As filed with the Securities and Exchange Commission on
April 28, 2000
File No. 70-9665
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO THE
APPLICATION-DECLARATION
ON FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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WESTERN RESOURCES, INC.
818 Kansas Avenue
Topeka, Kansas 66612
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(Name of companies filing this statement and
address of principal executive offices)
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(Name of top registered holding company
parent of each applicant or declarant)
Richard D. Terrill
Western Resources, Inc.
818 Kansas Avenue
Topeka, Kansas 66612
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(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
William S. Lamb, Esq.
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-4513
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Western Resources, Inc., a Kansas corporation ("WRI"), hereby amends and
restates this application-declaration on Form U-1 (the "Application"), initially
filed on April 19, 2000, with the Securities and Exchange Commission (the
"Commission") for the authorization and approval under Sections 9(a)(2) and 10
of the Public Utility Holding Company Act of 1935, as amended (the "Act"), with
respect to the acquisition of Westar Generating II, Inc. ("WG"), a wholly owned
subsidiary of WRI established for the purpose of operating two combustion
turbine generators at a generating facility owned by Kansas Gas and Electric
Company (the "GEEC Facility"). WG currently is in the process of constructing
two simple-cycle General Electric 7EA-DLN combustion turbine generators (the
"C-Ts") that are expected to become commercially operational on June 1, 2000.
Presently, the C-Ts are not operating commercially; therefore, WG is not
currently an "electric utility" as defined by Section 2(a)(3) of the Act. WRI
requests authority to acquire all right, title and interest in WG, once the C-Ts
become commercially operational, pursuant to Sections 9(a)(2) and 10 of the Act
(the "C-T Transaction"). After such acquisition, WRI will claim an exemption as
an intrastate holding company over WG pursuant to Section 3(a)(1) of the Act.
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS AND THE PARTIES
A. Description of WRI
WRI is a public utility holding company exempt from all provisions of the
Act except Section 9(a)(2) under Section 3(a)(1) pursuant to Rule 2 of the Act.
WRI, through its KPL/1/ division, is engaged in the production, purchase,
transmission, distribution and sale of electric energy as well as the
transportation and sale of natural gas in the State of Kansas. WRI's assets
include security company holdings through its ownership of Protection One, Inc.
("Protection
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/1/ "KPL" is the trade name for WRI's electric business.
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One"), which has more than 1.4 million security customers in 48 states. Its
utility operations, conducted through KPL and WRI's subsidiary, Kansas Gas and
Electric Company ("KGE"), provide electric service to approximately 628,000
customers in 471 communities in the State of Kansas. Through its ownership
interest in ONEOK, Inc., an Oklahoma corporation, WRI has a 45% economic
interest/2/ in the eighth largest natural gas distribution company in the
nation, serving more than 1.4 million customers. For the year ended December 31,
1999, WRI reported consolidated revenues of approximately $2,036,158,000. WRI's
net income reported for the same period was $12,459,000. Consolidated assets of
WRI at December 31, 1999 were $8,008,206,000.
WRI's subsidiaries include: KGE, a Kansas corporation and wholly owned
subsidiary of WRI, providing electric services to customers in the southeastern
portion of Kansas, including the Wichita metropolitan area; Westar Generating,
Inc., a Kansas corporation and wholly owned subsidiary of WRI, holding interests
in electric power plants; WG, a Kansas corporation and wholly owned subsidiary
of WRI, established for the purpose of operating the C-Ts at the GEEC Facility;
Westar Generating III, Inc., a Kansas corporation and wholly owned subsidiary of
WRI, holding interests in electric power plants; The Wing Group, Limited Co., a
Delaware corporation and wholly owned subsidiary of WRI, holding interests in
foreign power projects; Westar Capital, Inc. ("Westar Capital"), a Kansas
corporation and wholly owned subsidiary of WRI, a holding company for certain
non-regulated business subsidiaries of WRI; Protection One, a Delaware
corporation, of which 84.55% is held by Westar Capital, is a holding company for
monitored
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/2/ Comprised solely of approximately 9.9% of the voting stock and shares of
nonvoting convertible preferred stock of ONEOK. WRI has relied on a
no-action letter issued by the Commission's Staff in 1997 for the
proposition that ONEOK is not a subsidiary WRI and that WRI does not
control ONEOK (Western Resources, Inc., SEC No-Action Letter (Nov. 24,
1997) (Appendix D)).
