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File No. 70-6458
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Post-Effective Amendment No. 22
to
FORM U-1
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APPLICATION OR DECLARATION
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
***
INDIANA MICHIGAN POWER COMPANY
One Summit Square, P.0. Box 60, Fort Wayne, Indiana 46801
(Name of company filing this statement and
address 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)
***
A. A. Pena, Senior Vice President
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
Susan Tomasky, General Counsel
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215 (Names and
addresses of agents for service)
The undersigned Indiana Michigan Power Company, formerly Indiana &
Michigan Electric Company ("I&M"), hereby amends as follows its Application or
Declaration on Form U-1 in File No. 70-6458, as heretofore amended:
1. By adding the following additional paragraphs to the end of Item 1 of
said Form U-1:
"By prior Orders dated June 11, 1980 and June 25, 1980 (HCAR Nos.
21618 and 21642, respectively), I&M was authorized to enter into an
agreement of sale ('Agreement') with the City of Rockport, Indiana
('City'). By subsequent Order dated August 2, 1985 (HCAR No. 23781), I&M
was authorized to enter into amendments to the Agreement providing for the
issuance and sale of three additional series of pollution control bonds
('Series 1985 Bonds'), each in the principal amount of $50,000,000 with a
maturity of August 1, 2014.
The Series 1985 Bonds consisted of: (i) a series of
Floating Rate Weekly Demand Bonds; (ii) the Adjustable Rate
Bonds ('Adjustable Rate Bonds'); and (iii) Fixed Rate Bonds
('Fixed Rate Bonds').
By Orders dated October 5, 1994 (HCAR No. 26136) and June 26, 1995
(HCAR No. 35-26319), the Commission authorized I&M to enter into
agreements with the City whereby the City would issue and sell an
additional series of Pollution Control Revenue Refunding Bonds in the
aggregate principal amount of up to $50,000,000 for each series, the
proceeds of which were used to provide for the early redemption of the
Adjustable Rate Bonds and the Fixed Rate Bonds.
Pursuant to the Agreement, I&M may request the City to sell, issue
and deliver refunding bonds. Therefore, it is proposed that the City issue
and sell one or more additional series of Pollution Control Revenue
Refunding Bonds in the aggregate principal amount of up to $50,000,000
('Refunding Bonds' or 'Bonds') in order to provide funds for the payment
of up to $50,000,000 aggregate principal amount of the Floating Rate
Weekly Demand Bonds, Series 1985A ('Floating Rate Weekly Bonds') prior to
their stated maturity.
The Refunding Bonds will be issued pursuant to the Indenture of Trust
dated as of December 1, 1984 between the City and Lincoln National Bank &
Trust Company (now Norwest Bank Fort Wayne, N.A.), as Trustee (the
'Indenture'), as supplemented by a Seventh Supplemental Indenture of Trust
between the City and the Trustee, the form of which is filed as Exhibit
B-7-7 hereto ('Supplemental Indenture') and the Fourth Amendment to
Agreement of Sale, the form of which is filed as Exhibit B-4-6 hereto.
Pursuant to the Indenture and the Seventh Supplemental Indenture, the
proceeds of the sale of the Refunding Bonds will be deposited with the
Trustee and applied by the Trustee, together with other funds supplied by
I&M, to the redemption of the Floating Rate Weekly Bonds at a price equal
to the principal amount thereof.
While I&M will not be a party to the underwriting arrangements for
the Refunding Bonds, the Agreement provides that the Refunding Bonds shall
have such terms as shall be specified by I&M. I&M understands that
interest on the Refunding Bonds will be exempt from Federal income
taxation under the provisions of Section 103 of the Internal Revenue Code
of 1986, as amended (except for interest on any Refunding Bond during a
period in which it is held by a person who is a substantial user of the
Project or a related person).
It is expected that the Refunding Bonds will mature at a date or
dates not more than 30 years from the date of their issuance. The
Refunding Bonds may be subject to mandatory or optional redemption under
circumstances and terms specified at the time of pricing or change in
interest rate. In addition, the Refunding Bonds may not, if it is deemed
advisable, be redeemable at the option of the City in whole or in part at
any time for a period to be determined at the time of pricing or change in
interest rate of the Refunding Bonds. No Refunding Bond may bear interest
at an initial interest rate higher than 8%.
It is not possible to predict precisely the interest rate which may
be obtained in connection with the original issuance of the Refunding
Bonds. However, I&M has been advised that, depending on maturity and other
factors, the annual interest rate on obligations, interest on which is so
excludable from gross income, historically has been, and can be expected
at the time of issuance of the Refunding Bonds to be, 1-1/2% to 2-1/2% or
more lower than the rates of obligations of like terms and comparable
quality, interest on which is fully subject to Federal income tax. In any
event, no series of Refunding Bonds will be issued at rates in excess of
those generally obtained at the time of pricing for sales of substantially
similar tax-exempt bonds (having the same maturity, issued by entities of
comparable credit quality and having similar terms, conditions and
features).
