paper to
dealers in commercial paper in an aggregate amount not to exceed the 2000
Investment Limit. Borrowings under the lines of credit would generally bear
interest at an annual rate not greater than the prime commercial rate in effect
from time to time. The total annual cost of borrowings under all such bank lines
is estimated to be not greater than the effective rate for borrowings bearing
interest at the prime commercial rate with compensating balances of up to 10% of
the line of credit. The effective annual interest cost under any of the above
arrangements, assuming full use of the line of credit, will not exceed 125% of
the prime commercial rate in effect from time to time, or, for example, not more
than 10.625% on the basis of a prime commercial rate of 8.50%.
Any such short-term indebtedness resulting from the sale of commercial
paper will be limited to sales directly to dealers in commercial paper. The
commercial paper will be in the form of promissory notes in denominations of not
less than $50,000, and of varying maturities, with no maturity more than 366
days after the date of issue. Such notes will not be prepayable prior to
maturity and will be sold at a discount rate not in excess of the discount rate
per annum prevailing at the time of issuance for commercial paper of comparable
quality and maturity.
With respect to long-term debt issued by Resources, Project Parents or
Power Projects and guaranteed by AEP, AEP requests authorization to issue
guarantees in support of promissory notes ("Long-term Notes") in the aggregate
principal amount of up to the 2000 Investment Limit to one or more commercial
banks, financial institutions or other institutions or other investors pursuant
to one or more loan agreements. The Long-term Notes would be for a term of not
less than nine months nor more than twenty years.
The Long-term Notes would bear interest at either a fixed rate, a
fluctuating rate or some combination of fixed and fluctuating rates. Any fixed
rate of interest of the Long-term Notes will not be greater than 350 basis
points above the yield at the time of issuance of the Long-term Notes of United
States Treasury obligations ("Applicable Treasury Rate"). Any fluctuating rate
will not be greater than 200 basis points above the rate of interest announced
publicly by a major bank as its base or prime rate ("Prime Rate"). If the
indebtedness is denominated in the currency of a country other than the United
States, the fixed or floating rate, when adjusted for inflation in such country,
will not be greater than 700 basis points over the applicable Treasury Rate or
Prime Rate.
Applicants have complied, and will remain in compliance, with the
requirements of Rule 53(a)(2) concerning books, records and financial reports of
EWGs and FUCOs; Rule 53(a)(3), concerning the use of employees to provide
services of EWGs and FUCOs; and Rule 53(a)(4), concerning delivery of copies of
filings to state regulators.1
AEP will continue to file certificates under to Rule 24 within 60 days
after the end of each calendar quarter setting forth:
(1) a computation in accordance with Rule 53(a) (as modified by the 1998
Order) of its aggregate investment in EWGs and FUCOs;
(2) a statement of such aggregate investment as a percentage of the
following total capitalization, net utility plant, total
consolidated assets, and market value of common equity, all as of
the end of such quarter;
(3) consolidated capitalization ratios as of the end of such quarter,
with consolidated debt to include all short-term debt and
non-recourse debt of EWGs and FUCOs to the extent normally
consolidated under applicable financial reporting rules;
(4) the market-to-book ratio of AEP's common stock at the end of such quarter;
(5) an analysis of the growth in consolidated retained earnings which
segregates total earnings growth attributable to EWGs and FUCOs from
that attributable to other subsidiaries of AEP; and
(6) a statement of revenues and net income of each EWG and FUCO for the
twelve months ended as of the end of such quarter.
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. All applicable
conditions of Rule 53(a) are currently satisfied except for clause (1). As of
June 30, 2000, AEP, through its subsidiaries, had an aggregate investment in
EWGs and FUCOs of $1,920,829,000. This investment represents approximately 54.2%
of $3,544,649,000, the average of the consolidated retained earnings of AEP
reported on Forms 10-Q and 10-K for the four consecutive quarters ended June 30,
2000. However, 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. Although AEP's aggregate investment exceeds the 50%
'safe harbor' limitation contained in Rule 53, AEP's aggregate investment is
below the 100% limitation authorized under the 100% Order.
As of September 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, AEP's consolidated
capitalization consisted of 47.4% common and preferred equity and 52.6% debt. As
of June 30, 2000, AEP's consolidated capitalization consisted of 36.2% common
and preferred equity and 63.8% debt. The requested authorization will have no
impact on AEP's consolidated capitalization ratios on a pro forma basis. AEP
believes this ratio remains within acceptable ranges and limits. Further, AEP's
interests in EWGs and FUCOs have contributed positively to its consolidated
earnings.
AEP will continue to maintain in conformity with United States generally
accepted accounting principles and make available the books and records required
by Rule 53(a)(2). AEP does, and will continue to, comply with the requirement
that no more than 2% of the employees of AEP's electric utility operating
subsidiaries shall, at any one time, directly or indirectly, render services to
an EWG or FUCO in which AEP directly or indirectly owns an interest, satisfying
Rule 53(a)(3). And lastly, AEP will continue to 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 electric utility operating
subsidiaries, satisfying Rule 53(a)(4). Rule 53(c) is inapplicable by its terms
because the proposals contained herein do not involve the issue and sale of
securities (including any guarantees) to finance an acquisition of an EWG or
FUCO.
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 ($3,544,649,000)
represented an increase of approximately $40,644,000 (or 1.2%) in the average
consolidated retained earnings from the previous four quarterly periods
($1,693,698,000); and (iii) for the fiscal year ended December 31, 1999, AEP did
not report operating losses attributable to AEP's direct or indirect investments
in EWGs and FUCOs.
As noted, AEP was authorized to invest up to 100% of its consolidated
retained earnings in EWGs and FUCOs. 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 the AEP,
nor would it have an adverse impact on any of its electric utility operating
subsidiaries or their customers, or on the ability of state commissions to
protect the electric utility operating subsidiaries or their customers.
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/ A. A. Pena
A. A. Pena
Treasurer
Dated: November 16, 2000
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1 Rule 53(a)(2) requires that a registered holding company maintain books and
records to identify investments in and earnings from EWGs and FUCOs, and that
the books and records and financial statements of EWGs and FUCOs be kept in
conformity with stated standards and be made available to the Commission. Rule
53(a)(3) requires that no more than 2% of the employees of the utility
subsidiaries of a registered system provide services to EWGs and FUCOs at any
one time. Rule 53(a)(4) requires that copies of filings with the Commission with
respect to EWGs and FUCOs be submitted to each regulatory commission with
jurisdiction over the retail rates of an affected utility company.