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security alarm businesses; Westar Communications, Inc., a Kansas corporation and
wholly owned subsidiary of Westar Capital, providing home paging services;
Western Resources (Bermuda) Limited, a Bermuda limited liability company,
indirectly holding interests in four power plants in China; and Wing Turkey,
Inc., a Delaware holding company, owning a power project in Turkey.
B. Description of WG
WG is a wholly owned subsidiary of WRI that presently is constructing the
C-Ts, each of which are expected to be rated for a capacity of approximately 74
MW of net dependable capacity rated at peak conditions, at the GEEC Facility.
The C-Ts have been designed for natural gas as a primary fuel and No. 2 fuel oil
as backup. It is expected that the C-Ts will commence commercial operation on
June 1, 2000. WG, pursuant to a turnkey construction contract, is constructing
the C-Ts. WRI's cost associated with the acquisition of WG will be equal to that
of the equipment and construction costs incurred by WG. In addition, WG
initially intends to sell all capacity and energy generated from the C-Ts at a
cost-based rate under a power purchase agreement between WRI and WG. The power
generated by the C-Ts will be directly connected to KGE's existing electric
system through a new buss to be tied to a grid located at the GEEC Facility and
will flow across KGE's and WRI's transmission lines.
C. Description of the Proposed Transaction.
WG is a special purpose subsidiary of WRI, established in order to operate
the C-Ts at the GEEC Facility. Presently, WG is constructing the C-Ts and
expects them to be commercially operational on June 1, 2000. Upon such
commencement of commercial operation of the C-Ts, WG will become an "electric
utility" as defined by 2(a)(3) of the Act. Upon consummation of the C-T
Transaction described herein, WRI will qualify as an affiliate of WG under the
Act. Accordingly, WRI seeks approval under Sections 9(a)(2) and 10 of the Act in
advance of such
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commercial operation of the C-Ts and intends on claiming an exemption as an
intrastate holding company over WG pursuant to Section 3(a)(1) of the Act. As
discussed above, WRI's cost associated with the acquisition of WG will be equal
to that of the equipment and construction costs incurred by WG.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of WRI are expected to be paid or
incurred, directly or indirectly, in connection with the C-T Transaction
described above are estimated as follows:
Legal Fees................................................................*
Miscellaneous.............................................................*
Total........................................................*
* To be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 9(a)(2) and 10 of the Act are directly or indirectly applicable to
the C-T Transaction described herein:
Section 9(a)(2) makes it unlawful, without approval of the Commission under
Section 10, "for any person . . . to acquire, directly or indirectly, any
security of any public utility company, if such person is an affiliate . . . of
such company and of any other public utility or holding company, or will by
virtue of such acquisition become such an affiliate." By virtue of the C-T
Transaction described herein, upon the commencement of commercial operation of
the C-Ts WRI will qualify as an affiliate of WG under the Act. Accordingly, WRI
seeks approval under Sections 9(a)(2) and 10 for the proposed C-T Transaction.
WRI believes that the proposed C-T Transaction meets the requirements of
Sections 9(a)(2) and 10.
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A. Section 10(b)(1)
Section 10(b)(1) provides that, if the requirements of Section 10(f) are
satisfied, the Commission shall approve a transaction unless:
(1) such acquisition will tend towards interlocking
relations or the concentration of control of public utility
companies, of a kind or to an extent detrimental to the
public interest or the interest of investors or consumers.