If it is deemed advisable, I&M may provide some form of credit
enhancement for the Refunding Bonds, such as a letter of credit, surety
bond or bond insurance, and I&M may pay a fee in connection therewith. The
type of credit enhancement may change while the Refunding Bonds are
outstanding. I&M may pay an annual or upfront fee for the credit
enhancement which would not exceed 1.25% annually of the face amount.
I&M will not agree, without further order of this Commission, to the
issuance of any Refunding Bond by the City (i) if the stated maturity of
any such Bond shall be more than thirty (30) years, (ii) if the fixed rate
of interest to be borne by any such Refunding Bond shall exceed 8% per
annum or the initial rate of interest to be borne by any fluctuating rate
Refunding Bond shall exceed 8%, (iii) if the discount from the initial
public offering price of any such Bond shall exceed 3% of the principal
amount thereof, or (iv) if the initial public offering price shall be less
than 97% of the principal amount thereof.
The transactions described herein will be consummated no later than
June 30, 2000. I&M hereby requests that an Order be issued by this
Commission (i) releasing jurisdiction with respect to the purchase price
of the Project as it is affected by the sale of the Refunding Bonds and
(ii) reserving jurisdiction with respect to the purchase price of the
Project as it is affected by the sale of further series of Revenue Bonds."
* * *
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 March 31, 1999, American, through its
subsidiary, Resources, had aggregate investment in FUCOs of $823,265,000.
This investment represents approximately 48.6% of $1,693,698,000, the
average of the consolidated retained earnings of American reported on
Forms 10-Q and 10-K for the four consecutive quarters ended March 31,
1999.
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 Utility
Subsidiaries (FN1) of American 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
American's Utility Subsidiaries.
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 ($1,693,698,000) represented an increase of
approximately $19,477,000 (or 1%) in the average consolidated retained
earnings from the previous four quarterly periods ($1,674,221,000); and
(iii) for the fiscal year ended December 31, 1998, American did not report
operating losses attributable to American's direct or indirect investments
in EWGs and FUCOs.
2. By supplying the following list of estimated expenses with respect to
the transactions contemplated in Post-Effective Amendment No. 22:
Printing Official Statements, etc.................$. 25,000
Bond Insurance Premium.............................1,125,000
Independent Auditors' Fees.......................... 15,000
Charges of Trustee (including counsel fees)......... 20,000
Legal Fees..........................................`110,000
Underwriter Fees.................................... 375,000
Rating Agency Fees.................................. 45,000
Miscellaneous Expenses.............................. 30,000
TOTAL..................................$1,745,000
......3. By adding the following paragraph to the end of Item 4
of said Form U-1:
"The proposed issuance of the Refunding Bonds has been
authorized by the Indiana Utility Regulatory Commission and
Michigan Public Service Commission."
4. By adding the following paragraph at the end of Item 5 of said Form
U-1:
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
October 1, 1999. I&M waives any recommended decision by a hearing officer
or by any other responsible officer of the Commission and waives the
30-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. I&M consents
to the Division of Investment Management assisting in the preparation of
the Commission's decision and/or order in this matter, unless the Division
opposes the matter covered by this Application or Declaration".
5. By supplying the following exhibits:
B-4-6 Form of Fourth Amendment to Agreement of Sale
(to be filed by amendment)
B-7-7 Form of Seventh Supplemental Indenture
between the City and the Trustee (to be filed
by amendment)
6. By supplying the following Financial Statements:
It is believed that financial statements of I&M and AEP and its
subsidiaries are not necessary or relevant to disposition of this
proceeding.
7. By adding the following paragraph at the end of Item 7 of said Form
U-1:
"It is believed that the granting and permitting to become effective
of this Application-Declaration, as it relates to the Refunding Bonds,
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 company has duly caused this Post-Effective Amendment No.
22 to be signed on its behalf by the undersigned thereunto duly authorized.
INDIANA MICHIGAN POWER COMPANY
By /s/ A. A. Pena
Vice President
Dated: August 6, 1999
FOOTNOTES
1 American 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
American's application for the 100% Order, the Commission reviewed
American's procedures for evaluating EWG or FUCO investments. Based on
projected financial ratios and on procedures and conditions established to
limit the risks to American involved with investments in EWGs and FUCOs,
the Commission determined that permitting American 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 System,
nor would it have an adverse impact on any of the Utility Subsidiaries or
their customers, or on the ability of state commissions to protect the
Utility Subsidiaries or their customers. Since similar considerations are
involved hereunder with respect to Rule 54, I&M should not be required to
make subsequent Rule 54 filings once American's aggregate investment in
EWGs and FUCOs exceeds 50% of its consolidated retained earnings."