Section 10(b)(1) requires a finding that control is "of a kind or to an
extent detrimental to the public interest or the interest of investors or
consumers." The framers of the Act sought through Section 10(b)(1) to avoid "an
excess of concentration and bigness" while preserving the "opportunities for
economies of scale, the elimination of duplicative facilities and activities,
the sharing of production capacity and reserves and generally more efficient
operations" afforded by certain combinations. American Electric Power Co., Inc.,
46 S.E.C. 1299, 1309 (1978). The C-T Transaction has not created an "excess of
concentration and bigness" and will not alter the situation in any respect. WRI
does not believe the C-T Transaction will be detrimental to the interests of the
public or shareholders. On the contrary, the Kansas Corporations Commission has
determined that there is a need for the additional facilities as part of its
review of the project under the Kansas Electric Generation Facility Siting Act,
KSA ss. 66-1, 158, et seq. (1999)./3/ Thus, the C-T Transaction does not rise to
the level of transaction that the Act's framers were attempting to avoid.
B. Section 10(b)(2)
Section 10(b)(2) provides that a transaction should be approved unless the
price paid:
is not reasonable or does not bear a fair relation to the
sums invested in or the coming capacity of the utility
assets to be
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/3/ Docket No. 99-WSRE-381-EGF (Apr. 30, 1999).
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acquired or the utility assets underlying the securities to
be acquired.
Since WG, a wholly owned subsidiary of WRI, is constructing the C-Ts, WRI's
cost of the project will be equal to that of the equipment and construction
costs. Under the circumstances, the price being paid satisfies the statutory
requirement of Section 10(b)(2).
C. Section 10(b)(3)
Section 10(b)(3) directs approval of the transaction unless the Commission
finds that:
(3) such acquisition will unduly complicate the capital
structure of the holding-company system of the applicant ...
or will be detrimental to ... the proper functioning of such
holding-company system.
Section 10(c)(1) provides that the Commission may not approve a transaction
that is "unlawful under the provisions of section 8 or is detrimental to the
carrying out of the provisions of section 11." Together they relate to the
corporate simplification standards of Section 11(b)(2), which require that each
registered holding company take the necessary steps to ensure that the corporate
or continued existence of any company in the holding-company system does not
unduly or unnecessarily complicate the structure of such holding-company system.
The intent of these requirements is to assure the financial soundness of the
holding-company system, with a proper balance of debt and equity. No such
complexities will result from the C-T Transaction.
D. Section 10(c)(1) and 10(c)(2)
Section 10(c) provides for two distinct findings with respect to a proposed
transaction, and both are related to the standards prescribed in Section 11(b).
Section 10(c)(1) requires that the proposed transaction not be "unlawful under
the provisions of section 8 or is detrimental to the carrying out of the
provisions of Section 11." Section 8 by its terms applies only to registered
holding companies and prohibits such companies from combining electric and gas
utilities in a
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manner that violates state law. Section 11 of the Act relates to the
simplification of holding company systems, which was one of the major purposes
behind the passage of the Act. The terms of Section 11 are also only directly
applicable to registered holding companies. WRI is not a registered holding
company and, therefore, does not violate Section 8 and Section 10 of the 1935
Act.
Section 10(c)(2) is a more specialized provision. It requires that any
acquisition not be approved unless the Commission finds that:
[S]uch acquisition will serve the public interest by tending
towards the economical and efficient development of an
integrated public-utility system.
Section 2(a)(29)(A) defines an "integrated public utility system" as
applied to electric utility companies as:
[A] System consisting of one or more units of generating
plants and/or transmission lines and/or distributing
facilities, whose utility assets, whether owned by one or
more electric utility companies, are physically
interconnected or capable of physical interconnection and
which under normal conditions may be economically operated
as a single area or region in one or more States, not so
large as to impair (considering the state of the art and the
area or region affected) the advantages of localized
management, efficient operation, and the effectiveness of
regulation.
The C-Ts will be directly connected to KGE's existing electric system
through a new buss to be tied to a grid located at the GEEC Facility. All of the
power generated by the C-Ts will flow across KGE's and WRI's transmission lines.
Initially, WG intends to sell all capacity and energy from the C-Ts at a
cost-based rate under a power purchase agreement between WRI and WG.
E. Section 10(f)
Section 10(f) provides that the Commission shall not approve an acquisition
unless it appears as though all state laws are satisfied. Except as noted in
Item 4 below, the C-T
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Transaction does not require any state regulatory approvals and WRI shall
undertake to complete the transaction in a manner consistent with the laws of
the State of Kansas.
F. Section 3(a)(1)
WRI is currently exempt from all provisions of the Act except Section
9(a)(2). Upon consummation of the C-T Transaction, WRI will continue to be
entitled to such exemption because it and each of its public utility
subsidiaries from which it derives a material part of its income will be
predominantly intrastate in character and will carry on their businesses
substantially within Kansas.
ITEM 4. REGULATORY APPROVALS
No federal or state commission, other than this Commission, has
jurisdiction over the C-T Transaction as described herein. Both the need for the
additional electric generating capacity as well as the physical plant location
of the C-Ts were approved by the Kansas Corporations Commission on April 30,
1999 pursuant to the Kansas Electric Generation Facility Siting Act, KSA ss.
66-1, 158 et seq. (1999).
ITEM 5. PROCEDURE
It is requested that the Commission issue and publish no later than April
28, 2000, the requisite notice under Rule 23 with respect to the filing of this
Application, such notice to specify a date not later than May 26, 2000 as the
date after which an order granting and permitting this Application to become
effective may be entered by the Commission and that the Commission enter not
later than May 26, 2000, an appropriate order granting and permitting this
Application to become effective.
No recommended decision by a hearing officer or other responsible officer
of the Commission is necessary or required in this matter. The Division of
Investment Management of
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the Commission may assist in the preparation of the Commission's decision in
this matter. There should be no thirty-day waiting period between the issuance
and effective date of any order issued by the Commission in this matter, and it
is respectfully requested that any such order be made effective immediately upon
the entry thereof.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
A. Exhibits
D-1 Kansas Order No. 99-WSRE-381-EGF dated April 30, 1999
approving additional electric generating capacity and the
physical plant location of the C-Ts (previously filed)
F-1 Opinion of Counsel (To be filed by amendment)
F-2 "Past Tense" Opinion of Counsel (To be filed by amendment)
G-1 Financial Data Schedule (previously filed)
H-1 Form of Notice (previously filed)
H-2 WRI's Annual Report filed on Form 10-K for the year ended
December 31, 1999, filed on March 29, 2000 and amended by
WRI's 10-K/A filed on April 3, 2000 (File No. 1-3523) and
incorporated by reference herein.
B. Financial Statements
FS-1 Consolidated Balance Statement of WRI for the year ended
December 31, 1999 (filed on March 29, 2000 and amended by
WRI's 10-K/A filed on April 3, 2000 (File No. 1-3523) and
incorporated by reference herein).
FS-2 WRI's Consolidated Statement of Income for the Preceding
Three Years (filed on March 29, 2000 and amended by WRI's
10-K/A filed on April 3, 2000 (File No. 1-3523) and
incorporated by reference herein).
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ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this Application involve a
"major federal action" nor do they "significantly affect the quality of the
human environment" as those terms are used in Section 102(2)(C) of the National
Environmental Policy Act. None of the proposed transactions that are the subject
of this Application will result in changes in the operation of WRI that will
have an impact on the environment. WRI is not aware of any federal agency which
has prepared or is preparing an environmental impact statement with respect to
the transactions proposed herein.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned has duly caused this application and declaration to be
signed on their behalf by the undersigned thereunto duly authorized.
WESTERN RESOURCES, INC.
By: /s/ Richard D. Terrill
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Name: Richard D. Terrill
Title: General Counsel
April 28, 2000
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